[stop-imf] Neil Watkins debt talk at UN

[Robert Weissman]

Global Poverty, Debt, and the Millennium Development Goals: A Way Forward


Presentation by Neil Watkins, National Coordinator, Jubilee USA Network
Panel Discussion ?External Debt and the Achievement of the MDGs: Challenges=
 And Opportunities,? United Nations, New York, October 12, 2005

Greetings and thank you for the opportunity to speak to you today. I bring =
greetings on behalf of Jubilee USA Network?s 70 member organizations ? incl=
uding religious denominations and faith-based groups, trade unions, environ=
mental groups, solidarity organizations, and community groups and coalition=
s across the United States working for eradication of global poverty and de=
finitive debt cancellation. I also bring greetings from the global Jubilee =
movement ? Jubilee USA is the US arm of the global Jubilee network with org=
anizations in more than 60 countries, and we are here today to speak about =
the importance of debt cancellation to achieve the Millennium Development G=
oals and to move us towards a more just world.

Addressing the G-8 Deal: A Precedent Setting First Step

We see the crisis of debt as fundamentally one of morality and justice rath=
er than just economics and finance. More than 3 billion people live on less=
 than $1/day. Every year 10 million children die of hunger and preventable =
diseases ? that?s one every three seconds. The Millennium Development Goals=
, themselves modest but critical goals, are still far from reach. Debt canc=
ellation is a critical tool in the fight against poverty.

With considerable fanfare, G-8 leaders announced a new deal on debt this su=
mmer in Gleneagles, which was largely approved by the Boards of the IMF/Wor=
ld Bank in Washington three weeks ago. The agreement will mean 100% debt st=
ock cancellation of debts held by some multilateral creditors ? the IMF, Wo=
rld Bank, and African Development Fund ? for 18 of the most impoverished co=
untries that have reached ?completion point? in the HIPC Initiative. Up to =
20 other countries may be eligible under the initiative, though it is unlik=
ely that more than 10 additional countries will see benefits any time soon.

Jubilee USA Network welcomed the G-8 deal on debt announced on June 11 as a=
n important first step. It is a testament to the efforts of people of faith=
 and conscience across the US and globally as well as their allies in gover=
nments and international institutions like the UN, for it is clear that the=
 G-8 would not have taken up this issue without pressure and public attenti=
on. In the case of the 18 chosen countries, one of the demands of Jubilee U=
SA?s campaigns of recent years ? 100% cancellation of debts stocks to the I=
MF, World Bank, and African Development Fund ? has been achieved.

The agreement means that beneficiary nations will be relieved of more than =
$1 billion in annual debt service payments and new resources made available=
 that countries may spend on health care, education, clean water, and HIV/A=
IDS prevention and treatment. We know debt relief works. Debt relief to dat=
e has allowed Tanzania to abolish school fees and put 1.6 more children in =
school. In Uganda, debt relief gave 2.2 million people access to clean wate=
r.

Already, the Zambian government has indicated that funds released from the =
2005 debt cancellation will be used to provide life-saving AIDS drugs to 10=
0,000 Zambians living with HIV/AIDS; The deal represents the first time the=
 G-8 has approved 100% debt stock cancellation of multilateral debts, inclu=
ding those held by the IMF, an important precedent.

A Need to Deal Comprehensively with the Crisis of Debt

While the G-8 deal represents a step, it is clear that it is time to move o=
n to a much bolder, more ambitious effort to address the debt crisis. The M=
illennium Declaration calls on the global community to deal ?comprehensivel=
y? with the debt problems of developing nations.

The stark reality is that 9 out of 10 people in developing countries will r=
emain unaffected by the G-8 debt deal.

There is a growing global consensus that much broader and deeper debt cance=
llation is clearly required if the global community is to have any hope of =
meeting the Millennium Development Goals.

