8. Doesn't corruption make debt cancellation pointless?

No. Corruption is a big problem in some places - but funds from debt cancellation do make a difference.

A number of poor countries have – or have had – problems with corruption. However, this does not undermine the effects of debt cancellation: on the contrary, repeated studies have shown that money from debt cancellation does go where it is needed. One study of 10 African countries found a 40% increase in education spending and a 70% increase in health spending after just four years of debt relief. A study by IMF economists in 2006 confirmed again that cutting poor countries’ debt payments has a "significant" impact in terms of increasing social spending.

Governance is improving in many countries, and these efforts must be supported. But continued demand for debt payment weakens government structures and can worsen corruption.

Dealing with corruption also means redressing past corruption: it must be recognised that countries should not repay unjust or 'illegitimate' debts, which include those on loans that the rich world gave to corrupt leaders, knowing that they would steal the money. This was the case in, for instance, Zaire (now Democratic Republic of Congo) and Sierra Leone, where rich world loans helped to prop up corrupt and oppressive regimes - and where creditors subsequently demanded repayment from the people who suffered under those regimes.

There must be mechanisms in place to ensure that the proceeds of debt cancellation are not misused through corruption. Campaigners in indebted countries demand this. These should include creditor and debtor governments publishing and making accessible all information about loans and debt cancellation. Where governments can't deliver this, debt payments could instead be rediverted towards, for instance, humanitarian projects in the country: the solution is not for the rich world to take the money.

Download our full statement on transparency, accountability and corruption using the link on the right.

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