No sooner is the ink dry on the G8 communiques than leaks begin to appear suggesting that the debt cancellation deal announced by the finance ministers is under threat. The BBC are reporting that a memo has been leaked to the Jubilee Debt Campaign (as yet there is no news on the JDC website) indicating that the Belgian government is likely to try to block the agreement when it comes before the IMF’s board.

Belgium, it seems, is reluctant to allow for 100% debt cancellation for any countries as that would reduce the leverage it would have over countries that are currently heavily indebted to it (whether directly or through the IMF). Since the finance ministers of the G8 called for IMF debts to be cancelled using existing IMF funds, cancellation will have to be approved by the whole board. Belgium alone could not block it, but there is speculation that other countries might follow their example. Belgium is proposing that instead of debt cancellation ‘grants’ be given to countries that would otherwise qualify, thereby relieving their immediate cashflow crises but doing nothing for their long-term stability.

The brazen approach of Belgium is in some ways a little light relief. The key reason more debt has not been cancelled before now is because of the leverage it gives the creditors, leverage to impose the favoured economic policies du jour and a wide variety of other demands. At least Belgium is being a bit more open about it, even if through leaked documents.

But this leak lays many other things bare. It is another indicator that the G8 is the wrong body to make these decisions. It is a club of powerful nations, but not of all powerful nations, and where its pronouncements affect those other nations there is a real danger that they will obstruct them. More significantly, it is yet another reminder that creditors are not the right people to be deciding on debt relief.

Decisions about debt cancellation must be handed off to an agency that has no interest in maintaining existing power relationships, but which can instead make decisions based on the legitimacy of loans, the debtors’ ability to pay, and the developmental effects of the cancellation. We might hope that Belgium’s reticence will demonstrate this to those national leaders more disposed to debt cancellation.

In all likelihood, however, it will gradually slip out of sight, just like the failure to deliver on previous debt cancellation promises has. Capaigners must work to make sure that does not happen, and remind the public that “great justice” has yet to be done.

Tags: debt cancellation | belgium | g8

Sometimes I can’t stop myself from banging my head against brick walls. Today’s impact was a response to this piece in the Florida Baptist Witness:

Dear Sir,

My wife passed me a link to the page on your website carrying an article about whether Southern Baptists should support the One campaign. Having read the article, I felt compelled to respond due to a number of inaccuracies it contained, as well as the presentation of a particular brand of economic thought as though it were beyond dispute.

Firstly, the One campaign is not “entertainer Bob Geldof’s” but is instead run by a coalition of faith-based groups, charities and other NGOs who have come together to form this campaign. One of those groups is DATA, the group that was founded by Sir Bob Geldof, Bono (of U2) and Bobby Shriver, but DATA is not the sole originator of this campaign. Secondly, Bob Geldof’s call for a million people to demonstrate at last week’s G8 summit is not the “one” of the campaign’s name, nor even a stated goal of the campaign, but is instead a personal plea by Sir Geldof.

The causes for which One is advocating are indeed complicated and warrant serious attention. Deep-seated corruption has indeed been one of the causes which has led to the terrible poverty experienced by many around the world, particularly in Africa. That corruption itself has many sources, including the poorly managed transition from colonial to self-rule, and a lack of democratic accountability.

That corruption has also been fed by western banks and corporations who have been willing to lend to corrupt regimes, and pay the bribes that support them. Particularly well documented is continued lending on the part of numerous organisations to Mobutu’s Kenya, even though memos have been published showing that the IMF and other bodies were well aware that Mobutu was placing up to a third of the money borrowed into his own private bank accounts. When the people of these countries have finally risen up and replaced corrupt dictators with democratic rulers, those rulers are handicapped by the legacy of these odious debts.

