[stop-imf] Debt in the news

[Robert Weissman]

 From Neil Watkins <neil@jubileeusa.org>

1) Letter to the Editor of New York Times today on the Burdens of Debt
2) IPS: Debt and Hope Remain, Emad Mekay

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1) Letter to the Editor, NYT

October 8, 2004
The Burdens of Debt

To the Editor:

Your Oct. 1 editorial "Ending the Cycle of Debt" makes several important ar=
guments in support of renewed international efforts to end the debt burden =
of the indebted poor countries. I would like to add that the lack of much d=
eeper debt relief for the poorest countries has other negative consequences=
.

Thirty-four of the 50 countries classified by the United Nations as least d=
eveloped countries and 32 of the 38 countries eligible for the Heavily Inde=
bted Poor Countries treatment are in Africa. The debt burden is having adve=
rse effects on economic growth and poverty reduction in Africa and retardin=
g progress toward achieving Millennium Development Goal No. 1, which calls =
for halving the proportion of people living in extreme poverty and hunger b=
y 2015.

Moreover, Secretary General Kofi Annan's recent report on the New Partnersh=
ip for Africa's Development shows that, increasingly, most of the aid flows=
 to Africa are canceled out by debt service payments.

In the case of Africa, significant debt relief, including cancellation, wou=
ld nurture fledgling democracies, promote private enterprise and help natio=
ns cope with health and humanitarian challenges. The potential benefits of =
ending the cycle of debt could be much greater than often thought.

Ibrahim A. Gambari
Under Secretary General
and Special Adviser on Africa,
United Nations
New York, Oct. 2, 2004

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2)  Development: Debt, And Hope, Remain

Inter Press Service (Johannesburg)
ANALYSIS
October 5, 2004
Posted to the web October 6, 2004

Analysis - By Emad Mekay
Washington

The World Bank and the International Monetary Fund (IMF) wrapped up weekend=
 meetings here with no major results for developing nations, but the gather=
ing might have moved the issue of poor nations' debt onto rich nations' per=
manent agenda.

The annual meetings covered many topics. A half-hearted call by some develo=
ping nations to have more say and representation in the management of the t=
wo Washington-based institutions was politely received, but yielded no acti=
on from IMF and bank officials.

The officials also discussed financing of terrorism, the global economy and=
 oil prices. But nothing was as high profile as a proposal to cancel 100 pe=
rcent of poor countries' debts.

Finance ministers from the Group of Seven (G7) most industrialised nations =
who control the two financial powerhouses ended their official talks Friday=
 with no unified position on the debt proposal, but the issue received supp=
ort from important players, including the United States and Britain.

IMF Managing Director Rodrigo de Rato described the IMF/Bank meetings Satur=
day and Sunday as "fruitful discussions" on the issue, including the need t=
o increase aid alongside debt relief. But no concrete results emerged, he t=
old journalists.

"I hope these discussions will bring about the need for a political consens=
us that certainly is needed," de Rato said at the closing press conference =
Sunday.

World Bank President James Wolfensohn attributed the lack of concrete resul=
ts to an absence of political will on the part of shareholder countries.

"It is a political decision made by the shareholders, and we are trying to =
give them all the support possible," he said. "I think that the debate is e=
ngaged, and I hope it will be resolved before too long."

The lack of progress on debt dismayed many economists and non-governmental =
organisations (NGOs) that worked to bring the issue to the forefront of the=
 meetings.

The 41 nations the World Bank defines as "Heavily Indebted Poor Countries" =
(HlPCs) -- 33 of them in Africa -- owe 50-100 billion dollars in multilater=
al debts, says the Jubilee Movement for debt relief. That means each child =
in Nicaragua is born owing more than 2,000 dollars, in a country where aver=
age yearly income is only 390 dollars.

"We are of course disappointed that the G7 communiqu=E9 contained all of tw=
o sentences on debt, with only vague pledges to study the issue further," s=
aid the 50 Years Is Enough Network, a coalition of over 200 U.S. organisati=
ons that work to transform the IMF and the World Bank.

