Bush & Blair announcement a tiny step forward, when giant leap is needed

Jubilee Debt Campaign is describing the latest Bush-Blair statements on debt relief as 'a tiny step forward when the world needs a giant leap'.

At a press conference in Washington on 7 June, US President George W Bush and the UK Prime Minister Tony Blair spoke of a consensus that "highly indebted developing countries that are on the path to reform should not be burdened by mountains of debt" and stated that they were "well on the way" to an agreement.

However, the statements left many questions unanswered. Firstly, it is not clear which countries would be covered: the discussion referred repeatedly to Africa, and it is possible that only countries which have completed the Heavily Indebted Poor Countries initiative would be included. This is only 18 countries (of which 15 are in Africa). Even more generous guesses are that only around 30 countries would be covered. Jubilee Debt Campaign's latest briefing, produced with ActionAid and Christian Aid, shows that at least 62 low-income countries need total debt cancellation if they are to stand any chance of meeting the Millennium Development Goals.

Secondly, the agreement does not look likely to cover all multilateral debts. President Bush referred specifically to debts owed to the World Bank and African Development Bank, which is consistent with most proposals coming out of G8 governments at the moment. However, it is unacceptable to exclude debts owed to the International Monetary Fund (IMF) and other multilateral institutions. Debts to the IMF account for about one third of HIPC debt.

Thirdly, there has not so far been any guarantee that cancellation will come with additional resources to off-set the cost of debt cancellation. This leaves open the possibility, previously called for by the US, that cancellation will be paid for out of aid budgets. Tony Blair talked about debt cancellation making a real difference "if… substantial funding is added". Without new resources, debt cancellation will not release any more money for poverty reduction.

Moreover, neither Bush nor Blair addressed the issue of economic policy conditions on debt cancellation. The HIPC initiative and other debt cancellation schemes all require countries to implement harmful and undemocratic conditions – such as enforced privatisations and trade liberalisation and cuts in public spending – before receiving debt cancellation. This is unacceptable. The proposals also did not address the issue of creditors’ responsibility in creating and perpetuating the debt crisis.

A full analysis of what debt cancellation is needed to meet the Millennium Development Goals – and how far current proposals fall short – can be found in our new briefing, In the Balance.