G8 finance ministers agree on deal to relieve debts of 18 poorest nations
Saturday, June 11, 2005
The finance ministers of the G8, the world’s eight richest countries, after years of pressure from wide coalitions of human rights campaigners, such as the Committee for the abolition of third world debt (CADTM), have agreed to a deal to relieve the debts of 18 of the poorest countries in the world, but have not yet published the full details.
The International Monetary Fund (IMF), the World Bank (WB), and the African Development Fund will write off all of the money owed to them by the selected countries. However, the Inter-American Development Bank (IDB) and the Asian Development Bank (AsDB) will not cancel debts owed to them by heavily indebted poor countries (HIPCs) such as Bolivia, Nicaragua, Honduras, Guyana, Vietnam, and Laos.
The countries to receive debt cancellation from the IMF, WB and the African Development Fund are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda, and Zambia.
The deal, devised by the United Kingdom, could potentially free up government revenue for domestic spending on things such as education and health services.
The World Bank, the International Monetary Fund and the African Development Fund will write off all of the money owed to them by the above listed nations. A total of $40bn will be cleared, which will save debt repayments of $1.5bn a year.
CADTM argues that this is a negligible effort by the rich countries, since $1.5bn a year is extremely small compared to the $350bn the G8 devote to farming subsidies or the $700bn they spend in military expenditure each year. Moreover, these 18 countries only represent about 5% of the population of developing countries.
Another twenty countries may become eligible to have their debts cleared if they meet criteria decided by G8 finance ministries.
According to G8 representatives, the main criteria are the reduction of corruption and better government. According to critics, such as the CADTM, the criteria include the privatisation of natural resources and of strategic economic sectors to the benefit of transnational corporations, higher costs of health care and education through privatisation, a rise in VAT, free flow of capital, which leads to capital leaving the country as shown by several UNCTAD reports, lower tariff protection, which leads to thousands of small and middle producers losing their livelihoods because they cannot compete with imported goods.
The CADTM claims that the G8 agreement can solve neither the issue of the debt nor the issue of poverty since it bears on only 2% of the external debt of developing countries and demand an immediate and complete cancellation of the public external debt of all developing countries, the burden of the debt being a major obstacle to meeting fundamental human needs.
Other groups, including charities, have similarly stated that the debts of 62 countries need to be cleared if the UN wants to meet its target of halving world poverty.
Fourteen of the countries to receive debt relief are in sub-Saharan Africa.
The alleviation of third world debt has been a lifelong ambition of Gordon Brown, the current UK chancellor, and he has used all of his political power and status to push for this agreement in the G8 group.