Some of the key areas we see as critical next steps include:

Increasing cancellation and country eligibility,
Expanding cancellation to more creditors,
Challenging the harmful economic conditions still required for debt relief,=
 and
Addressing odious and illegitimate debt

Cancel Debt to Meet the MDGs

Under the plan endorsed by the G-8, at most $56 billion in debt stock owed =
to the IMF, World Bank, and African Development Fund would be cancelled. By=
 comparison in 2004,
The total external debt of sub-Saharan Africa was $218 billion.
Total debt for all developing countries was $2.6 trillion.

UK Charities ActionAid, Christian Aid, and Jubilee Debt Campaign have ident=
ified more than 60 low-income countries that require immediate, total debt =
cancellation as a necessary first step towards meeting the MDGs. These coun=
tries have a total external debt of more than $500 billion.

So, the $56 billion on offer from the G-8 represents just over 10% of the e=
xternal debt of low-income nations that require immediate debt cancellation=
 to meet the MDGs. Even this estimate is low, as it does not address the ne=
ed for debt cancellation of middle-income countries.

If we are truly serious about meeting the MDGs, we must tolerate no debt th=
at impedes a nations? ability to meet the goals. Much work remains ahead of=
 us.

Too Few Countries

Too many impoverished nations in Africa, Asia, and Latin America left out o=
f the G-8 deal on debt will continue to pay more in debt service than they =
spend on critical social needs.

Nations that aren?t part of HIPC and thus won?t be eligible for debt cancel=
lation under the G-8 plan:

Impoverished nations in Africa such as Kenya which spends 40% of its budget=
 servicing a $7 billion debt;
Nations devastated by the December 2004 Tsunami such as Sri Lanka and Indon=
esia; and other impoverished nations in Asia such as Bangladesh;
The most impoverished nation in the Americas, Haiti; and
So called middle income, heavily indebted nations with a high level of huma=
n need such as the Philippines, Brazil, South Africa, Ecuador, and Argentin=
a.

Up until now the debt discourse has focused too heavily on the problems of =
the poorest countries. Well over a billion people in Middle Income Countrie=
s live on less than $ 2/day, with 1/3rd surviving on less than $1/day. In B=
razil, where 40 million people live on less than $2/day, the country spends=
 three times more on debt servicing than on health.

Ecuador, where more than half of citizens live on less than $2/day, owes $1=
7 billion and pays twice as much on debt as health and education combined. =
It will receive nothing from the G-8 deal because it is classified as a mid=
dle-income country.

Creditors Left Out

Debt to other regional development banks is not included in the G-8 deal. T=
his includes debt to the InterAmerican Development Bank and the Asian Devel=
opment Bank. The four Latin American nations included among the 18 benefici=
aries ? Bolivia, Guyana. Honduras, and Nicaragua ? will still pay a total o=
f almost $1.4 billion in debt service over the next five years to the Inter=
-American Development Bank (IDB). This is an area for expansion of the agre=
ement that we hope will be remedied in the coming year.

Harmful Conditions Still In Place

One of the most significant concerns we have about the G-8 debt agreement i=
s that the proposal continues under the failed framework of the Heavily Ind=
ebted Poor Country (HIPC) Initiative. Under this approach, nations must dra=
ft and have the IMF/World Bank approve Poverty Reduction Strategy papers (P=
RSPs) and be in compliance with conditions on other World Bank and IMF loan=
 agreements, including those with the Poverty Reduction and Growth Facility=
 (PRGF) of the IMF. PRSPs and PRGF loans contain hundreds of economic polic=
y conditions that nations must, under HIPC?s terms, enact in order to quali=
fy for debt cancellation.

Jubilee USA Network opposes the linking of debt cancellation to countries? =
implementation of economic policies including those listed above. These pol=
icies have not been proven to increase per capita income growth and have ha=
d devastating impacts on livelihoods, increased poverty, and fostered envir=
onmental degradation.

