Debt relief

We need to hold hands-again

There have been few more successful campaigns than the Jubilee 2000 Coalition's struggle to cut the burden of international debt, which afflicts some of the poorest countries of the world. Jubilee 2000 opened up the shady world of international finance and exposed the way in which creditors, including the British government, and global institutions, such as the World Bank and the International Monetary Fund (IMF), were enriching themselves by demanding debt repayments, which in turn were further impoverishing the poor. Giant human chains formed around successive G8 summits forced debt cancellation to the top of the political agenda.

Health professionals have played a major role in highlighting the drain that the debt burden places on health and health systems in developing countries. Firstly, an unsustainable debt burden severely undermines economic growth by deterring public and private investment. Growth is an important tool for lifting populations clear of the swamp of disease and squalor. Secondly, debt repayments squeeze government budgets for health and education and ensure that clinics go without drugs and schools go without teachers. Astonishingly, for the past 20 years, many countries have been paying between a quarter and a third (and sometimes even more) of their public revenues to us, the rich nations.¹

Direct interventions in the debt debate by organisations such as Medact, MedSIN, the BMA, and several medical royal colleges, along with many other organisations in another 100 countries, have played their part in changing this situation. In 1999 individual developed nations, led by Bill Clinton and Tony Blair, promised to cancel 100% of the debt owed to them. Now, two years down the line, 22 countries have started receiving debt relief and another 14 are in the pipeline. This is fewer than the 50 or so countries that the Jubilee 2000 Coalition has been campaigning for, and the list does not include some desperately poor countries, such as Bangladesh, the Philippines, and Nigeria, who badly need debt relief.

Latest figures show that for the first 22 countries to receive debt relief, repayments are down by less than a third.² These countries are still spending more on debt repayments than they are on health. Zambia and Niger will actually find themselves paying more after "debt relief" than they were before, because of peaks in their debt service obligations. Alarmingly, debt repayments for some countries are also projected to rise considerably by the end of the decade because of the impact of new loans and the end of concessional periods of payments, perhaps already pointing to the need for a Jubilee 2010 campaign.2 A new World Bank paper released at the end of April warns that the current debt relief initiative is not a long term solution for the crisis, and that the fragility of the economies of poor countries makes them vulnerable to a further build up of debt.³

Ironically, theWorld Bank and the IMF are responsible for the slow start to the debt relief process. While individual governments have committed themselves to total cancellation, these global institutions are still demanding large repayments. After the current round of debt reduction, the 22 benefiting countries will owe more to theWorld Bank and the IMF than to all the next biggest 17 creditors put together.

The bank and the fund argue that greater debt cancellation on their part will mean that they can give less in aid to other non­indebted developing countries, will endanger their "Triple­A" credit rating in the financial markets, and may even lead them into bankruptcy.4 However, a new report from accountants Chantrey Vellacott DFK shows this to be false and offers proposals to release more than $30bn (£21 000m) of resources which the institutions could use to cancel debt. These include another revaluation of the gold in the IMF's coffers, which is currently undervalued, and greater use of the World Bank's reserves and its future profits. Neither solution would endanger the credit rating or lending status of the global institutions.²

Funds released by debt cancellation are already helping the poor. In Uganda, primary school enrolment has been doubled with the help of debt relief. In Mozambique half a million children have been vaccinated against killer diseases. Three years of extra schooling have been provided in Honduras and money saved from debt repayments has financed half of Guyana's national development plan. These examples should confound those who said that debt relief would be frittered away in developing countries by corrupt governments. Where countries are in conflict or have unacceptable human rights records, campaigners are demanding that a trust fund be set up into which debt repayments can be made to be invested in development in the future once the situation is more acceptable.

For us in the rich world only one option remains: we must get involved in the fight to cancel world debt. One option is to go out on to the streets once more and make another human chain around the G8 summit in Genoa in Italy next month. The impact of popular protest in the past has been huge and has moved politicians to act on this complicated and obscure economic issue. The G8 nations control the World Bank and IMF and can tell them what to do - let's make sure that they act.

You can take action on debt by visiting the Medact website on www.medact.org or by contacting www.dropthedebt.org
For details on getting to Genoa, please contact Mike Rowson or Diane Harris at the Medact office on info@medact.org or 020 7272 2020.
The new web address for the follow up of Jubilee 2000 is www.dropthedebt.org

Mike Rowson, director, Medact
Email: mikerowson@medact.org

Sarah Finer, MedSIN (UK)


studentBMJ 2001;09:171-216 June ISSN 0966-6494

1. British Medical Association. Debt and health. London: BMA, 2000.
2. Drop the Debt. Reality check: the need for deeper debt cancellation and the fight against HIV/AIDS. London: Drop the Debt, 2000.
3. World Bank. The challenge of maintaining long­term external debt sustainability.Washington, DC:World Bank, 2001.
4. Alan Beattie. Lenders scent an attempt to clip their wings. Financial Times April 11 2001.