International Monetary Fund Refuses Nepal Debt Relief

26 June 2015 by Jubilee USA


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Washington DC - International Monetary Fund (IMF) spokesperson Gerry Rice announced Nepal will not receive debt relief from a special IMF trust fund that helps poor countries when they face natural disasters. The IMF’s Catastrophe Containment and Relief Trust cancelled nearly $100 million in debt owed by Ebola-impacted West African nations. Jubilee USA Network, a religious development organization, advocated for the trust fund and debt relief for West Africa and Nepal. A powerful earthquake struck Nepal April 25, killing more than 8,600 people and destroying over 500,000 homes.

“This is troubling news,” said Eric LeCompte, a United Nations debt expert and executive director of Jubilee USA Network. “Given the devastation in Nepal, it’s hard to believe that the criteria was not met.”

Nepal is one of 38 low-income countries eligible for relief from the new fund. To qualify for that relief after a natural disaster, an eligible country must meet certain criteria. The disaster must impact at least one-third of the country’s population and either destroy 25% of the nation’s productive capacity or cause damage equal to the size of the country’s economy. According to Rice, Nepal met the first condition but the earthquake did not cause enough total economic damage. Nepal’s earthquake and its aftershocks caused $5-10 billion in damage, about one-third of the country’s total economy. However, Rice did not comment on whether or not Nepal’s productive capacity was affected to trigger debt relief under the trust.

“This fund was created for situations just like this and debt relief in Nepal could make a significant difference,” said LeCompte.‎ “Beyond 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
, 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.

and Asian Development Bank who hold about $3 Billion of Nepal’s debt have unfortunately not announced any debt relief plans yet.”

Nepal owes $3.8 billion in debt to foreign lenders, including $54 million to the IMF and approximately $3 billion to the World Bank and Asian Development Bank. According to the most recent World Bank numbers, Nepal paid $217 million in debt in 2013, approximately $600,000 in average daily debt payments, or more than $35 million since the earthquake.

On June 25th, Nepal hosted a conference that failed to raise $6.6 billion in needed post earthquake aid. It’s unclear if any debt relief was a part of the aid money raised.

Source : Jubilee USA




Watch the IMF’s announcement. (Relevant section at 48 minute mark)

Read more about the Catastrophe Containment and Relief Trust.

Read more about the June 25th Nepal aid conference.

http://jubileeusa.nationbuilder.com/r?u=http%3A%2F%2Fwww.jubileeusa.org%2Fpress%2Fpress-item%2Farticle%2Fnepal-conference-hopes-to-raise-66-billion-in-post-earthquake-aid.html&e=7688fa85e7b5720ea1dc8d9371840100&utm_source=jubileeusa&utm_medium=email&utm_campaign=pr_nepalwins&n=3
Jubilee USA Network is an alliance of more than 75 US organizations and 400 faith communities working with 50 Jubilee global partners. Jubilee’s mission is to build an economy that serves, protects and promotes the participation of the most vulnerable. Jubilee USA has won critical global financial reforms and more than $130 billion in debt relief to benefit the world’s poorest people. www.jubileeusa.org

Other articles in English by Jubilee USA (5)

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