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19 May 1998

The Big Debt Relief Scam

John Pender from Africa Direct was at the Jubilee 2000 jamboree in Birmingham

Up to 70,000 people converged on Birmingham, England last weekend to form a human chain around the city centre on the occasion of the G8 meeting to demand international action against third world debt. The protest, probably the biggest ever UK demonstration on this issue, was organised by Jubilee 2000 - an umbrella organisation of church groups and aid agencies, including Christian Aid, CAFOD, Tearfund, the World Development Movement and Oxfam. Its campaign has won influential support from the Guardian newspaper and the all-party Commons International Development Committee. After years of campaigning for debt relief, the momentum now seems unstoppable. Yet this momentum has not been generated by debt relief campaigners, and the particular form of debt relief being called for is making matters for people in the world's poorest countries far worse.

'Cancel the debt!,' read the placards. But the real message was 'Cancel the unpayable debt if our conditions are met!'. Bill Peters, former British high commissioner to Malawi and co-founder of Jubilee 2000, speaking at the day's Cancelling the Debt debate called for a "comprehensive cancellation of unpayable debt [decided] on a case by case basis". What does this mean? Jubilee 2000's charter calls for an "unrepeatable one-off remission of unpayable debts," conditional upon a country's record on "economic management, social policies and human rights record", and "upon governments utilising the financial resources that become available, for investment in basic human needs."

The momentum for action on 'unpayable' debt was in fact initiated by directors of the World Bank and the International Monetary Fund (IMF) in the early 1990s. Their concern was the problem of 'unsustainable debt'. Such was the burden of debt on the world's poorest countries that there was a rapid growth in defaults in scheduled debt repayments. Simply unable to pay, governments were forced to reschedule debt on over 8,000 occasions between 1984 and 1992. The World Bank and the IMF recognised that a new mechanism had to be found if the credibility of the whole third world debt repayments system was to be preserved. The specific problem was therefore that element of debt which would never be paid off, the 'unpayable' debt.

The resulting mechanism formulated by the World Bank and IMF is called the Heavily Indebted Poor Countries initiative (HIPC). Rather than write off the debt, the World Bank/IMF HIPC plan involves firstly working out what it believes a country can afford to pay and then holding it to those payments. By creating a trust fund it pays off the unpayable element of debt as it falls due in return for a country's compliance with comprehensive World Bank/IMF economic policy prescriptions.

Debt relief is therefore conditional on protracted and ongoing compliance with World Bank/IMF policy prescriptions, which have since the early eighties themselves resulted in the build up of massive debt arrears.

Oxfam have celebrated and trumpeted the experience of Uganda, the first country to benefit from the HIPC initiative. Yet Eurodad, an aid agency think tank, believes that Uganda will, as a consequence of the loss of other aid from the World Bank, "be in exactly the same financial position" as before the initiative. It also states that "Uganda will remain heavily dependent on external financing for human development." The country's Universal Primary Education initiative was funded predominantly by a USD75m World Bank grant in 1997 and will therefore be heavily influenced by the World Banks insidious educational priorities. Far from releasing funds for the government's own priorities, it has given external powers more influence at a deeper level in Ugandan society. Uganda is flavour of the month in Washington and London for the degree of its acquiescence to Western policy priorities, including its role as a key player in the invasions of Rwanda and former Zaire, now engaged in backing rebels in southern Sudan against their government. The benefits of the HIPC initiative pale in comparison with the human effects of the requirement of compliance with the West's agenda.

Jubilee 2000 are making the situation worse by redefining the debt issue into one of 'unpayable debt'. Bill Peters said that one the unpayable debt issue had been resolved, the debt question would be a "done deed". In fact the problem is all the debt - payable and unpayable - owed by these countries, because it is the political leverage of the creditors that is very much at the heart of the problem. Where HIPC is implemented it will signify a country's utter subservience to western policy prescriptions, utterly disempowering the people of those countries from any control over their destiny.

What has given contemporary momentum to the debt relief initiative in Britain is the way that it has become one of the themes around which Britain is attempting to carve out a role for itself as a moral force in international politics, and to give a positive new identity to what it means to be British. Indeed third world debt relief is now up as a candidate to be 'the big idea', the central theme of the Millennium Domeproject. Tony Blair, Robin Cook and Clare Short have all been emphasising how Britain has been at the forefront of promoting the HIPC initiative, criticising other countries lack of commitment to the plan and to the world's poor.

Jubilee 2000 has very much become a non-governmental form of popularising this new British foreign policy and lending legitimacy to Britain's civilising mission. While praising Britain's record on the HIPC, Oxfam is taking Germany, Japan and Italy to the United Nations alleging that their failure to back the HIPC is in contravention of their commitment to the UN convention on the rights of the child. Anybody who is serious about defending the world's poor, will oppose the HIPC, and certainly reject the idea that Britain can ever be a moral force for good in the third world.

Africa Direct can be contacted at africadirect@easynet.co.uk or by telephone: +44 (0) 973 326302

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