[stop-imf] World Bank Report Undermines Key Precedent of G-8 Debt Deal

[Robert Weissman]

Reuters story below that also details the leaked World Bank report.

*Jubilee USA Network * www.jubileeusa.org <http://www.jubileeusa.org/>
*
*FOR IMMEDIATE RELEASE
Wednesday, August 03, 2005
*
*Contact:* Debayani Kar, 202-783-0215, 202-246-8143
Neil Watkins, 202-421-1023

*World Bank Report Undermines Key Precedent of G-8 Debt Deal

Jubilee USA Calls on Leaders to Cancel Debts of All Impoverished
Countries Including 18 in G-8 Deal, Without Harmful Economic Conditions
*

WASHINGTON =96 As the World Bank Executive Board meets tomorrow to discuss
the (Group of 8) G-8 leaders June agreement on debt cancellation,
Jubilee USA Network, the US arm of the global Jubilee movement, is
concerned by a leaked World Bank staff report that calls into question
the implementation of the already limited G-8 debt agreement. Combined
with recent press reports that some International Monetary Fund (IMF)
Executive Board members have proposed curtailing the scope of the G-8
agreement, Jubilee USA expresses concern that if implemented, the World
Bank proposal would undermine a key precedent of the G-8 deal, that of
100% debt cancellation for 18 impoverished countries.

Jubilee USA had characterized the G-8 deal on debt cancellation as an
important and precedent-setting first step, but one that falls short of
what is needed to conclusively address the crisis of debt faced by the
world=92s impoverished nations. Jubilee USA Network is concerned that a
new internal World Bank report on the G-8 debt deal questions the G-8
principle of 100% debt cancellation. Instead, the World Bank argues that
the 18 initially eligible countries should receive debt cancellation
based on continuing to implement harmful economic conditions, thus
modifying the G-8 proposal to be revocable.

Any backtracking on the G-8 deal would result in serious consequences
for those populations in the 18 initially eligible impoverished
countries that urgently require the resources released through full debt
cancellation. As an example, the president of Zambia, an eligible
country, last week called for the IMF and World Bank to implement 100%
cancellation of their debt immediately. The Zambian finance minister had
announced in June that the funds released through debt cancellation
would be used to provide AIDS drugs to almost 100,000 infected people.

=93At the conclusion of their July summit, the G-8 nations endorsed their
plan to cancel the debt of 18 countries immediately, with an additional
9-20 countries being eligible for cancellation in the near future,=94 said
Debayani Kar, Communications/Advocacy Coordinator of Jubilee USA
Network. =93Now, this already limited agreement =96 which fell short of
conclusively addressing the debt crisis for all impoverished countries
and countries in crisis, while perpetuating devastating economic
conditions =96 looks to be under fire.=94

Jubilee USA Network has produced a 14-page analysis of the G-8 debt
agreement, entitled =93First Step on A Long Journey: Putting the G-8 Deal
on Debt into Perspective.=94 The report highlights the benefits of the G-8
debt agreement, while detailing its limitations, and provides
recommendations of next steps. The report and executive summary are
available at www.jubileeusa.org <http://www.jubileeusa.org/>.

Some of the key findings of the Jubilee USA analysis:

    * *Debt Cancellation Will Save Lives.* The agreement, in addition to
      setting the important precedent of 100% debt cancellation for some
      nations to some creditors, will release close to $1 billion
      annually in resources poor nations can use for development.
    * *The G-8 Plan Includes Too Few Countries.* The 18 countries that
      qualify immediately represent less than a third of countries (at
      least 62) that need full cancellation to meet the internationally
      agreed Millennium Development Goals (MDGs), which seek to halve
      extreme poverty by 2015. /The $40 billion to be cancelled by this
      agreement represents less than 10% of debt cancellation required
      for nations to meet the MDGs. /The plan does not include
      middle-income countries that are heavily indebted and
      impoverished. The African Union called earlier this week for all
      African nations to receive debt cancellation; the G-8 agreement
      applies to only 14.
    * *The G-8 Plan Contains Onerous Conditions.* The economic policies
      mandated by the Heavily Indebted Poor Country (HIPC) Initiative
      will continue under the G-8 debt agreement, including
      privatization of government-run services and industries, increased
      trade liberalization, and budgetary spending restrictions. These
      policies have not been proven to increase per capita income growth
      or reduce poverty as documented by both World Bank and civil
      society economists. Jubilee USA and social movements call for
      these conditions and policies to be abandoned.

