When discussing the issue of international debt, the most common question people have is a variant on
who controls these debts? The answer is usually a combination of the IMF and the World Bank. These two institutions, funded by a conglomeration of governments, are responsible for lending money to countries for development projects. It is these bodies that are responsible for the Highly Indebted Poor Countries (HIPC) initiative, that requires countries who desire debt reduction or cancellation to demonstrate their commitment to good economic governance (and, along the way, the privatisation of public services and the removal of trade tarrifs) through the production of Poverty Reduction Strategy Papers (PRSPs).
It seems that rich-country governments are finally admitting that the HIPC process has run out of steam. Gordon Brown‘s pronouncement that the British government will put up significant funds for further debt cancellation, and rumblings within the US government of new policy on debt cancellation, amount to tacit acknowledgement that the programme we were told five years ago would solve the problem of ‘third world debt’ has done nothing of the sort.
One of the many great injustices of the debt crisis is that the terms of cancellation are decided by the lenders. To use an oft-quoted analogy, if I were to declare bankcruptcy then the process would be arbitrated by independent parties rather than my creditors. In international finance there is no analogue to this and it is the creditors (who naturally have a vested interest) set the terms. Various long term solutions to this situation have been suggested, chief among them the proposals of Jubilee Research, a team within the New Economics Foundation by Ann Pettifor, the former Director of Jubilee 2000 UK.
What was for so long lacking was strong voices from the debt-afflicted nations. With at least one government threatening to withdraw development aid from certain countries were their governments to speak out, or even request debt cancellation, many indebted governments were forced to act submissively. That, at least, is changing. Since the WTO meetings in Seattle in 1999 when poor country leaders managed to stall proceedings (while police gassed protestors outside) and Olusegun Obasanjo of Nigeria and Thabo Mbeki of South Africa’s meeting with G8 leaders in Okinawa in 2000, the voice of the poorer countries has grown louder.
The BBC this week reported that African leaders failed to get more votes on the IMF and World Bank boards. This news initially dispirited me — it’s about time that countries so deeply affected by IMF/WB policies had a strong voice on their boards — but on reflection I’m taking it as a sign of progress. Only a few years ago there would not have been a group like the G24 to make such demands. Now there is. Maybe soon they’ll start making the gains they so richly deserve?