The G8 and debt cancellation – the facts
1 July 2005The G8 meets in Gleneagles: will they go further on debt – or unpick last month’s finance ministers deal? The Finance Ministers' proposal was for a deal on debt cancellation that, if ratified:
- would only apply to some multilateral debt, not all;
- would immediately benefit 18 countries, and may benefit up to 38. At least 60 countries need an immediate 100 per cent debt cancellation if they are to meet the Millennium Development Goals.
- according to our figures, would reduce poor countries' debt service 2005 by $742 million, $633 million in Africa – less than $1 per person in sub-Saharan Africa. (The quoted $40 and $55 billion is the potential value of the deal over a 40 year period.
- would reinforce the economic policy conditions enforced through the Heavily Indebted Poor Countries (HIPC) Initiative.
- ‘In 2003, the total (public) debt service paid by all sub-Saharan African countries amounted to US$8.6 billion. Of this, US$2.4 billion was paid to bilateral lenders, US$2 billion to multilateral lenders, and US$4.2 billion to private creditors.’ (Commission for Africa)
- "Well-managed debt relief has produced many success stories. Uganda used the money to double primary school enrolment and invest in a successful HIV/AIDS plan. Mozambique’s debt relief has enabled its government to immunise 500,000 children. Benin eliminated school fees in rural areas, allowing thousands of children to attend classes for the first time." (Conservative Party manifesto)
- In just four years, 10 African countries increased education spending by over 40% and health spending by over 70% because of debt relief. (Jubilee Debt Campaign)
- "Debt relief is highly efficient compared with other aid modalities in that it can deliver flexible long-term, untied, predictable and on-budget resources." (Commission for Africa)
- "Over the years Africa has had difficulty in paying off the interest – let alone the capital – on these debts. Even after various rounds of debt reduction, sub-Saharan Africa still pays out more on debt service than it spends on health (around 3% of its annual income)." (Commission for Africa)
- In 2004, Zambia paid more in debt service just to the IMF than its entire education budget; Malawi spends more on debt than on health – despite one in seven Malawians being HIV positive. (Jubilee Zambia; Jubilee Debt Campaign)
At the behest of the World Bank and IMF, Senegal liberalised its groundnut sector in 2002, which provoked a near state of famine in rural areas. As a result of the ‘reform’, less than 30 per cent of the groundnut crop was collected, farmers lost millions of dollars in income, the government had to step in with a bail-out package worth some $23 million and economic growth was cut in half. Despite this failure, the liberalisation of the rest of the groundnut sector is one of the conditions for Senegal to receive debt relief. This places Senegal’s government in an impossible position: implement a policy that could spell disaster for your economy or not get debt relief. (WDM, Nov 2003) Contacts:
- Stephen Rand, co chair; Edinburgh 1-4 July, Gleneagles 5-8 July, 07889 158215. (Stephen is also a spokesperson for Make Poverty History)
- Caroline Pearce, campaigns officer; Edinburgh 1-9 July, 07791 971890
- Trisha Rogers, national coordinator; Edinburgh 1-3 July, London 4-8 July, 07712 005666