– There has been lots happening in the debt relief movement around
the world. The Jubilee 2000 push for debt relief has never had more
momentum than right now. But as Bono (from U2) quipped at the recent
G7 summit, “There is no honour in getting halfway up Everest.”
Jubilee 2000 has helped the world to take significant strides, but
there is still a long way to go.

QUOTE: “A child born in a highly indebted African country is more
likely to suffer premature death than to attend secondary school.”

THE G7 TAKE A SMALL FIRST STEP

Amidst the fanfare of popstars, politicians, and populace at the
Cologne Summit on the weekend of June 18-20, the seven most powerful
nations (the G7) agreed to cancel an additional US$45 billion of poor
country debt. This raises the amount of debt relief from the previous
cumulative total of $45 billion to the current amount of $100
billion.

THE FACTS

Governments and the media have a habit of distorting things. In order
to help separate the truths from the hype we have prepared a brief
summary of the core decisions made by the G8 summit in Cologne:

In total there is a new cancellation of US$45 billion of poor country
debt stock. Government and media quotes of $70 billion and $100
billion are misleading in that they include debt which had already
been previously cancelled. The $70 billion figure comes from adding
the Cologne $45 billion to the previously agreed cancellation level
of $25 billion. The $100 billion figure comes by adding a further $30
billion which had also been previously agreed to under Paris Club
terms. The $45 billion of newly cancelled debt is made up of two
parts: $20 billion is the cancellation of Official Development
Assistance loans (long term and low interest loans) which have been
given in the past as “aid.” The other $25 billion represents a
doubling of the size of debt relief under the Highly Indebted Poor
Countries (HIPC) Initiative from $25 to $50 billion.

Other changes to HIPC include the formalisation of a flexible
qualifying time for debt relief. Under the original HIPC Initiative
poor countries had to implement IMF dictated strucutral adjustment
programs for two periods of three years before they received debt
relief. Gradually this evolved to the position of the new agreement
in which there is a ‘floating completion point.’ Under certain
conditions (decided by creditors) countries may receive relief at any
time during the second three year term.

Under the new conditions it is expected that around 24 countries will
receive some debt relief by the end of the year 2000. nAlthough the
G7 agreed to sell ten million ounces of IMF gold stocks (valued at
$2.6 billion) to help finance the new HIPC Initiative, it is unlikely
this will actually happen.

For further information about the Cologne agreement contact the
Jubilee 2000 office or check out the article by researcher Joseph
Hanlon at http://www.jubilee2000uk.org/news/kolndebt.html.

OUR CONCERNS

Almost nothing has changed in the actual amount the poor countries
are paying. The real flow of money out of poor countries will remain
the same even if the size of debt stock becomes smaller on paper. In
most cases the debt that has been cancelled was debt that poor
countries were never going to pay anyway since creditor nations had
already written it off as bad debt. Cologne debt cancellation is a
feigned generosity embellished for the sake of image.

Our concern is that the new levels of debt repayment are still beyond
what a country can repay without directing funds away from essential
areas such as health and education.

Tanzania, for example, has a foreign debt of US$7.4 billion. It has a
debt- to-export ratio around 500%. It spends one and a half times
more on debt service than on health. It has a debt service bill of
$250 million per year. Under the old HIPC Initiative Tanzania would
have saved $10 million per year in debt service. Under the terms of
the new HIPC Initiative agreed to in Cologne, this amount would be
increased to $16 million. This won’t make much real difference to the
poor in Tanzania.

The Cologne agreement has not changed the fundamental structure of
the HIPC Initiative. Despite widespread evidence of the detrimental
effects of structural adjustment programs on the poor, debt relief is
still conditional upon implementation of these strict financial
reforms designed by the IMF.

It is feared that creditor governments will fund debt relief by
removing money from already decreasing aid money. Australia, for
example, hasn’t provided a cent of new money to the HIPC Initiative;
instead it has redirected $30.5 million from other areas of our
diminishing aid budget.

Although rhetoric stipulating that civil groups in poor countries
need to be ‘consulted,’ creditors still maintain final say about all
decisions.

In canceling $45 billion the G7 has taken an important step forward,
but it is only a first step!

NEW DIRECTIONS GLOBALLY…

At the Cologne Summit Bono quipped, “There is no honour in getting
halfway up Everest.” Jubilee 2000 has come a long way, but the lives
of many of the poorest of the poor will remain unaffected until rich
nations go further to challenge the injustices of our global economic
system. Internationally Jubilee 2000 will be campaigning “to
intensify pressure on the G7 for a new decision,” to make the most of
the year 2000, and to help the world to see that debt is our modern
form of slavery.

IT CAN BE PAID!

A recent study by Jeffrey Sachs, Director Harvard Institute of
International Development, has shown that the major creditors owed
money by the Highly Indebted Poor Countries can “easily” cover a
compete cancellation of these debts without significantly
compromising their capital base or credit rating. He concludes that
“The cruelest joke in the whole debate on debt relief is the claim of
the rich countries that they are ‘too poor’ to heed the call of deep
debt cancellation.”

Not only is debt cancellation possible, it is the only solution to
the poor country debt crisis. Sachs argues that “realism calls for
very deep writedowns, indeed complete forgiveness, for many of the
HIPCs. The call of the worldwide Jubilee 2000 movement for such deep
writeoffs is fully justified and achievable.”

(Taken from a report given to the US Congress House Committee on
Banking and Financial Services, June 15, 1999.)

From the Australian Offices of:

the Jubilee 2000 Debt Coalition http://www.jubilee2000uk.org/

and

TEAR Australia (Christian Action with the World’s Poor)
PO BOX 289, Hawthorn 3122, Australia
Ph: (03) 9819 1900, Fax: (03) 9818 3586.
Email: