Norway sets standard for rich countries

The Norwegian government yesterday took the unprecedented step of accepting that its own bad lending in the past was responsible for debts being paid by five poor countries - and cancelled these debts without conditions.

Debt campaigners around the world have welcomed the move as a crucial breakthrough in the campaign for rich countries to accept the role they have played in creating poor countries debt crises, through their own reckless or self-interested lending. Kjetil G. Abildsnes, chair of Jubilee Norway, described it as "simply historic" and as "showing political courage that won't go unnoticed". The Norwegian Jubilee Campaign and Norwegian Church Aid have long been campaigning for cancellation of Norway's illegitimate debts.

Jubilee Norway (SLUG)

Norway is cancelling, without conditions, a total of US $80 million of debts being paid by Ecuador, Egypt, Jamaica, Peru and Sierra Leone. The debts came from loans incurred through Norway's 'Ship Export Campaign' between 1976 and 1980. During the campaign, Norway propped up its own ship-building industry by encouraging poor countries to take out loans to buy Norwegian-built ships. Many of the ships were useless (such as saltwater ships sold for use on the Nile) or had to be rebuilt. The Norwegian government, in its statement, accepted that the loans were made without conducting proper "needs assessment and risk analyses" and that many of the projects were "economically unsustainable". It concluded that the loans should not have been made, that the campaign was a "development policy failure" and that Norway therefore "has a shared responsibility for the debts that followed".

This is a very significant move in a number of ways:

Norway is accepting responsibility for bad lending
Debt campaigners - not least in Norway - have long been arguing for cancellation not only of unpayable, but also of unjust (or 'illegitimate') debts. International debt cancellation schemes are still based only on creditors' calculations of what they think poor countries can afford, without taking into account what they need to spend on their people's own needs or where the debts came from. It is simply unacceptable that poor people around the world are still paying off debts that came from rich countries' negligent, corrupt or politically-motivated lending - as Norway has recognised.

Norway is cancelling the debts without conditions

Jubilee Norway (SLUG)

Most debt cancellation only comes after poor countries spend years complying with damaging and undemocratic conditions imposed by the rich world. Norway is cancelling these debts without conditions.

Norway is not paying for this cancellation from aid budgets
The Norwegian government has explicitly said that it will not pay for this debt cancellation out of its aid budget OR count it as an increase in its aid. Usually, all debt cancellation is counted as aid - whether or not its motivation is development, and whether or not it is cancelling 'debts' that should never be considered legitimate in the first place. For instance, more than half of the global increase in aid last year was accounted for by cancellation of Iraqi debts.

Norway is setting a standard for other rich governments
This cancellation creates serious pressure on other rich governments to live up to Norway's example, by examining the legitimacy of their outstanding debts and cancelling those found to be unjust. It also higlights the need to ensure that money is lent responsibly in future, to prevent such debts recurring. Norway's Development Minister, Erik Solheim, explicitly said that "by cancelling these debts we want to give rise to an international debate on lender responsibility". Jubilee Debt Campaign is also calling for such a debate.

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