KAIROS Statement on Global Day of Action Against Debt Domination
Dec. 8, 2004
Developing countries’ debts reached US$2.4 trillion at the end of 2003, almost four and a half times as much as what they owed in 1980 on the eve of the international debt crisis. Since then developing countries have paid about nine and a half dollars in debt service for every dollar owed in 1980. New loans have been used primarily to roll over old debts, rather than for meaningful investments in human or economic development.
As KAIROS observes the second annual day of action against unjust and illegitimate debts, we renew our call for the elimination of debts that have already been paid many times over. We also demand the release of impoverished countries from disastrous Structural Adjustment Programs (SAPs) imposed by their creditors.
Over the past year expectations of imminent cancellation of unjust and illegitimate debts have risen due to recognition of five realities:
1) Bilateral debt relief is inadequate when weighed against multilateral debts:
The amount of bilateral (that is country-to-country) debt relief delivered by Canada to 14 low-income countries reached approximately C$609 million in November. If 5 low-income countries persist in applying International Monetary Fund and World Bank SAPs, Canada will one day cancel another C$379 million of their bilateral debts. Thus total Canadian bilateral debt relief for poor countries could amount to about C$1 billion.
But, for every dollar of Canadian debt relief, Sub-Saharan African countries owe another $94 to multilateral financial institutions, principally the World Bank and the African Development Bank.
Canada must build on the leadership shown by being the first country to remit 100% of bilateral debts and take initiatives to ensure that low-income countries’ debts to multilateral institutions are also written off unconditionally.
2) Some G7 Governments recognize the HIPC initiative has failed:
Some Group of Seven industrialized countries have recognized that the official Heavily Indebted Poor Countries (HIPC) initiative has been a failure. Canadian Finance Minister Ralph Goodale notes that 6 of 11 African countries that have completed the HIPC process still have debts deemed to be “unsustainable” and that many low-income countries have to make payments to multilateral financial institutions that are too high relative to their ability to pay and their social needs.
Indeed of the twenty-seven countries that have qualified for debt relief under HIPC, nine had or will have to make higher debt service payments after receiving HIPC “debt relief” than what they paid beforehand.
The United Kingdom and the United States have proposed that up to 100% of the debts owed to multilateral financial institutions by some low-income countries should be cancelled. However, the G7 Finance Ministers have not yet agreed on how to pay for such debt remission.
Canada should broker a deal among creditors to cover the costs of 100% multilateral debt remission. The resources should come from a sale or a revaluation of a portion of the IMF’s gold holdings, using some of the World Bank’s loan loss reserves and retained earnings and, only if necessary, using new Official Development Assistance allocations.
3) Some G7 countries have begun to question World Bank and IMF conditions:
Britain has issued a document which questions conditionality in such areas as privatization and trade liberalization. Minister Goodale has recognized the need for donors “to become more sensitive to local conditions, especially with respect to structural reform conditionality.”
But, so far G7 governments have not questioned core IMF macroeconomic policy prescriptions that have not only failed to stimulate growth but actually worsened poverty.
KAIROS continues to insist that debt relief must not be conditional on the implementation of IMF and World Bank Structural Adjustment Programs. Twenty years of experience with SAPs have resulted in disappointing levels of economic growth, efficiency and competitiveness; the misallocation of financial resources; the destruction of national productive capacity; extensive environmental damage and growing poverty and inequality.
4) A de facto recognition that odious debts need not be repaid
Creditor governments have de facto recognized Iraqi debts as “odious”, that is, as debts contracted by a dictatorial regime against the interests of the people, without their consent but with the awareness of the creditors.
A wide-spectrum of Iraqi society insists that once a democratically elected government is established debts left over from the Saddam Hussein dictatorship must be recognized as odious and need not be repaid.
We in KAIROS demand that neither the people of Iraq, nor citizens of other countries formerly ruled by dictators, should be obliged to repay odious debts. Debts contracted by other notorious dictators, such as Mobutu Sese Seko who ruled Zaire (now the Democratic Republic of the Congo) with an iron fist from 1965 to 1989 and the generals who waged their “dirty war” against the people of Argentina from 1976 to 1983 are equally odious and must not be repaid.
5) Debts whose repayment denies peoples’ basic rights to food, shelter, health care and education are illegitimate and must not be paid:
There is a growing recognition that official commitments to meeting the Millennium Development Goals (MDGs) will never be reached as long as impoverished countries must keep up payments on external debts. The MDGs include commitments to cutting in half the proportion of people living in extreme poverty and who suffer from hunger, achieving universal primary education, eliminating gender discrimination in education, reducing child-mortality by two-thirds and maternal mortality by three-quarters, halting the spread of HIV/AIDS, malaria and other major diseases and halving the number of people without safe drinking water – all by 2015.
African governments spend an average of US$14 per person a year on debt service and just US$5 per capita on health care. With 25 million people living with HIV/AIDS in Africa alone, how can creditors collect even one dollar in debt service from these impoverished countries?
Therefore on this Day of Action we in KAIROS call upon the Government of Canada to
- SUPPORT the immediate and unconditional cancellation of 100% of the debts owed to multilateral financial institutions by low-income countries that need debt cancellation in order to meet the Millennium Development Goals;
- ENSURE that countries who receive debt cancellation are free to implement their own national development strategies by ending adherence to IMF Structural Adjustment Programs as conditions for receiving debt remission;
- RECOGNISE that neither the people of Iraq, nor citizens of other countries formerly ruled by dictators, should be obliged to repay odious debts; and
- GUARANTEE adequate financing for impoverished countries including the dedication of 0.7% of Gross National Income to Official Development Assistance, not as an act off charity but as reparations for past exploitation.