Scoring a try

CADTM takes satisfaction from the Belgian Senate’s adoption of a resolution cancelling the debt of developing countries and urges the government to implement it

3 April 2007


The resolution cancelling the debt of the Least Developed Countries Least Developed Countries
LDC
A notion defined by the UN on the following criteria: low per capita income, poor human resources and little diversification in the economy. The list includes 49 countries at present, the most recent addition being Senegal in July 2000. 30 years ago there were only 25 LDC.
(LCD) [1] adopted by the Belgian Senate on 29 March 2007 with a majority of 34 votes to 29 represents a major advance in several respects.

The resolution calls for the Belgian government to conclude an agreement with all concerned indebted countries in order to completely cancel their debt. In that respect, the Senate’s proposal does not go beyond what has already been decided by other governments. But fortunately the Senate blazes trails in several very significant areas:

- it proposes to decide on a moratorium on the bilateral debt with no interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. arrears [2] in favour of the Least Developed Countries (point 6);

- it states that a country’s bilateral or multilateral debt must be assessed at its true value. The Senate considers that the actual value, and not the nominal value, must be taken into account. Take the example of Belgium’s debt claim on the DR of the Congo: in the early 2000s it amounted to some USD 900 million. This amount represented the nominal value of debts going back twenty years, when Belgium was actively supporting dictator Mobutu. But in fact the Belgian Treasury estimated privately that the real value of the debt was equivalent to no more than 4% of this amount. Indeed, given the DRC’s poor economic condition, if Belgium had wished to sell its debt-claims on the secondary debt market, it would not have been able to cash in more than about USD 36 millions (i.e. 4% of the nominal value). A few years ago when the Belgian government started to implement a debt reduction plan in DRC, it tried to inflate the scope of its financial effort by claiming that it would cancel nearly USD 900 million in Congolese debts in several stages. Actually it amounted to no more than USD 36 million less for Belgium. Since all other creditor countries manipulate figures as Belgium does, the Belgian Senate’s proposal has considerable international significance.

- it asks the government to publicize the accountancy principles used for the management of debts and the debts’ real value (point 4) and no longer to include cancelled amounts in the budget for public aid to development (point 17) [3]. The Senate asserts that Parliament must exert its democratic control on government. Government must report to parliament on its debt-cancelling actions every year (point 20).

- while it applies in principle to all developing countries (see introduction to point 10 in the Senate’s text), point 10 relates to debt auditing and odious debts, two of the recurring demands formulated by CADTM and other movements for cancellation of the debt. In this respect the Senate asks the Belgian government to set up an audit on the odious nature of Belgian debt-claims on developing countries. In the same paragraph it considers that at the very least an odious debt is one contracted by a non-democratic government, that the borrowed amount did not benefit the local population, and that the loan was granted while the creditor was aware of the two above-mentioned facts (point 10). The Senate thus uses two of the instruments CADTM among others has put forward to establish a legal basis on which the Third World debt can be cancelled: auditing and the notion of odious debt. Consequently CADTM can provide Belgian authorities with various tools, including an Auditing Manual it developed in 2006 with a number of organizations in countries of the South and with CETIM (Switzerland), and its recently published « Pour un audit de la dette congolaise » (For an audit of the Congolese Debt) [4].

The Senate asks the government to cancel the odious part of Belgian debt claims that the auditing process will reveal (point 11).

Several paragraphs in the Senate’s resolution extend the demands made to the Belgian govenment to the World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

, the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
and other international institutions, considering that so far the WB’s and the IMF’s initiatives aimed at solving the debt crisis have not had any positive results (point C. of the voted resolution).

The Senate also clearly rejects the macro-economic conditionalities imposed by the WB, the IMF and other institutional creditors. Indeed, referring to multilateral debts, the Senate urgently demands that debt cancellation be granted on the basis of a new social approach defined, at the very least, by the Millenium Development Goals, and not only [5] on the traditional macro-economic conditionalities (point 14). The Senate asserts that the Belgian government must present to Parliament the current situation and the results of its diplomatic contacts as well as the points of view on multilateral debt that Belgium put forward in IMF and WB meetings (point 21).

Since the text relates to the multilateral debts of all Third World countries, Belgium will have to strengthen its diplomatic action within international circles in order to achieve the cancellation of public external debts to the WB and the IMF and must not include the cancelled amounts as part of the budget for development cooperation. After the Norwegian government, which one-sidedly cancelled its bilateral debt-claims on five Third World countries in October 2006 - without referring to the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

 -, the Belgian government must now implement the resolution adopted by the Senate, and the Finance Minister Didier Reynders must put forward Belgium’s new position at the next IMF and WB general assembly to be held in Washington DC on 14 and 15 April 2007.

In concertation with other movements that demand more North - South solidarity CADTM will see to it that the present resolution is not forgotten in some drawer and that cancellation of Belgian debt claims is not included in public aid to development.

Finally CADTM urges the peoples and the authorities in the South to audit their country’s debt so as to be able to demand its cancellation, the retrocession of ill-acquired goods and the compensations they are entitled to from countries of the North.

For more information see the CADTM website:
the complete text of the resolution as voted by the Senate on 29 March 2007:
http://www.cadtm.org/IMG/pdf/070327Senat.pdf
the report of the Belgian Senate and Chamber of representatives on the debt, dated 16 October 2006:
http://www.cadtm.org/IMG/pdf/061016CR.pdf

Contacts : Eric Toussaint, president CADTM Belgium international at cadtm.org
Renaud Vivien, jurist at CADTM, renaud at cadtm.org

Translated by Christine Pagnoulle with Judith Harris




Footnotes

[1According to the list established by the IFI and the OECD, there are currently 50 LCDs.

[2It should be recalled that following the tsunami of December 2004 off the coast of Indonesia, the Paris Club had proposed a one-year moratorium with possible accounting of interest arrears, which CADTM denounced in March 2005, since this meant increasing the debt of the countries concerned. See Damien Millet and Eric Toussaint, Tsunami Aid or Debt Cancellation !, VAK, Mumbai, 2005.

[3See Damien Millet et Eric Toussaint, « Les faux-semblants de l’aide au développement », Le Monde diplomatique, July 2005.

[4A manual on how to organise audits on third world debts. Let’s launch an enquiry into the debt!, CADTM-CETIM, Liège-Geneva, 2006, 96p. on line: http://www.cadtm.org/texte.php3?id_article=2296
A qui profitent toutes les richesses du peuple congolais. Pour un audit de la dette congolaise, CADTM, 2006, 56p.

[5Naturally, CADTM would have liked the word « only » to be removed from the text.

CADTM

COMMITTEE FOR THE ABOLITION OF ILLEGITIMATE DEBT

35 rue Fabry
4000 - Liège- Belgique

00324 226 62 85
info@cadtm.org

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