Moreover, we are extremely concerned about the pace at which countries beco=
me eligible for cancellation under HIPC. Since the HIPC Initiative was laun=
ched 9 years ago in 1996, on average, 2 nations per year have reached compl=
etion point and qualified for debt relief (and now debt stock cancellation)=
. The 18 nations that have reached completion point will receive cancellati=
on, with luck, from the IMF by the end of 2005 and the World Bank by July 2=
006 ? itself a year after the G-8 announced the deal and an unacceptable de=
lay. But if the delays that have characterized the HIPC Initiative so far a=
re any indication, it would take 10 more years for the remaining 20 nations=
 in the program to reach completion point, and thus be eligible for 100% de=
bt stock cancellation. This again, is, unacceptable. If the G-8 claims that=
 their plan will cancel $56 billion in debt, they must provide such cancell=
ation immediately. Delay costs lives.

Many HIPC countries have been delayed because they have not met IMF or Worl=
d Bank requirements to reform their economic policy. For instance, Cameroon=
, an impoverished nation desperate for resources to reach the MDGs. Cameroo=
n reached ?decision point? in 2000; a March 2005 IMF report cites lack of i=
mplementation of economic policies contained in the country?s PRGF loan pro=
gram as a reason for Cameroon not yet reaching ?completion point?; privatiz=
ation of Cameroon?s urban water service is a policy condition, among others=
. We ask: what does privatization of water have to do with debt cancellatio=
n? We reject economic policy conditions including water privatization.

Externally imposed conditions also fundamentally restrict a nation?s policy=
 space. Total cancellation frees up space for nations to democratically det=
ermine their own economic policies.

Separating Financing from Delivery of Debt Cancellation

We reject conditions, but we all agree on the need for accountability. As c=
onsensus grows on the need for a more comprehensive approach to debt cancel=
lation, one of the most commonly raised concerns about debt cancellation is=
 how to assure that proceeds from relief are not siphoned into the pockets =
of corrupt leaders and to be sure that they money actually gets to those wh=
o most need it.

This is a serious and real concern and civil society shares this concern. F=
irst, it is important to insist that the primary responsibility for ensurin=
g accountability is civil society in the affected country ? we must do more=
 as a global community to support such efforts. But we also need to look at=
 innovative measures for accountability. Such measures should separate the =
financing and delivery mechanisms of debt relief. One idea that some in the=
 Jubilee network are discussing is the creation of peer-reviewed trust fund=
s where donors would provide the financing for much broader debt cancellati=
on but regional bodies like the African Union or parliament would make demo=
cratic decisions about governments whose governance problems might necessit=
ate a delay in cancellation. It is clear that the creditors ? the IMF, Worl=
d Bank, and G-8 cannot and should not be judge and jury on these matters as=
 they are now.

Odious and Illegitimate Debt Must Be Considered

We must also begin to address the substantial odious and illegitimate debt =
burdens plaguing developing countries. ?Illegitimate debt? refers to debts =
that cannot be reasonably or morally ascribed to a country. This includes d=
ebts arising from failed projects, projects which were never completed or w=
ere not implemented due to corrupt practices, and projects whose primary pu=
rpose was channeling funds to external actors (such as consultants and mult=
inational corporations).

?Odious debt? is an established international legal principle. Legally, deb=
t is to be considered odious if the debts were contracted without the knowl=
edge or consent of the population and the government used the money for per=
sonal purposes or to oppress the people.  In cases where borrowed money was=
 used in ways contrary to the peoples? interest, with the knowledge of the =
creditors, the creditors may be said to have committed a hostile act agains=
t the people. Creditors cannot legitimately expect repayment of such debts.=
 A similar argument was made by the U.S. government in arguing for the canc=
ellation of Iraq?s debt.

In Indonesia, careful analysis of World Bank and other documents has found =
that nearly a third of the $30 billion in loans from the World Bank to Indo=
nesia under former dictator Suharto were diverted towards corrupt uses. Thi=
s odious debt argument also applies to debts contracted by the apartheid re=
gime in South Africa, by Mobutu Sese Seko in what is now the Democratic Rep=
ublic of Congo, Ferdinand Marcos in the Philippines, the military junta in =
Argentina, and many more.

