G-7 finance ministers are being called on to endorse total debt cancellation for the world’s poorest nations. The ministers are scheduled to meet in Washington, DC, October 1st. Supporters of the proposal say if poor nations spend less money on debt relief they can spend more fighting HIV/AIDS and other diseases. The supporters presented their case in an international teleconference. In 1996, The World Bank and the IMF began HIPC (HIP-ik), the Highly Indebted Poor Countries Initiative. According to officials the aim was to “reduce debts to sustainable levels for poor countries that pursue economic and social policy reforms.”
Supporters of HIPC say it has greatly reduced the debt burden of poor countries. However, critics say it has not gone far enough.
When G-7 finance ministers meet in Washington, they are expected to consider a US proposal for 100 percent debt cancellation for over thirty countries. It has the support of such groups as the Jubilee USA Network. Marie Clarke is the National Coordinator.
She says, "When a country has more access to its own resources through debt relief, they use this money extremely well. And the latest HIPC report from the IMF and World Bank shows that on average eligible countries have at least doubled poverty reduction expenditures since 1999. However, the HIPC program’s extensive conditions have been counterproductive for impoverished country development. And the debt relief has been too slow for too few countries and with too many burdensome obstacles."
Another long time proponent of debt cancellation is Jeffrey Sachs, special advisor to the United Nations and director of the Columbia University Earth Institute. He says, “Money that should be invested in health care has been funneled off to repay debts.”
"These are countries that are broke. Charging them debt is killing their people. Asking them to repay the debt so that the World Bank can lend them the same money or lend some other impoverished country their money makes no sense. The only thing that makes sense is the net transfer of resources from rich to poor countries, not the transfer of resources from impoverished countries to other impoverished countries," he says.
One of the countries now in the HIPC program is Zambia. Its president, Levy Mwanawasa, told the UN General Assembly that despite HIPC, debt continues to consume increasing amounts of national incomes. He says HIPC has problems that prevent countries from taking full advantage of it.
Agreeing with the Zambian leader is Father Peter Henriot director of the Jesuit Center for Theological Reflection. Fr. Henriot, who’s spent 15 years in Zambia, says the country’s debt stands at six and a half billion US dollars. He says there are three basic problems with HIPC.
"First of all, the HIPC approach is based upon a sustainable debt being defined not in terms of how much money does the country need to service its people, but how much must be gathered through export earnings to service debt. The second thing is that HIPC comes with a lot of conditionalities, liberalization that simply ignores, so often ignores, the social consequences. And thirdly, even with HIPC resources, even with HIPC reducing some of the debt stock, Zambia will still be paying some 120 to 150 million US dollars each year on debt servicing," he says.
Fr. Henriot says debt cancellation would help in the fight against HIV/AIDS in Zambia, where 15 to 20 percent of the population is infected.
Sharonann Lynch, of the group Health Gap, says debt cancellation would save lives.
She says, "We know that people are dying needlessly on the order of 8200 every day due to a lack of access to AIDS treatment. We know that six million people currently are in immediate need of clinical therapy with anti-retroviral drugs. We know that the current program to fight AIDS and provide ARV therapy are not good enough or big enough. So, what we are saying is that our only hope now is to free up the money that is now used for debt servicing for treatment scale-ups."
Despite the US position, there’s no guarantee all the other G-7 nations, which include Britain, Canada, Japan, France, Germany and Italy, would go along with it. A number have voiced reservations.