International
Debt Cancellation
Momentum builds to cancel Haiti’s debt
Momentum is really now building to cancel Haiti’s $1 billion debt and give the country a clean slate as it begins reconstruction efforts.
Since we launched our campaign we’ve seen real progress, which is giving us hope that we can help score a success.
According to reports, Venezuela now plans to cancel its share of the debt. As we’ve reported, Haiti’s debt to Venezuela is approximately $295 million. This is an enormous step forward in Haiti’s path to full debt cancellation. Announcing the cancellation, Venezuelan resident Hugo Chávez is reported to have said, “Haiti has no debt with Venezuela – on the contrary, it is Venezuela that has a historic debt with Haiti.”
Adding to the increasing volume of calls asking world leaders to forgive Haiti’s debt, Canada’s Finance Minister Jim Flaherty yesterday argued that given Haiti’s current focus and priorities, the country should not be burdened by “liabilities of its past.” Flaherty specifically called on others to follow Canada’s lead of debt cancellation.
All of this is very encouraging, but we still have much work to do. So our attention is now turning to governments directly, especially those attending the G7 Finance Ministers Meeting next week.
Thank you to everyone who has taken action so far. With your help we really are making a difference.
Delivering for Haiti
Momentum continues to grow for cancelation of Haiti’s $1 billion in debts so that the country can have a clean slate upon which to rebuild.
Yesterday evening ONE’s Tom Hart delivered the signatures of more than 150,000 ONE members calling for debt relief to the International Monetary Fund (IMF).
Tom Hart hands IMF Spokeswoman Caroline Atkinson a CD with the petition’s signatures
Of Haiti’s $1 billion debt, the IMF holds a relatively small amount, $165 million, but swift action by the IMF would increase momentum and pressure on all creditors. The IMF intends to move quickly to provide immediate financial assistance on the most favourable terms that it has at its disposal, zero-interest loans.
This delivery is just the first of several that we’ll have to make and we’ll have to work to put pressure on some of the other large creditors.
The response to the action has been incredible, and since we presented the petition to the IMF, almost 10,000 more people have signed, making our calls even stronger.
But we still have much work to do, and need to show continued and growing interest in debt cancellation.
So once you’ve signed, or if you’ve already done so, please do take a moment to ask 2-3 of your friends to join you in taking action. The more of us do it, the greater impact we’ll have when we hand over to the next of Haiti’s creditors.
Help Haiti Today
In the last few days, I have learned that most of my family members in Haiti, though homeless, are alive. Even as we grieve for those we lost, we are thankful for the safety of other loved ones, and for the incredible outpouring of concern, aid, and assistance coming from all over the world.
Since this disaster occurred last Tuesday, I have wanted nothing more than to go to Haiti to help, hold and comfort my family and other survivors. Knowing I can’t do that now, I am putting all my energies into helping Haitians rebuild their lives without the burden of debt. Like me you can’t go to Haiti today, but here is what we can do: we can convince global creditors to cancel Haiti’s $1 billion international debt.
Please click here to sign ONE’s petition calling for cancellation of Haiti’s debts
Petition text:
As Haiti rebuilds from this disaster, please work to secure the immediate cancellation of Haiti’s $1 billion debt and ensure that any emergency earthquake assistance is provided in the form of grants, not debt-incurring loans.
Haiti needs a sustained international effort as it seeks to recover from this earthquake. The current outpouring of support is encouraging, and now we need to cancel Haiti’s debt so the country can start its recovery without the burden of debts it won’t be able to pay. In addition we must be vigilant that new aid doesn’t come in the form of loans that would create new debt for Haiti.
But here and now, there is a very clear goal: let’s get rid of this crippling debt.
Keren Dongo
Community Engagement Manager, ONE.org
P.S. Today we updated our petition text from our initial ask for $890 million worth of debt cancellation to $1 billion to reflect new information on further debt of which we were not previously aware.
The State of Debt Cancellation
For those unfamiliar with the term, certain countries are considered Heavily Indebted Poor Countries, or HIPC. These are countries that can get special assistance from the International Monetary Fund and World Bank.
The annual “HIPC Status of implementation” report was published a couple of weeks ago. The report has some interesting information in it:
In total, 35 out of 40 HIPCs have qualified for assistance; and 26 have reached completion point. For the 35 post-decision-point HIPCs, poverty reducing expenditures between 2001 and 2008 increased by 2 percentage points of GDP, on average.