Creditors must bear their share of responsibility for bad lending decisions=
 in the case of odious debts. A classic example is the case of the former Z=
aire, where in 1980, the IMF?s representative in Zaire, Erwin Blumenthal, w=
arned his employers that there was no chance Zaire?s creditors would ever g=
et their money back due to the corruption of Mobutu. But in the decade that=
 followed, the IMF, World Bank, US, and UK governments lent Mobutu another =
$8.5 billion, in exchange for his support in the Cold War. Creditors must a=
cknowledge responsibility for bad lending decisions and cancel odious debt.

The House of Representatives in the Philippines passed a resolution in 2004=
 to engage in a public audit to determine the origins of their debt, especi=
ally under dictator Ferdinand Marcos. Debt audits are underway in Brazil an=
d other countries as well. While these audits are underway, creditors shoul=
d agree to a moratorium on receiving odious debt payments.

Cancelling debt is not an act of charity by rich creditors or institutions.=
 It is an act of justice. Consider that from 1970-2002, UNCTAD found that A=
frican nations took out $540 billion in loans, and over the same period pai=
d back $550 billion. But today Africa owes almost $300 billion. The debt ha=
s been paid; it is time for a comprehensive approach.

The Way Forward

Moving forward, global civil society organizations from Jubilee USA to broa=
d based networks across Europe, Asia, the Americas, and Africa are planning=
 next steps and campaigns. It is clear that with the rather dismal outcome =
of the recent World Summit, that stronger global campaigning and advocacy w=
ill be needed if we are to achieve our goals ? the MDGs, but more broadly t=
he eradication of global poverty and relationships of justice, equity, and =
respect between nations. In the North, we will demand much bolder action on=
 debt ? especially as 2007 ? seven years after the Jubilee and the biblical=
 Sabbath year nears.

But we will also join more strategically and methodically with Southern NGO=
s and social movements calling for repudiation of debts if debts are not ca=
ncelled. Calls for repudiation and refusing to pay the debt have rightfully=
 grown louder in recent years, with Jubilee South leading civil society gro=
ups across Asia, Africa, and Latin America under the slogan ?Don?t Owe, Won=
?t Pay.? Jeffrey Sachs, as we all know an adviser to Kofi Annan and leading=
 advocate of the MDGs has advised African leaders to consider refusing to p=
ay these illegitimate and unpayable debts. Taking such action has many risk=
s for a country, and should not be taken lightly. But these threats will gr=
ow, especially as nations look to Nigeria and Argentina as examples of coun=
tries that when they threatened repudiation or simply stopped paying, credi=
tors paid attention. Jubilee USA Network sees the justice in an impoverishe=
d nation refusing to pay its debts so that it may provide health care, educ=
ation, or clean water for its people, and we will support such nations.

Conclusion

To summarize, we call on the G-8, the IMF and World Bank, and other credito=
rs to:

Immediately cancel the debt of all impoverished nations that need cancellat=
ion to meet the MDGs, beginning with the 60+ low income nations require but=
 also beginning to address the crisis faced by middle income countries
Cut all economic conditions countries must meet to qualify for debt relief,=
 as these policies have failed to increase growth and reduce poverty; and
Include all creditors ? begin by canceling 100% of debt held by impoverishe=
d nations to the Inter-American Development Bank and Asian Development Bank=
 this year.
Take their share of responsibility for irresponsible lending and cancel the=
 odious debt of Southern nations.

Finally, we must avoid the recurrence of the debt crisis ? by providing gra=
nts instead of loans for development.

To conclude, we have a shared goal. To fight the scourge of global poverty =
we must meet, then go beyond, the Millennium Development Goals. To do that,=
 we must provide a truly comprehensive approach to address the crisis of de=
bt, in the spirit of the Millennium Declaration.  Our work has only just be=
gun.