Jubilee 2000 - Debt Cancellation
Two thirds world debt
is one of the world's biggest killers
Jubilee 2000 is an international debt forgiveness
campaign, aiming to help emerging countries to become economically
self-sufficient. Many countries have run up massive debts. Since
these debts can only be paid through export earnings, the best
way to measure the burden is by comparing export earnings with
total debt. Examples (World Bank figures 1998):
 |
Somalia - total
debt $2.6bn - as % of export earnings 3,671 |
|
Sudan - total
debt $16.9bn - as % of export earnings 2,131 |
|
Rwanda - total
debt $1bn - as % of export earnings 1,374 |
Every time you give $1 in aid for a project on a
developing country, at least $1 is taken from that country in
interest on long term debts to banks or other governments or UN
bodies. In some cases the ratio is as high as $1 donated to $3
extracted.
As a direct result, spending on health and education
has actually fallen in some of the poorest nations over a decade
when the rest of the world has become more prosperous.
What can be done? Clearly those who are owed money
are extremely unlikely to see their money back. Therefore the
logic is to write off these debts, and to be more cautious about
lending money in future. Sadly in many cases substantial parts
of these loans were spent propping up corrupt regimes and lining
the pockets of dictators.
A compromise is the debt swap programme. Let us
take a bank which is owed $1bn, shown on their balance sheet.
In reality the loan agreement is almost worthless since the bank
has little way of enforcing repayments on a country that has no
foreign currency to pay interest or repay capital. Along comes
a development agency wanting to invest in health promotion and
care, with a budget of $100,000. The agency offers to buy the
debt off the bank for $100,000, and the bank is delighted. The
agency agrees at the same time with the debt-crippled government
that this debt will only be paid off if the government agrees
to spend the equivalent of $100,000 in local currency on approved
health programmes.
In theory the net result is that a major debt is
cancelled, and the local economy is stimulated. In practice these
arrangements are hard to supervise and governments can default
on programme delivery just as they did on interest repayments.
However there have been some successes.
The latest proposals from the UN are that debt will
be written off if countries can show they have been following
responsible economic policies for eight years. A number of countries
are already in the scheme but there is a major problem. Eight
years is far too long for a country that is becoming progressively
destabilised as a result of grinding, overwhelming poverty. As
events in Indonesia have showed, a country under pressure may
begin to fall apart with riots, civil disorder and violent changes
in government. The very policies designed to impose discipline
can wreck a country.
Four years is long enough for an emerging country
to take costly steps without any visible return.
It is in every nation's interests to sort this problem
out, and the result will be a stimulation of world trade as well
as a reduction in the need for constant
http://www.jubilee2000uk.org/
is a brilliant site for more.
AIDS impact
on the poorest nations and what we can do about it - huge number
of resources here on the rest of our site.
Globalisation
- good or bad? Pros and cons of free trade from a poor nation
perspective. (Video)
Free
copies of latest edition of "AIDS and You" - paperback
New edition of book by Dr Patrick Dixon available in bulk
for Relief and Development organisations working in the poorest
nations. Contains practical guidelines for setting up community
projects.
Blogs - web / video diaries on trends / management by Dr Patrick Dixon
Future Trends - main blog
Future of Banking and Financial Services
Future of Digital Technology
Future of the Telecom Industry
Future of the Pharmaceutical Industry
Future of Management
Future of Marketing
Conference Speakers
Lectures, Slides and Videos
AIDS Care Education and Training (ACET)
Spirituality
