[stop-imf] Drop the Debt: IMF/Bank can cancel debts from existing resources
Robert Weissman
rob@milan.essential.org
Wed, 11 Apr 2001 11:17:40 -0400 (EDT)
Drop the Debt, the successor to Jubilee 2000 UK, has just issued an
important report, "Reality Check: the need for deeper debt cancellation
and the fight against HIV/AIDS." The full text is available on their web
page, at http://www.dropthedebt.org/home.html.
I am posting here a summary, and then in a second note excerpts that make
the point that the IMF and Bank can cancel debts of the poorest countries
using their existing resources. It is important to note that the
methodological approach of the Drop the Debt auditors -- they hired
independent accountants to do an analysis -- is *very* conservative. Most
importantly, they accepted the IMF and Bank's continued valuation of the
debts owed them by poor countries at face value, even though other
creditors do not do this, in recognition of the fact that they are not
likely ever to be repaid in full.
--
Robert Weissman <rob@essential.org>
Essential Information
P.O. Box 19405, Washington, DC 20036, USA
Tel: 1-202-387-8030
Fax: 1-202-234-5176
www.essential.org
Reality Check: the need for deeper debt cancellation and the fight
against
HIV/AIDS
Key findings
The Heavily Indebted Poor Countries (HIPC)
initiative fails to meet the challenge of
significant debt cancellation
Average annual debt payments by the 22
countries which have begun to receive some debt
relief are being reduced by a mere 27
per cent - or an aggregate $735 million per year
This leaves these 22 countries still
spending more repaying debts than they currently spend
on healthcare
The G7 countries have all promised to
write off virtually all the debts owed by HIPCs; the
IMF and World Bank will reduce debts
owed to them by less than half
Zambia and Niger both face increased
debt service payments after qualifying for HIPC
The World Bank and IMF are the biggest
remaining creditors to the poorest countries and
independent accountants have confirmed they
could write off 100 per cent of the debts of
Heavily Indebted Poor Countries without
impeding their ability to function
After HIPC debt reduction, the 22
countries will owe more to the World Bank and IMF than
to the next 17 biggest creditors put
together
The cost of going beyond the HIPC
initiative to provide 100 per cent cancellation for these
22 countries will be $215 million per
year for the World Bank and $287 million for the
IMF; to extend it to all HIPCs would
cost a further $138 million and $81 million
respectively
Independent research by accountants
Chantrey Vellacott DFK offers proposals that would
release more than $30 billion of
resources to fund deeper World Bank / IMF debt
cancellation
Chantrey Vellacott state that if their
proposals were followed, the World Bank and IMF
could cancel 100 per cent of the debts
owed to them by HIPCs without jeopardizing the
ability of the World Bank and the IMF
to carry out their overall functions
The IMF can write off its debts to the
HIPC countries, according to Chantrey Vellacott, by
using the earning capacity of general
reserves, together with a repeat of limited gold
revaluation
Chantrey Vellacott show that the World
Bank can afford to cancel 100 per cent of HIPC
debts owed to its two lending arms,
IBRD and IDA, through prudent use of IBRD reserves
and future net income, without
impacting on the Bank's credit rating or its status as a lender
Beyond their specific recommendations,
Chantrey Vellacott also point out that the World
Bank and IMF could afford to cancel
even more given sufficient political will from their
shareholders
A second independent opinion on the
capacity of the World Bank shows that deeper
cancellation can be made possible
through use of future reflows to IDA, which are projected
to grow rapidly to bring in $2 billion
more every year in 2016-20 than they do today
If the G7 countries were to fund the
write off of the World Bank and IMF's debts from
HIPCs, it would effectively cost each
of their citizens one dollar per year
Debt cancellation delivered so far is making a
real difference to the lives of ordinary people -
but it is not enough
Funds released by debt cancellation are
helping the poor, for example: doubling primary
school enrolment in Uganda; vaccinating
half a million children against killer diseases in
Mozambique; providing three extra years
of schooling in Honduras; and financing half of
Guyana's national development plan
Two-thirds of resources released by
debt cancellation so far are being spent on health and
education, with most of the remainder
being used for HIV/AIDS, water supply, roads and
governance reforms
Deeper debt cancellation is more urgent than
ever in order to help fight HIV/AIDS and meet
2015 poverty reduction targets
The 17 countries in Africa which have
started receiving debt relief are still spending $1.3
billion per year on debt repayments -
virtually identical to what UNAIDS estimates the same
countries need to begin scaling up the
efforts to fight HIV/AIDS
Sub-Saharan Africa spends approximately
$13.5 billion per annum repaying debts; the
Global AIDS Alliance estimates that
this region needs $15 billion to combat HIV/AIDS each
year
Sub-Saharan Africa, the continent most
affected by debt, is the region faring worst against
the 2015 targets to cut poverty by
half; between 1990 and 1998 the proportion of Africans in
extreme poverty increased, not
decreased
New Deal on Debt is needed urgently in order
to fight the HIV/AIDS emergency, to work
towards the 2015 targets and to make levels of
debt genuinely sustainable; A New Deal on
Debt should include the following elements:
100 per cent debt cancellation for the
poorest countries from wealthy creditors who have not
yet committed to this, led by the World
Bank, IMF and members of the Paris Club
a trust fund for countries in conflict
or with unacceptable human rights records so that their
debt payments can be returned in the
future to be invested in development
significant debt cancellation for poor
countries facing huge debt burdens which are not
currently considered - in particular,
Nigeria - and eligibility for cancellation based on the
resources need to fight poverty
increased efforts in debtor countries
to fight poverty and disease using the funds from deeper
debt cancellation, and an end to
imposed conditions that hurt the poorest
concrete steps to minimize the risk of
a new debt crisis, through an increased proportion of
future financing for poorer countries
in the form of grants instead of loans; and the
exploration of a new process to control
unsustainable lending and borrowing