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G-8 Challenged to Outlaw Unjust Debts to African Countries

In the two years since the G-8 Gleneagles debt relief agreement, African nations have seen a majority of their debts to the IMF, the World Bank, and the African Development Bank cancelled under terms of the Multilateral Debt Relief Initiative (MDRI). As G-8 countries get ready to meet next month in Germany, one of the challenges to a broader solution to unfair and unjust financial burdens is the threat posed by so-called vulture funds, which speculate and profiteer from poor countries’ debts in default. The director of the Jubilee USA Network, Neil Watkins, asked a House foreign affairs subcommittee this week to address this challenge at upcoming world trade talks. He explains how vulture funds have impeded Zambia’s economic recovery.

“Romania offered Zambia a loan in the late 1970’s, and in the late 1990’s, Romania sold that debt for a fraction of the original value, which was just over three million dollars. And it was picked up by a vulture fund called Donegal, who then enforced the debt and sued the government of Zambia for 55 million dollars, claiming that it was entitled, not only to the face value of the debt, but also interest and penalties,” he said.

About a month ago, in court in London, the court ruled that Zambia had to pay 15 million dollars, which Watkins notes is “not quite as much as they had asked for, but still, a significant amount of money to owe Donegal in damages.” To counteract this and other liabilities plaguing financially strapped countries trying to loosen their indebtedness, Watkins told Congress, the G-8 nations should take action next month at their summit in Germany.

“First, they can call on the World Bank to expand access to its debt reduction facility, which actually buys back debt which is at risk of being bought up by vulture funds. Second, they should support a charter for responsible lending, which would not allow these practices to continue. And third, they should help provide technical and legal assistance to countries which are threatened by vulture fund cases because many countries simply don’t know how to respond and don’t have the expertise on hand,” he recommended.

Watkins says that ultimately, the United States and other nations will also have to change their international trade laws to ensure that vulture lending practices won’t continue into the future.

On another topic, the Jubilee USA director described yesterday’s meeting in Paris between Liberian President Ellen Johnson Sirleaf and incoming French President Nicolas Sarkozy as very important.

“France continues to be one the countries which has not agreed to a way to solve the Liberian debt problems. So it’s very important that France moves forward quickly to support full debt cancellation for Liberia, a clearing of their arrears. This (Liberia) is a country that has suffered through decades of terrible conflict, faces a tremendous need to rebuild, and really, the next couple of weeks at the G-8 summit, there needs to be an agreement reached to cancel Liberia’s debt, and France is key to that,” he explained.