The total amount of debt cancellation now stands at $117 billion, out of which $72 billion was cancelled under HIPC and $45 billion under the Multilateral Debt Relief Initiative. This is an increase of roughly $5.5 billion in cancelled debt since last year. However, the number of post-completion-point countries that are at risk of re-incurring unsustainable debt (especially due to the global economic crisis) has increased from four in 2008 to five now.
This highlights the importance of continuing and expanding the initiative. Post completion point countries must have a chance to maintain bearable levels of debt even when shocks, such as the global economic crisis, occur. This can be done by providing grants rather than loans for example. Otherwise, financing the achievement of the Millennium Development Goals in many countries will be tantamount to re-accumulating unsustainable debt.
How to Avoid a Renewed Debt Crisis in Africa
I recently attended a very interesting congressional briefing titled “The Global Financial Crisis and Africa: How to Avoid a Renewed Debt Crisis?” hosted by partner organizations Jubilee USA Network, the Evangelical Lutheran Church of America, the American Jewish World Service and the Episcopal Church. The conversation focused around how to preserve the achievements that many African countries have made over the last five or so years (with help from debt relief and increased trade) in light of the current global financial crisis. One of the measures suggested was that the International Monetary Fund (IMF) direct revenue from its upcoming gold reserve sales to developing countries.
As explained by Matthew Martin, Director of Debt Relief International, countries freed from odious debt have been able to invest in national poverty-fighting strategies such as lowering the barriers to healthcare and education by reducing user fees and improving infrastructure. In turn, debt relief empowers countries to be less dependent on foreign assistance in the future. Hon. Timothy Thahane, Minister of Finance and Development Planning for Lesotho, shared how when Lesotho received debt relief from the United Kingdom, they immediately redirected monies previously spent on debt relief service to vulnerable populations by providing free primary education, school feeding programs, and antiretroviral drugs for persons living with HIV/AIDS.
All this was somberly put into context when Thahane explained that the gains in employment and revenue due to debt relief and increased trade vis-à-vis the African Growth and Opportunity Act (AGOA), are currently threatened by the global financial crisis. The World Bank has estimated that an additional 53 million people will be forced to live on less than $1 per day as a result of the global economic downturn. The decline in commodity prices, remittances, and demand for exports has already had a dramatic effect throughout the continent. For example, the downward trend of car manufacturing in the U.S. has led to a significant decline in steel exports, which has impacted steel-producing African countries such as Guinea, Liberia and South Africa. Similarly, the sudden decline in demand for textile exports, led to a loss of 12,000 jobs in Lesotho, which impacts 40,000-50,000 lives.
Vitalis Meja, Program Director of African Network on Debt and Development (Afrodad) warned that the economic situation will make it very difficult for African countries to achieve the Millennium Development Goals (MDGs) and called on donor countries to resist reducing Official Development Assistance (ODA). Meja called for the reform of lending practices and joined the other panelists in asking the IMF to allocate revenue from its gold sales for debt relief and grants for the world’s poorest countries, which would help them weather the current economic crisis and avoid falling back into another debt crisis. Lesotho would be one of the countries that would directly benefits.
More information about the IMF gold sales and its potential to help low-income countries can be found in briefings prepared by ONE and Jubilee USA.
-Margaret McDonnell, US NGO Partnerships & Faith Relations Team
Liberia Slashes its Debt with Historic Buyback Deal!
Liberia bought back $1.2 billion in debt today at a 97% discount, “the steepest ever negotiated on developing country commercial debt.”
From the World Bank:
“The deal was concluded with the payment of $38 million to retire 25 outstanding commercial claims. The World Bank contributed half of this money through the International Development Association (IDA) Debt Reduction Facility, and Germany, Norway, the United Kingdom, and the United States contributed the other half.
“The successful resolution of this inherited debt, which had ballooned through interest and penalty charges during a period when my country was wracked by civil war, is an important step on our road to recovery,” said Liberian President Ellen Johnson Sirleaf. “This puts us on a firmer footing to attract investment and accelerate economic growth.”
Expect more from ONE soon on this amazing update.
-Virginia Simmons
Burundi’s Debt Canceled
On January 29, Burundi reached its debt-canceling “completion point”! This is the final stage of the Highly Indebted Poor Country Initiative (HIPC) which seeks to cancel highly indebted countries’ loans. After a long process, Burundi, a small country in Eastern Africa will now receive irrevocable cancellation of a little less than $ 1 billion in debt. This is composed of $833 million under HIPC and $105 million under the Multilateral Debt initiative (MDRI). MDRI is only accessible to countries that have reached the HIPC-completion point and it complements HIPC, which is basically focused on bilateral debt.
