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In
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External debt
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Public debt: Who ows who?
Source:
Rede Brasil - Jubilee South
The auditing will aim at identifying interest rates, commissions and penalties imposed, often in an unilateral manner in credit agreements – thus violating the sovereignty of borrowing countries – as well as the consequences of the conditionalities assumed in loan agreements regarding the population’s living conditions. July, 2008 (pdf format)[see more]
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In the last two decades, the external debt has been a huge problem that third world countries have to face. The amount of developing countries external debt in 2004 was 2.5 millions of millions of dollars, this amount represents 34 per cent of the Third World Gross National Product (GNP). Taking into account that in 1968 the Third World debt represented nearly 50 thousand millions dollars, the amount has increased by 50 times.
The World Bank and the International Monetary Fund are the two main loaners. These institutions that were initially created to help poor countries are now being used as a tool by developed countries to increase their power. The sister institutions: the Asian Development Bank, the African Development Bank and the Inter-American Development Bank were created in order to promote development, but their policies have so far failed to achieve these goals.
For low-income countries (defined by the World Bank as those with a GNP per capita below US$785), multilateral debt increased by 544% between 1980 and 1997, from US$24 billion to US$155 billion, and currently represents 33% of their total long-term debt burden (versus 25% in 1980).
As a consequence of this crushing debt-service burden, national governments have virtually no bargaining power when negotiating policy lending. The Structural Adjustment Programs (SAPs) of the World Bank and IMF, created originally to “reduce poverty”, are being replaced by a new approach called Poverty Reduction Strategy Papers (PRSPs). But both are similar instruments that regulate development of poor countries by imposing conditionalities.
The Washington Consensus legitimated and created institutions for the implementation of neo-liberal policies, like privatisation, deregulation, liberalisation of markets, and great reductions in social expenditures. SAPs themselves, by orienting economies towards generating foreign exchange, are designed to ensure that debtor countries continue to pay their debt, further enriching Northern creditors at the expense of domestic programs in the South.
This situation has generated since 1980s a “spiral of poverty” where once inside it, is very difficult for developing countries to get out. The national resources that should be oriented to effective social investment and to improve people’s living conditions are now needed to be destined to payments of debt interest.
Thus, this international debt problem has become such a crisis that many poor countries pay more money to the World Bank and the IMF each year than they receive in loans. The World Bank's own figures indicate that the IMF extracted a net US$1 billion from Africa in 1997 and 1998 more than they loaned to the continent.
The problem has been greatly increased by the multilateral institutions’ conditionalities, since the IMF determines the creditworthiness of countries: i.e., until the IMF gives its stamp of approval (which usually requires adherence to the economic policies it recommends), poor countries generally cannot get credit or capital from other sources.
In the last few years, the World Bank and the IMF have agreed to help countries that are heavily suffering from major debt burdens by creating the Heavily Indebted Poor Countries (HIPC) Initiative of 1996. But to qualify for HIPC, a country must complete three years under an IMF-designed Structural Adjustment Program. Even after that hurdle, the country must fulfil a further three years bound by another SAP before relief is granted on its multilateral debt. The cruel paradox here is that the SAP requires them to cut spending on health care, food subsidies, and education.
Many critics and borrowers have stated that these policy conditions often lead to negative environmental, social and economic impacts - disproportionately harming people living in poverty – and provide few tangible benefits in exchange for large increases in debt. In addition to the well-known consequences such as the increase in public indebtedness, negligible or negative growth, and socio-environmental degradation, these measures reassert a dependency of borrowing countries on ‘creditors’.
As a consequence of this situation, civil society organisations seeking solutions to the debt problem propose alternatives ranging from the sole acknowledgement of legitimate debts to the non-payment or condonation of debts. Several campaigns around the world seek to create awareness in poor countries of how unfair this situation is and to call the attention of national governments and IFIs.
Source: Rede Brasil, World Revolution and International Debt Observatory
Versión
en español
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News |
| Up-to-date current affairs information. |
Wed May 24 2006
Despite debt relief, poor nations back in the red
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In-depth
reports |
| Detailed
reports on key issues |
Financing for Development
The opportunity that came up in Monterrey can turn into a road to nowhere without an injection of political will.
Poverty
Although there is a wide array of perspectives on poverty at world level, no agreement has been reached about its character. In spite of having a common basis, there are multiple definitions and concepts on this issue.
The G8 Summit 2005
The Group of Eight (G8) Summit 2005 held in Gleneagles, Scotland from 6 to 8 July was aimed to focus on poverty in Africa and climate change but the leaders commitments fell far short of the expectations.
World Bank
The World Bank's main self-proclaimed objective is to eradicate poverty. Yet, evidence suggests that its programmes often harm the poor and the environment.
International Monetary Fund - IMF
The IMF is one of the most powerful international organizations. Its policies change the lives of millions of people in developing countries.
World Trade Organization - WTO
Trade at the service of people, or people subjected to trade? The WTO makes the difference.
Millennium Development Goals - MDGs
A comprehensive list of resources from the United Nations and civil society organizations.
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NGOs |
| NGO web sites |
Bank Information Center
BIC is dedicated to monitoring the impacts of multilateral development bank lending.
EURODAD
European Network on Debt and Development.
Jubilee South
International Peoples' Tribunal on the Debt.
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International Financial Institutions (IFIs) |
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Information resources - International Institutions |
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History and evolution |
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A historical overview of the fight to cancel Third World debt
Source: CADTM
Eric Toussaint
In a historical context, the international struggle to obtain cancellation of the Third World countries' debt is fairly recent: it has existed for hardly more than 20 years. It finds itself amongst major international combats and strong campaigns like that for the abolition of slavery, for the eight hour day at the end of the 19th century, for universal suffrage, for sexual equality, among others, which have influenced and still influence the struggle endured by the oppressed to gain emancipation. January, 2007
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Information resources - Civil society |
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Debt campaign |
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Negotiations |
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Debt and trade |
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Debt and development |
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Debt and Women |
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Debt sustainability |
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Debt conditionalities |
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Debt audit |
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Debt relief |
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