"The IMF/WB meetings, which immediately followed, offered no further news o=
n debt."

Analysts blamed both European officials and the United States for not takin=
g long-awaited action. The Europeans reportedly foiled a proposal from the =
U.S. Treasury Department to cancel 100 percent of the countries' debt, and =
to substitute loans to the poorest nations for a system of grants.

German Finance Minister Hans Eichel, for example voiced his country's oppos=
ition to that proposal, saying that shareholder countries needed to protect=
 the financial position of the bank and the IMF.

Wolfensohn leaned towards the European position, warning that the U.S. plan=
 could deplete the bank's financial position and available resources unless=
 it included alternative funding for the two institutions, an argument that=
 critics vehemently attacked.

They say Washington could have used its power to veto the European argument=
 if it strongly backed the debt cancellation plan.

"Washington has veto power in both the IMF and World Bank and has used it f=
or 60 years on matters that are of importance to it," wrote Mark Weisbrot, =
co-director of the Centre for Economic and Policy Research, in an electroni=
c message.

"So the blame must fall upon all of the rich country governments for failin=
g to cancel this debt."

Weisbrot argued that the IMF and bank's justifications for delaying debt fo=
rgiveness are typically feeble.

"According to standard economic theory, international lending can benefit t=
he borrowing country by allowing it to invest more and increase productive =
capacity," he said.

"In this scenario the country has a net benefit even after paying interest =
and repaying the loans. But many developing countries are stuck in a situat=
ion in which their debt service payments exceed new borrowing, with no obvi=
ous reversal in sight."

On Tuesday, a group of international civil society groups that monitor the =
World Bank and IMF and which followed the weekend meetings, issued a joint =
statement decrying the failure to advance on any of the major issues, espec=
ially the debt crisis.

The groups noted that Iraq's debt of 120 billion dollars is getting far mor=
e attention than that of poor nations, which incurred debts under military =
dictatorships similar to those of former Iraqi President Saddam Hussein.

"We note with concern that Iraq's debt is being given special treatment; al=
l decisions on debt cancellation must be taken through an equitable and tra=
nsparent process," said the statement.

The United States has proposed that rich nations forgive up to 95 percent o=
f the debt of Iraq, a nation that the U.S. military still occupies. France,=
 Germany and Russia, the three countries owed most of Iraq's debt, have ind=
icated that they will only accept 50 percent debt relief.

Signatories to the Iraq statement include ActionAid International UK, AFROD=
AD, a Zimbabwe-based Pan-African group, Debt and Development from Ireland, =
Halifax Initiative from Canada, Japan Network on Debt and Poverty, Jubilee =
USA Network, Oxfam International and France's Plate-forme Dette et Developp=
ement.

But despite the meetings' failure to resolve the debt issue, the high profi=
le interest it received got some positive reviews, with activists suggestin=
g the issue might remain on the agenda for the long-term.

The British government, which floated an idea of 100 percent debt cancellat=
ion financed by IMF gold reserves, also appears determined to make developm=
ent a central theme of the G8 summit it is hosting in June 2005. Activists =
report that NGOs in Britain are gearing up to make debt a significant focus=
 of that meeting.

"A few weeks ago we viewed this past weekend's meetings as perhaps a unique=
 opportunity to make significant progress toward the goal of 100 percent de=
bt cancellation," said the 50 Years is Enough statement. "We're unhappy wit=
h the result, but mollified somewhat by the attention the issue received."

"It seems more possible now that the issue will not go away, and G7 governm=
ents will remain under pressure to make substantial progress soon," added t=
he statement.

Some activists say that considering the past record of the rich nations on =
debt relief, the discussions were a step forward.

"That is huge in many many ways, especially when you consider where it came=
 from and against the charter and the mandates of the bank and the fund (IM=
F)," said Njoki Njoroge Njehu, director of 50 Years is Enough. "So to come =
where we are now, where a 100 percent cancellation is on the table, I belie=
ve is a huge movement forward."


Neil Watkins
Outreach and Communications Coordinator
Jubilee USA Network
(202) 783-0129
www.jubileeusa.org

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