Letter to Minister Goodale Re: HIPC debt cancellation - December 15, 2005

December 15, 2005

The Honourable Ralph Goodale
Minister of Finance
House of Commons
Ottawa, ON,
K1A 0H5

Dear Minister Goodale,

The IMF is proposing to delay debt cancellation for 6 of the 18 countries that have already reached HIPC Completion Point. The IMF Board will decide to accept or reject the staff recommendation to further require 6 countries to undertake structural reforms next Wednesday.

We applauded your efforts in July and again in September to ensure that countries at, or upon reaching World Bank and International Monetary Fund "Completion Point" would receive immediate full cancellation of debts owed to the IMF, International Development Association and African Development Fund. The IMF is now proposing that at least 6 of the 18 have to wait to receive immediate debt cancellation until they further restructure their economies as per IMF advice.

IMF staff are defending the delays arguing that the actions that will have to be taken to qualify for the Multilateral Debt Relief Initiative are the same as what they had to qualify for to reach HIPC Completion Point and therefore it is not new conditions.

First, we would like to remind you that the HIPC Initiative was changed in 1999 to the Enhanced HIPC Initiative to speed up debt relief. The IMF is now proposing that HIPC Completion Point is no longer good enough, and after reaching Completion Point, countries now have to enter the MDRI, and in the case of at least 6 countries, add a further round of conditionality, even if the conditions were the same as what it took to reach the Enhanced HIPC Completion Point. We do believe that when the G8 called for immediate debt cancellation for countries at HIPC Completion Point, they meant HIPC Completion Point, not at MDRI Completion Point.

Second, although the IMF analysis of countries' progress since reaching Completion Point has not been publicly released, the summary analyses for Madagascar and Nicaragua have been leaked. The problems that the IMF staff perceive ironically could all be at least partially addressed if the large drain on each country's foreign exchange through debt servicing would be plugged. The problems that they have identified are not quick fixes nor have the proposed IMF solutions had a poverty and social impact assessment. Delays could last for years.
Third, by withholding debt cancellation until reforms are undertaken is a form of blackmail. Countries should have space to decide whether to raise electricity tariffs or not. Again this is a reason for immediate debt cancellation to provide fiscal and policy space to governments to pursue their own development path. A further round of conditions contradicts the official G8 Gleneagles Summit Communique which said "It is up to developing countries themselves and their governments to take the lead on development. They need to decide, plan and sequence their economic policies to fit their own development strategies, for which they shall be accountable to all their people."

Lastly, 4 of the 6 countries that the IMF are proposing to 'fail' the MDRI test will not have an IMF programme as of January 2006. The IMF is proposing for the countries that fail the MDRI test that the first remedial action is to accept an IMF mission in January 2006. What choice will countries have to take on a PRGF or PSI programme with debt cancellation being withheld? The only country that the IMF is proposing to pass that currently does not have an IMF programme ongoing in 2006 is Uganda and Uganda has already signaled its intention to take on a PSI. It looks very much like the IMF is cornering its market.

We would also like to remind you that the Canadian Debt Initiative has delivered bilateral debt cancellation for countries at HIPC Completion Point, including Ethiopia, Senegal and Madagascar, three countries which the IMF says is not yet deserving.

We are counting on you to instruct the Canadian Executive Director to the IMF to vote for immediate debt cancellation for countries at HIPC Completion Point.


Graham Saul
International Program Director
Friends of the Earth Canada
Chair of the Halifax Initiative Coalition

On behalf of its members:

Canadian Catholic Organization for Development and Peace
Canadian Conference of Catholic Bishops, Social Affairs Office
Canadian Council for International Co-operation (CCIC)
Canadian Friends of Burma
Canadian Labour Congress (CLC)
Canadian Lawyers for International Human Rights (CLAIHR)
CAW - Canada
CoDevelopment Canada
Democracy Watch
Falls Brook Centre
KAIROS: Canadian Ecumenical Justice Initiatives
MiningWatch Canada
North-South Institute
Oxfam Canada
Rights & Democracy
Sierra Club of Canada Nuclear Campaign
Social Justice Committee
Steelworkers Humanity Fund
Toronto Environmental Alliance
World Interaction Mondiale

Cc. Kevin Lynch, Canadian Executive Director to the IMF