G7: DROP THE DEBT OR STAND ASIDE (fwd)

[Robert Weissman <rob@essential.org>]

Sunday Journal, Washington, DC
June 13, 1999
Robert Naiman, Preamble Center

G7: DROP THE DEBT OR STAND ASIDE        

NATO's war in Yugoslavia, in addition to causing needless 
death and destruction, swept many urgent issues under the rug. 
One issue whose resolution is long overdue is the crushing 
external debt burden of poor countries, which forces them to 
divert resources from lifesaving expenditures on health care 
to service external debts.

At its upcoming summit the G7 club of rich countries has the 
opportunity to take decisive action. It's long been obvious 
that the external debts of the poorest countries are 
unpayable. The Jubilee 2000 movement has called for debt 
cancellation by the year 2000, invoking the Biblical concept 
of a Jubilee to cancel debts and free slaves. The G7 could end 
the crisis because the rich countries -- particularly the 
United States -- run the International Monetary Fund, which 
dictates policy on the debt issue.

Don't expect real action from the G7, because their IMF is at 
the heart of the problem. The IMF refuses the central demand 
of Jubilee 2000, to deal with the debt issue once and for all. 
On the contrary, the bottom line for the IMF is that things 
can only change in order to remain the same: the only 
allowable "reforms" are those that preserve and enhance the 
IMF's power to micromanage the economic policies of poor 
countries.

Michel Camdessus, the head of the IMF, said as much at the 
semiannual meetings of the IMF in April. Camdessus noted that 
while some wanted to "deepen" the debt relief currently 
provided to poor countries by the IMF and the World Bank, he 
wanted to "broaden" it to include more countries. This 
broadening would increase the power of the IMF. The current  
program allows the IMF to control the economic policies of the 
countries that participate, by imposing so-called "structural 
adjustment" policies. These policies force governments to cut 
spending on basic health care and education and have been 
widely criticized for worsening poverty.

To make matters worse, even the IMF and the World Bank 
admitted in a recent staff report that the current debt relief 
program -- the Heavily Indebted Poor Countries Initiative -- 
doesn't actually help poor countries. Even after participating 
in the program, and enduring years of brutal IMF policies, 
these countries don't actually see their debt payments 
reduced. They just get a paper reduction of the debt that 
could never be paid anyway. The "debt relief" provided is 
actually relief provided to the IMF and the World Bank, which 
instead of  writing off bad loans, make the taxpayers of the 
G7 countries pay off those loans. American taxpayers absorb 
the biggest share of the cost.

Most of the "reforms" being proposed by the Clinton 
Administration and their allies in Congress  would be worse 
than insufficient; they would actually make poor people in 
poor countries worse off than they are today, by extending the 
IMF's power.

Fortunately there is a way out, which is to remove the IMF 
from the process of debt relief. In a recent report condemning 
the G7 for offering "crumbs" to the poorest countries, the 
Jubilee 2000 Coalition in Britain wrote, "Using the debt 
relief carrot to impose the structural adjustment policies of 
the IMF, which many believe increase poverty, is unacceptable 
to Jubilee 2000 campaigners... The intended purpose of debt 
relief is to benefit the poor. If the IMF refuses to minimize 
costs and maximize benefits to the poor, it should no longer 
be a gatekeeper for debt relief." 

Two Congressional initiatives seek to end the IMF's control of 
the debt issue. The HOPE for Africa Act, sponsored by 
Representative Jesse Jackson, Jr. calls for the IMF to cancel 
the debt of the countries in sub-Saharan Africa. Jackson's 
bill counters the corporate-backed African Growth and 
Opportunity Act being considered by the House. The corporate 
"free trade" bill doesn't even deal with the debt issue. Now 
Representative Cynthia McKinney will propose a bill that would 
further increase pressure on the IMF, by barring any U.S. 
contributions to the IMF until the IMF has cancelled the debts 
of the poorest countries.

Meanwhile, the people and governments of the poor countries 
are getting increasingly restive. Recently Zimbabwe threatened 
to cut off its dealings with the IMF and the World Bank. If 
the G7 fails to act, they may find matters taken out of their 
hands.

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Robert Naiman <naimanr@preamble.org>
Preamble Center
1737 21st NW
Washington, DC 20009
phone: 202-265-3263
fax:   202-265-3647
http://www.preamble.org/
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