Facts on Debt

Facts on Debt

This web site is not being updated - use Jubilee Debt Campaign instead

Click For

this is a website for WDM group in Manchester

Back to basics ...

"The constant need to borrow in order to service our debt; the constant need to service our debt in order to borrow - we can no longer get out of this vicious circle ... Is human development a possibility when so much of Africa's wealth is channelled into debt servicing?"

Julius Nyerere,

former president of Tanzania.

"Blessed are the meek, for they are good for business"

The origins of the Debt Crisis -How did the crisis arise? see Origins of Debt -click on Left

Debtspeak - a wry summary of the jargon! see Origins of Debt -click on Left Hand side

Who owes the debt

There are 42 Heavily Indebted Poor Countries (HIPC) with debts of $213Billion!

	Paying $9Billion a year debt service
	600 Million people, average less than $1/day pay $15 per year in debt service

Jubilee believes that 52 countries should be included, debts of $375Billion

	Paying $23Billion a year debt service
	1032 Million people, average $1.5/day pay debts of $22 per year debt service

Who lent the money?

Financial Institutions called Multilaterals -mainly global -Bretton Woods Institutions

	The main Multilaterals are World Bank and IMF -International Monetary Fund. These institutions are run by the rich countries -the G8 have over 50% of the votes.
	Several other banks, such as the African development Bank and the Arab Development Bank. All controlled by governments.

When individual countries lend money, it is called Bilateral loans. The largest bulk of these loans are to fund or guarantee arms sales or for large infrastructure projects tied to the donor country.

The largest grouping of these countries, work together as a 'club' known as the Paris Club. Almost every developed country is a member

Commercial Banks represent very little of the debt now. (note that originally they were major creditors but the debt was converted to publicly held debt against the IMF/WB!)

How much has been cancelled so far

Depends who is spinning!

The headline figure is $100Billion debt cancelled

	In practice about £20 billion has been promised, against conditions
	About $12Billion has actually been cancelled

The debt relief process

There is a legitimate argument that in countries in conflict or where corruption is endemic, cancellation of the debt would merely fuel the problem. It is accepted that the objective of debt cancellation is poverty reduction.

PRSP -Poverty Reduction Strategy Paper. The concept is that each government prepares a strategy paper to address poverty relief, in consultation with so called 'civic society' to ensure it reflects the real needs of the poor. If the IMF/WB agree then a 'Decision Point' is reached, debt service is suspended. If after several years the government is carrying out the plan, then the debt will be finally cancelled.

However there are two main reservations

	The debt is NOT cancelled it is reduced to a so called sustainable level (cynically just too high to stop the country really developing- in some cases even higher than it was before HIPC!!). The formulae are typically complex, but for example it is considered that Kenya can afford to pay 25% of its foreign earnings (compare with Germany after the war where the limit was set at 3.5%)
	The IMF has pre-conceived economic strategies, primarily 'liberalisation, privatisation and most cruelly -payment for services such as health and education. Unless the strategy embraces these economic strategies, it will not be accepted. Previously these policies were called 'SAPs -Structural Adjustment Policies'. They impose crushing penalties on the poor countries.

Jubilee Web Group - last updated 26 Januar 2003