Jubilee USA Network notes that the G-8 debt agreement is an important
/first step/ towards the Jubilee vision of a world where external debt
no longer diverts resources from impoverished people or constrains
policy choices. In addition to ensuring the agreement is implemented for
these 18 initially eligible countries, Jubilee USA Network will expand
its campaign in the years ahead to work for debt cancellation for more
countries (such as impoverished countries not included in this deal,
middle income countries with large impoverished populations and those
with odious/illegitimate debts) and creditors (such as the
Inter-American Development Bank, Asian Development Bank, bilateral, and
private creditors) not included in this year's initiative.

/Jubilee USA Network is the US arm of the international movement working
for debt cancellation for impoverished nations. Jubilee USA is a network
of over 70 religious denominations, labor groups, environmental
organizations, and community and advocacy groups working for freedom
from debt for countries in Africa, Asia, and Latin America.

/
******
http://today.reuters.com/news/newsArticleSearch.aspx?storyID=3D68045+03-Aug=
-2005+RTRS&srch=3Dlesley+wroughton

<http://today.reuters.com/news/newsArticleSearch.aspx?storyID=3D68045+03-Au=
g-2005+RTRS&srch=3Dlesley+wroughton>*World
Bank report calls for changes to G8 debt plan
*Wed Aug 3, 2005 1:13 AM ET

By Lesley Wroughton

WASHINGTON, Aug 3 (Reuters) - The World Bank is calling for substantial
changes in the highly-touted debt relief proposal for poor African
countries agreed to at last month's Group of Eight summit.

A World Bank staff report given to Reuters says the deal reached by
leaders of G-8 industrialized nations -- the United States, Britain,
Germany, France, Japan, Italy, Canada and Russia -- lacks sufficient
compensation to the bank's low interest lending arm most affected by the
debt relief plan.

The potential cost to the bank's International Development Association
(IDA) lending facility could be more than $50 billion, including
commitments made under previous debt-relief initiatives, according to
the report.

Without some form of funding to make up for the losses, the IDA would
have its ability to continue lending to the world's poorest nations
severely undermined, said the report by World Bank senior officials
Geoffrey Lamb and Danny Leipziger.

"If IDA is fully compensated in a robust, certain way, the institution
would be able to maintain its role as the cornerstone to global
development efforts," said the report.

"If not, IDA risks undergoing a fairly rapid decline in its financing
capacity, an outcome clearly not consistent with the intention of the
framers of the G8 proposal."

The IDA is the world's largest lending facility for poor countries,
offering the most affordable loans along with grants to governments in need=
.

The report is considered an initial posturing by the World Bank on the
G-8 initiative, which responded to years of pressure from activists and
the development community by canceling 100 percent of the debt owed by
23 nations -- most of them in Africa -- to the IDA, the IMF and the
African Development Bank.

Both the World Bank and the International Monetary Fund, its sister
global lending organization, are considering implications of the G-8
deal in separate meetings starting this week.

According to the World Bank report, the deal would mean the IDA loses
between $27.1 billion to $42.8 billion in outstanding loans, along with
another $15.4 billion previously canceled under a 1996 Heavily Indebted
Poor Countries (HIPC) initiative.

The G-8 nations agreed to compensate the World Bank for its losses over
the next three years, but the deal lacked any specifics for future
funding for the IDA which the report said raised doubts as to whether
there would be proper compensation.

It noted the G-8 proposal offered no mechanism for suspending debt
relief if a debtor country deviated from economic and social reforms
prescribed by the World Bank and IMF.

Irrevocable debt cancellation amounted to "unconditional budget support"
for debtor countries over the 40-year term of the loans, the bank report
said.

An alternative, the report suggested, was to tie the amount of debt
relief given to the amount of contributions from donor countries for the
program.

Under such a proposal, debt relief could potentially be suspended if a
country's performance deteriorates, it said. IDA's financing capacity
also could be protected if donor contributions fall short of
commitments, the report noted.

It called for donor countries to pay the entire amount owed to the IDA
up front, or for debt relief to proceed at the same pace as donor
contributions.

The report also said the G-8 plan should be implemented in fiscal year
2007, which begins on July 1, 2006, instead of disrupting the budgets
already completed and approved for the current fiscal year.

=A9 Reuters 2005. All Rights Reserved.