Global Debt
Home Up Debt Forgiveness

Haitians selling biscuits made out of dirt.

 

"International debt in excess of $200 billion is a hurricane wreaking havoc upon the lives of impoverished peoples throughout Africa,

 Asia and Latin America. Canceling most international debts owed the US would cost $3 per US citizen. "

 

U.S. Bishops

 

 

 

"Love for others, and especially for the poor,
is made concrete by promoting justice.
It is not a matter of giving some surplus,
but of helping entire peoples.
It requires a change of lifestyles,
a reorientation of ourselves
and our organizations
toward the whole of the human family.
It asks for effective international agencies
to coordinate the powerful nations
and take into account the weaker ones—
which even the most powerful state on earth
would not be able to do on its own."

 

John Paul II

"The Hundreth Year"

1991

 

image:wehaitians.com 

image:maryknoll.org

America The National Catholic Weekly

Vol. 192 No. 10, March 21, 2005

 

Editorial: Debt Burdens and Poor Countries

Crippling debt burdens accumulated over the past several decades still weigh heavily on many of the world’s poorest countries. As they struggle to repay what they owe to rich countries and financial institutions like the World Bank and the International Monetary Fund, they find themselves with inadequate resources to cover the cost of basic services for education, health, clean water and rural roads. In 1994, Pope John Paul II urged in Tertio Millenio Adviente that in the spirit of the Book of Leviticus (25:8, 10), the international debt should be reduced or canceled outright, because it “seriously threatens the future of many nations.” Some progress has been made through the Heavily Indebted Poor Country (H.I.P.C.) initiative of the I.M.F. and the World Bank—adopted in 1996 and expanded in 1999. Kathy Selvaggio, advisor on economic justice issues at Catholic Relief Services, told America that although the levels of debt reduction have fallen short of what is needed, the money saved in debt service payments has been put to good use. She gave the example of Tanzania, which made a commitment to provide free primary education after it received debt relief, making it possible for over two million more children to attend school. She went on to say, however, that the steps toward debt relief have been insufficient.

What advocates seek, therefore, is 100 percent debt cancellation for all countries included in the H.I.P.C. initiative, as well as others that are also very poor and indebted. Finance ministers of the G-7 countries—Canada, United States, Japan, Britain, France, Germany and Italy—met to discuss the debt issue in early February. Held in London, the meeting was chaired by the United Kingdom, with the U.K. serving as leader. The U.K. has been pressing for a more generous approach to debt cancellation. Unlike the United States, it believes that more than the 37 H.I.P.C. countries should be included in the cancellation process. Gerald Flood, a consultant to the U.S. Conference of Catholic Bishops, told America that other poor countries like Haiti should also be included in the H.I.P.C. initiative; but they do not qualify under the initiative’s terms, because their debts are not considered heavy enough. So far, the U.S. view is that debt forgiveness should be limited to H.I.P.C. countries, a position with which the U.S.C.C.B. and C.R.S. disagree. In either case, to receive relief, indebted nations must meet various conditions, including making arrangements to ensure that debt relief savings will be used to reduce poverty.

Most rich lender countries have acted on their own to eliminate the debts owed them. Britain’s finance minister, for example, recently announced that it will cancel Mozambique’s $150 million debt to the U.K. No concrete decisions by the G-7 countries were made in February, but another meeting is scheduled for April. So far, with the possible exception of Japan, all these countries appear to be in favor of up to 100 percent debt relief. What is unclear is how debt relief on this scale should be financed. The U.K.’s Gerald Brown has suggested that the I.M.F. use part of its gold reserves to write off a portion of the poorest countries’ debt. Some resist this approach, fearing that it might hurt the organization’s financial standing.

But generous debt forgiveness is possible, as can be seen in the fact that the G-7 and other wealthy nations agreed in a single day to cancel 80 percent of the $39 billion owed by Iraq, with no conditions imposed and even without insisting on the track record of good economic management it requires of other poor countries. As Ms. Salvaggio pointed out, it comes down to a question of political will. But advocacy groups like C.R.S. and the U.S.C.C.B. also fear that large-scale debt cancellation might tempt some creditors to seek to recoup their losses by reducing the levels of financial assistance provided to developing countries. This would amount to a zero-sum game, because the debt cancellations would result in little poverty reduction in the neediest countries.

Nelson Mandela, who was in London at the time of the G-7 meeting in February, pleaded for an end to the debt crisis as one of the steps that the developed countries could and should take. The debt crisis goes counter to the United Nations’ millennium goal of halving the extreme poverty of developing countries. The time has come for 100 percent debt forgiveness to become a reality. All it takes is an exercise of political will on the part of the world’s richest nations.

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