The campaigners calling for debt cancellation are inspired by the biblical call for Jubilee, the 50th year when debts were to be cancelled and property that had changed hands was to be returned to the families that previously held it. But we are well aware that mechanisms need to be put in place to stamp out corruption on both sides, to ensure that future loans are only given with adequate securities and guarantees that the money will go to the people and projects that most need it, and that any cancellation is carried out through a fair and transparent process which is open to scrutiny. We are also aware that the bible is very clear on the subject of usury, and many countries despite having paid back more than they originally borrowed find themselves still further indebted due to the build up of interest payments.

The responsibility for the debt burden that now hangs heavily on many poor countries is not owned by any one person or body. Insufficient scrutiny before loans are given (those of us who use banks surely hope that our banks check that projects will be successful before lending our money to them?), corrupt officials and corrupt borrowers are all to blame. Those of us who are concerned that justice should be done — who would echo Jesus’ call that the hungry be fed and the homeless given shelter — must work through this sorry mess. A robust new method of cancelling internatioanl debts is a vital start.

yours,

James Stewart

Yesterday saw another major debt cancellation announcement. Not from the G8 this time, but from a shadowy cabal of supposedly democratic governments.

One of the many dreadful injustices tied into the current international debt situation is that indebted governments are not allowed to negotiate ‘en bloc,’ while creditors routinely gather into groupings to negotiate together. One of those groupings is the Paris Club, a group of creditor governments that meet in private to decide on policies towards bilateral debt. It has long been a hard organization for interested parties to penetrate, and is just one of many institutions that desparately needs to be opened up so that voters can scrutinise its proceedings.

On Wednesday, the Paris Club made a very welcome surprise announcement. In a press release they announced an agreement in principle to cancel loans owed by Nigeria, a country that has (for various reasons) until now been excluded from debt deals such as HIPC. The press release states that:

The announcement takes place after Nigeria has recently been declared eligible to IDA-only borrowing status and at a time when Nigeria has decided to renew closer relations with the International Financial Institutions.

(”IDA-only borrowing status” means that Nigeria’s credit rating is now considered particularly low, so they are only eligible for what “International Development Association” backed loans. I had hoped to link to the World Bank FAQs on IDA, but that page of their site is devoid of content…)

In September 2001, Jubilee Plus published a report by Kwesi Owusu titled “Drops of oil in a sea of poverty: The case for a new debt deal for Nigeria,” the forward of which stated that Nigeria owed a total of US$28 billion, around 50% of which was due to “a build up of arrears due to the inability to pay over many years.”

Yet despite that inability to pay and continually mounting arrears (the BBC currently estimate Nigeria’s external debt at $35bn), it has taken four years for any group of creditors to announce even this level of willingness to negotiate debt cancellation for Nigeria. Nigeria currently pays out six times the amount they receive in aid in debt servicing, but those payments are not making any impact on their total indebtedness.

What this announcement does not mean is that Nigeria will immediately receive debt relief. While the BBC may have decided on a headline of “Nigeria to get $18bn debt relief,” the package announced by the Paris Club is contingent upon Nigeria completing certain deals with the IMF (the terms of which are yet to become clear) and may well take some time to come through.

Where this announcement is significant is that it is a signal that creditor countries may be beginning to realise that HIPC is not good enough. There are many countries which do not yet qualify for HIPC, but which, like Nigeria, are in desparate need of debt cancellation if they are ever to start digging themselves out of poverty.

The fact that Nigeria alone owes nearly as much as the amount cancelled under the G8 Finance Ministers’ meeting (which is supposed to assist between 18 and 38 countries) will hopefully provide pause for thought about how much further they could have gone, but have yet to.

Tags: Debt Cancellation | Paris Club | Nigeria

The BBC are appealing for messages. Here’s mine:

“Who are you and where did you come from? Or rather, who elected the leaders of these eight countries to make decisions that so deeply affect the whole world.

But if you’re going to be here, it’s about time you did something useful. Start by bringing about a truly transparent and effective debt cancellation process, that applies to all of a country’s debts (not 100% of some arbitrary portion) and channels funds to its poorest people.”