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’Drop the Debt’

by Navine Murs hid
***Debt cancellation would mean nothing if the amount saved is not properly utilised. Money saved must go into health care, education, shelter, food, security, poverty alleviation and other social purposes. Debt relief will be meaningless if the money saved goes into the pockets of our political leaders or is spent on defence and military equipment.***
A major problem facing underdeveloped countries today is the burden of debt. Billions of dollars in aid in the form of loans have been sent to most underdeveloped countries since the early 1960s. Much of the borrowing was done when the Industrial nations were prosperous and interest rates were low.. Multinational corporations such as the World Bank and the IMF have spent millions of dollars to finance loans as well. Today many Third- and Fourth-World countries are overburdened with huge debts and at times, see no way to repay them. The largest debtors include Brazil. Mexico, Argentina, Venezuela, Nigeria. Peru, Chile, and Poland. To keep these nations afloat, lenders are forced to refinance the loans or face the threat of default or total non-repayment, thus deepening the debt crisis.
Bangladesh, being a major debtor, has been servicing Its debt. And that Is why it has not been considered eligible for the Heavily Indebted Poor Countries Initiative. Such is the view of Craig Smallbone who is working at a London based organisation called Jubilee 2000 for debt cancellation of several poor countries around the world. Including Bangladesh.
Few years back, a group of NGOs and religious groups, under Jubilee 2000 started campaign against the debt imposed by international lenders on poor countries. Under public pressure, a debt relief criteria was designed by the IMF, according to which all those countries will be eligible for debt relief, whose Per capita income is less than $695; debt to export ratio is greater than 220 per cent or debt to GNP
ratio is 80 per cent and the country should have a good track record of three years in meeting the World Bank and the IMF guidelines.
Even after meeting these criteria. creditors still have the option of 1) forgiveness of debt: 2) rescheduling of debt; 3) offering new Ioans to cover payments of old loans.
In this process. 12 countries were examined by creditors for debt relief but only one country. Guyana, was given a relief package of $410 million, and the rest of the countries were promised assistance. In order to solve debt problem, thousands of rescheduling meetings were held over the last 15 years without much success. There are also several flaws In debt relief process. Countries under debt relief will have to spend six years under IMF supervision. Moreover debt will only be reduced to a sustainable level while there Is a need for deeper and fast debt reduction. Ratio of debt service to export is a selection criterion while number of people under absolute poverty is a better one for a country's debt relief selection. There has been a lot of demonstrations in the west against international lenders under Jubilee 2000.
What makes this campaign strong Is the fact that it is an international campaign. The campaign started about five years ago Ln England with the notion of
beginning the new millennium on a fresh note; of settling old bills; of starting with a clean platter. International celebrities like Mohammad Ali backed up the campaign and during the G-7 meet in Cologne last June, demonstrations under the banner of 'Drop the Debt' took place in different parts of the world Including London, Cologne, India, Pakistan, Thailand and different countries in Africa. That resulted in a one-third cut in the total debt of $300 billion in 42 countries.
The problem is that the criteria upon which the 42 countries were enlisted are ambiguous and do not have any pattern. Many poor countries like Bangladesh have been left out. Also, cancellation of one-third of their debts may not make much difference, especially since the division was arbitrary, each country having different proportions of their debts cancelled. Moreover, they still have not worked according to their promise (to cancel one-third of the debt). Only one per cent has come through.
"Bangladesh's debt per person is $130. We feel that this money should be used in the health and education sector, used for food security, for disease control and the like. Bangladesh is certainly one of the poorest countries of the world. And for it to grow and prosper it has to free itself from the debt burden. Bangladesh has
paid its debt many times over with interests. The UN had said that they would try to halve poverty by 2015. There is no way that would happen if the present debt situation persists", opined Craig Smallbone.
One redeeming factor that strengthens the debtcancellation argument is that many of the loans were bad loans. The conditions that were placed with the loans were often inappropriate that have lead to disturbances like displacing indigenous people; disrupting the environment; dictating rules without much knowledge and above all. providing assistance that never reached the needy, the people at the grassroots level.
Khushi Kabir. Head, ADAB, talking about how foreign policies affect us said, "In the 1990s the pressure to lower population growth was an external push. It was made to believe that was our primary and foremost problem. Yes. it was a problem but not of the magnitude it was given. The methods used for birth control was once again donor driven. It was not the government who made such choices. The programme was also sexist in the sense that only women were identified as those who were responsible for high birth rates. Also the rural women were discriminated. Women in cities were not lectured on how many children to have, only the rural were.
These women were not always comfortable talking about such things to complete strangers. Moreover, the contraception that was prescribed did not suit all women. The problems are immense." Currently. 160 developing countries owe roughly $ 2.5 trillion to international commercial banks as well as multilateral institutions such as the World Bank and the IMF. Forty one poorest countries are the hardest hit out of which. 31 are in Africa. These countries are classified as Heavily Indebted Poor Countries (HIPCs). These 41 countries owe $227 billion to the International creditors including one fourth alone to the World Bank. Their state of Indebtedness Increased from only S3 billion In 1962 to $122 billion Ln 1983. and almost $ 227 billion in 1999. Their indebtedness was caused due to the lending frenzy by the World Bank and its encouragement to other commercial banks, to Invest in third world countries for quick profit. Unfortunately, these loans were neither intended nor used for the interest of the poor in these countries. Most of this money was siphoned back to western banks by elites of poor countries and left these countries and their poor in extremely indebted position. In order to repay these loans, governments of these countries are cutting back on social services and eliminating subsidies, which is hurt
ing the poor. These measures are part of the IMF sponsored policies these countries have to follow. It is because of these policies that malnutrition is rising, health services are declining, and school enrolments are falling. In 41 heavily indebted poorest countries. around four million children under the age of five die every’ year and 50 million children of sdhool going age are not in schools.
With the G-8 summit looming ahead, it is indeed a crucial time. July’ 21 is being unofficially called the 'Debt Decision Day' as the eight nations are about to meet in Japan. July 21 would show whether the pressure that has been created actually pays off or not. Not only the Jubilee 2000 and NGOs, the campaign has managed to attract people from all walks of life: the young, the elderly, those from different religions. This is one time when all the nations have come together for a common cause.
The Japanese government is polite; they really want to know and understand. Moreover, they are sympathetic to the situation at hand. Although we are not keeping our hopes high, we do expect some results during this year's meet. This is a crucial stage of the campaign." said Craig Smallbone.
However, debt cancellation would mean nothing if the amount saved is not properly utilised. Money saved must go into health care, education, shelter. food, security, poverty alleviation and other social purposes. Debt relief will be meaningless if the money saved goes into the pockets of our political leaders or spent on defence and military equipment.