Debt relief
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Debt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations.
Debt relief for heavily indebted and underdeveloped developing countries was the subject in the 1990s of a campaign by a broad coalition of development NGOs, Christian organisations and others, under the banner of Jubilee 2000. This campaign, involving, for example, demonstrations at the 1998 G8 meeting in Birmingham, was successful in pushing debt relief onto the agenda of Western governments and international organisations such as the International Monetary Fund and World Bank. Ultimately the Heavily Indebted Poor Countries (HIPC) initiative was launched to provide systematic debt relief for the poorest countries, whilst trying to ensure the money would be spent on poverty reduction.
The HIPC programme has been subject to conditionalities similar to those often attached to IMF and World Bank loans, requiring structural adjustment reforms, such as privatization of public utilities.
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Arguments in favour of debt relief
Supporters use a variety of moral and economic arguments to make the case for debt relief. Much of the debt was incurred by regimes different from those that currently govern the debtor nations. Supporters of debt relief believe that people in developing countries should not be burdened with debts accrued by dictators, especially as the borrowed finance was so often used for the benefit of the ruling elite, on prestige projects and to bolster the military.
Since the beginning of the HIPC programme, beneficiary countries have used some of the money saved on debt repayments for social programmes:
- In Benin, 54% of the money saved through debt relief has been spent on health, including on rural primary health care and HIV programmes.
- In Tanzania, debt relief enabled the government to abolish primary school fees, leading to a 66% increase in attendance.
- After Mozambique was granted debt relief, it was able to offer all children free immunisation.
- In Uganda, debt relief led to 2.2 million people gaining access to clean water.
Arguments against debt relief
Opponents of debt relief argue that it is a blank cheque to governments, most of which are plagued by corruption, and which immediately go out and contract further debts, partly in the belief that these debts will also be forgiven in some future date. They use the money to enhance the wealth and spending ability of the rich, many of whom will spend or invest this money in the rich countries, thus not even creating a trickle down effect. The money is also used to increase defence budgets, which are then used to promote war. They argue that the money would be far better spent in specific aid projects which actually help the poor. They further argue that it would be unfair to third-world countries that managed their credit successfully, or don't go into debt in the first place, that is, it actively encourages third world governments to overspend in order to receive debt relief in the future.
- Uganda saw a 24% increase in military spending after HIPC.
See also
- International development
- Third World debt
- International Monetary Fund | World Bank
- Anti-globalization movement
- Odious debt
- conditionality
External links
- Debt Relief under the Heavily Indebted Poor Countries Initiative, International Monetary Fund (http://www.imf.org/external/np/exr/facts/hipc.htm).
- Borgen Project (http://borgenproject.org/)
- Debt Relief for Heavily Indebted Poor Countries, World Bank (http://www.worldbank.org/hipc/).
- Debt Relief International, Development Finance Group (http://www.dri.org.uk/pages/homeen.html).
- Jubilee Research at New Economics Foundation (http://www.jubilee2000uk.org/).
- HIPC Debt Relief: Myths and Reality (Jan Joost Teunissen and Age Akkerman, eds.), Fondad, 2004, book, pdf) (http://www.fondad.org/publications/hipc/contents.htm)
- Underdevelopment in Sub-Saharan Africa: The Role of the Private Sector and Political Elite (Moeletsi Mbeki), Cato Institute foreign policy brief (http://www.cato.org/pub_display.php?pub_id=3728)
- George Monbiot, The Guardian , June 14, 2005, "A truckload of nonsense: The G8 plan to save Africa comes with conditions that make it little more than an extortion racket" (http://www.guardian.co.uk/comment/story/0,3604,1505816,00.html)de:Schuldenerlass