Committee for the Abolition of Third World Debt
CADTM

Press Release

The CADTM appalled by World Bank’s empty promises on debt

Nine months after the much-trumpeted announcement in London by the G8 (eight most industrialised countries), the World Bank has only just revealed its mode of cancelling the debt owed to it by some 17 heavily indebted poor countries (HIPC). The agreement, classified as “historic” by World Bank president Paul Wolfowitz, concerns 13 African countries and 4 in Latin America |1|. By July 2006 the debt owed by these countries to the World Bank is due to be written off. A total sum of 37 billion dollars has been announced, to be spread over 40 years.

Despite the proclamations of the World Bank, there is nothing new here. This decision merely consolidates - belatedly - the decision taken by the G8 last year. In addition, over the last ten years, the World Bank has spent only 2.6 billion dollars to reduce the debt of these 17 countries whereas it has a net worth of over 38 billion dollars. The financial effort is feeble to say the least, yet year after year it boasts a generosity that is totally unwarranted.

Launched in 1996, the HIPC initiative was meant to settle - once and for all - the problem of the debt of 42 very poor and heavily indebted countries. But the initiative has become a fiasco: the debt has gone from 218 to 205 billion dollars between 1996 and 2003, in other words it has been reduced by just 6% |2|. Although the majority of these countries have applied the drastic economic measures demanded by the IMF and the World Bank, the burden of debt still hangs heavy on them. How, one asks, can there be trust towards those who have already failed and still persist in repeating their errors?

The CADTM affirms that for the World Bank, the debt is a very valuable instrument of domination. To achieve cancellation of the debt, the 17 countries concerned have had to fulfill all stages of the HIPC initiative and for at least 4 years submit to the rigors of the neo-liberal treadmill: drastic cutbacks in social spending, massive privatizations, opening up of markets, liberalization of the economy for the benefit of multinational corporations and international investors. All of these measures have taken a heavy toll in terms of poor people’s living conditions. All these countries have had to pay a high price, in terms of human suffering, for their eligibility to a doubtful privilege.

The CADTM takes the view that the World Bank’s decision is both ill-adapted and unacceptable. Ill-adapted, because it concerns a small number of countries (17, which together represent just 5% of the population of 165 so-called “developing” countries). Unacceptable, because it reinforces the dominance held by creditors over people worldwide through the intermediary of the debt. The World Bank “doctor” prescribes its poverty-reducing strategies (in fact, paltry sums sprinkled over a handful of social projects) while concealing the serious secondary effects: in countries where more than 40% of the budget goes to repayment of the debt, it prohibits governments from recruiting and training sufficient teachers, nursing staff, doctors, etc. in the name of untouchable principles such as the reduction of public posts and budget balancing.

This announcement leaves many questions unanswered: what cut-off date will be used to calculate the cancellation - end of 2004 as for the IMF or end 2003, as rumor has it, which would reduce the scope of the agreement? Will Mauritania - presently excluded from the list, be reintegrated? What about the many very poor countries forgotten by the HIPC initiative - such as Haiti, Eritrea or Nepal - which today are not eligible for any debt relief whatsoever? Will additional conditionalities be discreetly introduced by the World Bank to test the economic docility of a country?

The CADTM considers the World Bank procedure, and more generally the measures taken by all the creditors, as nothing more than a decoy designed to distract public opinion from the core problem. The essential demands remain the same: cancellation of the external public debt of all developing countries and an end to structural adjustment policies. This debt siphons off the intrinsic wealth of countries in the South for the benefit of rich creditors, lays waste entire regions, spreads poverty and corruption. This debt is unlawful and largely odious. For the CADTM, total and unconditional cancellation of the debt is not negotiable.

Footnotes

|1| Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mozambique, Nicaragua, Niger, Uganda, Rwanda, Senegal, Tanzania and Zambia.

|2| CADTM calculation based on figures published by the World Bank in 2005.

Translated by Judith Harris.

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