4. Hasn't all the debt been cancelled?No! Thanks to campaigners, debt cancellation has become a reality - but the debt crisis is still with us. This includes ‘illegitimate’ debts such as those on loans knowingly given to dictators or for useless or harmful projects. But it is true that there has been substantial cancellation. Before the debt campaign really got underway in the 1990s, this seemed an unattainable goal. Now, thanks to campaigner pressure, cancellation happens in various ways - but there is still very far to go. The major debt cancellation schemes have written off $110 billion in debt so far. These schemes are:
The Heavily Indebted Poor Countries (HIPC) initiative
This is the major international debt relief scheme for the poorest countries. Whilst it has led to some crucial reductions in debt burdens, HIPC, which is run by creditors, is open to too few countries, doesn’t properly assess the need or justification for debt cancellation, and offers too little, too slowly, with harmful conditions attached. HIPC cancels debt to a level that it considers 'sustainable' - based on countries' export earnings, but not taking into account the other demands on their finances, nor whether the debts themselves are legitimate. More than $55 billion has so far been cancelled for 32 countries through HIPC since it was launched in 1996. Another six are currently going through the scheme, and a further four are eligible to enter. (See our in-depth section on HIPC for more details.)
The Multilateral Debt Relief Initiative (MDRI)
MDRI is the scheme that came out of the G8 agreement to cancel more debt at their summit in Gleneagles in 2005: the decision came after massive campaigner pressure through MAKEPOVERTYHISTORY and the Global Call to Action Against Poverty. It is only open to countries that have already been through HIPC and met all its conditions. Once they complete HIPC, MDRI means that they get cancellation of more World Bank, IMF African Development Fund, and more recently Inter-American Development Bank debts than was originally agreed through HIPC. Campaigners have pointed out that this is unfair to those countries who still have debts to, for instance, the Asian Development Bank. By early 2010, 32 countries had had around $45 billion cancelled under the MDRI.
The Paris Club
This is a 'club' of rich governments which are owed money by poorer countries: it is the way that rich countries club together to negotiate with poorer countries who are having difficulties paying debts. It deals only with debt owed directly to those governments, not with debt owed to international bodies like the World Bank, or to private banks. The Paris Club is notoriously opaque: Finance Ministers of poor countries approaching the Club have complained that there are no clear rules, and that rich countries dominate the conversation. Often the Paris Club just agrees to ‘reschedule’ debts – that is, to let poor countries pay them off over a longer period – although since 1994, it has also cancelled debts. Countries that go through HIPC get their debts cancelled by the Paris Club. In late 2005, the Paris Club agreed to cancel $18 billion of Nigeria's debt – although it had to pay off the remaining $12 billion upfront.
Thanks to campaigner pressure, debts have been cancelled, and debt cancellation is taken seriously by governments. But this does not mean that we are anywhere near a full and just resolution of the debt crisis. Debt cancellation should include all illegitimate - including unpayable - debt.
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