Burundi has improved the quality of its fiscal and debt management. The funds that no longer need to be paid to international financial institutions can now go towards economic and social recovery of the country, which is needed to stabilize its post-conflict society.
-Andreas Huebers
A Victory for Transparency
Here at ONE we love a good news story and this is a mini-victory for transparency!
The Paris Club of creditor nations has published the list of its debt claims on individual countries. Although people have long argued for this, it’s the first time they have published this information. This is a great step forwards in terms of transparency and gives the public an opportunity to look at the figures.
The Paris Club, originating in 1956, is an informal group made up of finance officials from 19 of the world’s richest countries. According to their website their role is “to find co-ordinated and sustainable solutions to the payment difficulties experiences by debtor nations”.
In April 2006, Nigeria became the first African country to fully pay off its debt (estimated $30 billion) owed to the Paris Club.
You can view the list of Paris Club’s debt claims here.
-Jessica Gomez-Duran, UK ONE Media Assistant
Status check: debt relief delivery
Last month, the World Bank and the International Monetary Fund released their annual report on the status of debt cancellation for the world’s poorest countries.
The report monitors the two initiatives that channel debt relief: the Highly Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative, called MDRI. Together, these two initiatives have mobilized debt relief for 41 of the world’s poorest countries, 33 of which are in Africa. In exchange for debt relief, poor countries adopt economic policy reforms and agree to channel the debt savings to poverty reduction activities.
ONE’s debt expert and Berlin-based Policy Manager Andreas Huebers sent along the following summary after combing through the report:
In September, the IMF and World Bank released their annual report on the progress of debt cancellation. In the last year, two African countries have started to benefit from debt relief- Liberia (which ONE members helped make possible) and the Central African Republic. The Gambia has also completed its debt relief program. These developments bring the overall debt cancellation provided by the HIPC and MDRI initiatives from $105 billion to $111 billion. The next African countries that are expected to progress to the next stage in the coming months are Togo, Cote d’Ivoire Burundi and Guinea.
Debt relief is continuing to free up government resources to fight poverty. The report found that in post-decision point HIPC countries, government expenditures targeting poverty reduction increased on average from under 7% of GDP in 2000 to 9% in 2006. This translated to $17 billion in 2006, which represents a substantial increase of $3 billion since 2005. These expenditures are more than five times the level what countries now paying to service their debts, a major improvement from a decade ago when some countries were spending more repaying old debts than on health and education combined.
Read more about how the financial crisis might impact debt cancellation.
Liberia’s Debt and the IMF in the News
Development expert Steve Radelet wrote an important piece on the state of debt relief in Liberia on Nicholas Kristof’s NYT blog earlier this month.
Radelet writes:
“Liberia is beginning to rebound from its devastating civil war and the monstrous incompetence of [the country's former Presidents] Samuel Doe and Charles Taylor that nearly destroyed the country.
Liberia is at peace, the economy is growing, democracy is taking root, kids are going back to school and families are being united…Liberia’s “control of corruption” index, as measured by the World Bank, registered the second-largest improvement of any country in the world this year.”
And then he talks about their debt situation:
“Most [of the debt] was borrowed by Samuel Doe in the early 1980s, and has not been paid since 1984. With penalty interest, Liberians today are stuck with the bill: $4.5 billion, equivalent to a massive 3,000 percent of exports, the highest ratio in the world.
The major creditors all have pledged to forgive Liberia’s debts, but the process is stuck at the IMF, where the Board has been debating for a full year how to share the costs of the write-off. A solution seems at hand, but it isn’t done yet, and meanwhile Liberia must wait (if you feel so moved, write this week to the Managing Director of the IMF and ask for fast action to resolve Liberia’s debt crisis).”
You can read the full piece here.
(Note that Liberia’s turn around happened after they elected President Ellen Johnson Sirleaf, the first woman elected head of state in Africa. Radelet closes by saying: “I hate to be a sexist, but maybe we ought to put more women in charge in tough places around the world.”)
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About the Blog
The International ONE Blog is a daily log of the anti-poverty movement. The site is operated by ONE staff, with guest contributions from ONE volunteers, members and allies.
The content of each post and each comment represents the views of that author and does not necessarily reflect the views of ONE. ONE does not support or oppose any candidate for elected office, and any post expressing support or opposition for a candidate is not endorsed by ONE.
TAGS: Debt Cancellation, Haiti, Spotlight