is a website for WDM group in Manchester
Back to basics ...
"The constant need to borrow in order to service our debt; the
constant need to service our debt in order to borrow - we can no longer get
out of this vicious circle ... Is human development a possibility when so much
of Africa's wealth is channelled into debt servicing?"
former president of Tanzania.
"Blessed are the meek, for they
are good for business"
The origins of the Debt Crisis
did the crisis arise? see Origins of Debt -click on Left
Debtspeak - a wry summary of the jargon!
see Origins of Debt -click on Left Hand side
Who owes the debt
|There are 42 Heavily Indebted Poor Countries (HIPC) with debts of
|Paying $9Billion a year debt service|
|600 Million people, average less than $1/day pay $15 per year in debt
|Jubilee believes that 52 countries should be included, debts of
|Paying $23Billion a year debt service|
|1032 Million people, average $1.5/day pay debts of $22 per year debt
Who lent the money?
|Financial Institutions called Multilaterals -mainly global -Bretton Woods
|The main Multilaterals are World Bank and IMF -International Monetary
Fund. These institutions are run by the rich countries -the G8
have over 50% of the votes.|
|Several other banks, such as the African development Bank and the Arab
Development Bank. All controlled by governments.|
|When individual countries lend money, it is called Bilateral loans.
The largest bulk of these loans are to fund or guarantee arms sales or for
large infrastructure projects tied to the donor country.
|The largest grouping of these countries, work together as a 'club'
known as the Paris Club. Almost every developed country is a
|Commercial Banks represent very little of the debt now. (note that
originally they were major creditors but the debt was converted to publicly
held debt against the IMF/WB!)|
How much has been cancelled so far
Depends who is spinning!
|The headline figure is $100Billion debt cancelled
|In practice about £20 billion has been promised, against conditions|
|About $12Billion has actually been cancelled|
The debt relief process
There is a legitimate argument that in countries in conflict or where
corruption is endemic, cancellation of the debt would merely fuel the
problem. It is accepted that the objective of debt cancellation is poverty
|PRSP -Poverty Reduction Strategy Paper. The concept is that each
government prepares a strategy paper to address poverty relief, in
consultation with so called 'civic society' to ensure it reflects the real
needs of the poor. If the IMF/WB agree then a 'Decision Point' is
reached, debt service is suspended. If after several years the
government is carrying out the plan, then the debt will be finally
|However there are two main reservations
|The debt is NOT cancelled it is reduced to a so called sustainable
level (cynically just too high to stop the country really developing- in
some cases even higher than it was before HIPC!!). The formulae
are typically complex, but for example it is considered that Kenya can
afford to pay 25% of its foreign earnings (compare with Germany after
the war where the limit was set at 3.5%)|
|The IMF has pre-conceived economic strategies, primarily
'liberalisation, privatisation and most cruelly -payment for services
such as health and education. Unless the strategy embraces these
economic strategies, it will not be accepted. Previously these
policies were called 'SAPs -Structural Adjustment Policies'. They
impose crushing penalties on the poor countries.|
Web Group - last updated 26 Januar 2003