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Debt –Understanding the Challenge. The Injustice of the debt burden Background to the Debt Crisis Structure of Debt Campaign Achievements Challenge ahead. The Debt burden. Debt Service:- $64,000,000 every day $23,000,000,000 every year Debt stock $375,000,000,000.

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Debt understanding the challenge
Debt –Understanding the Challenge

  • The Injustice of the debt burden

  • Background to the Debt Crisis

  • Structure of Debt

  • Campaign Achievements

  • Challenge ahead

JDC Web Group - Debt Slides


The debt burden
The Debt burden

Debt Service:-

  • $64,000,000 every day

  • $23,000,000,000 every year

    Debt stock

  • $375,000,000,000

  • 52 counties identified by Jubilee

  • Over 1 billion people live on less than $1/day

JDC Web Group - Debt Slides


Debt death
Debt = death

  • 19,000 die every day from poverty

  • 1 in 5 babies die before the age of 5

  • Average age is falling!

    • 2-3 Million AIDS

    • 3.5 Million from Pneumonia

    • 2 million TB

    • 1 million Malaria

  • Because there is no money in drugs for the poor countries, less than 1 % of health research is in tropical disease

JDC Web Group - Debt Slides


Debt lost opportunity
Debt = lost opportunity

  • Education has to be paid for

  • 125 million children get no education

  • Sometimes the state pays just the teachers salary

    • Pay for books, paper, buildings, school clothes

  • Education is a route to empowerment

JDC Web Group - Debt Slides


Origins of debt
Origins of Debt

  • Vast petroleum dollar liquidity after the oil price rise in the 1960's

  • Cold war politics to 'buy' influence – Much of it military contracts

  • Conversion of commercial debt into public debt

What does the 'G' stand for?..why, GREEDY !

JDC Web Group - Debt Slides


Debt structure 22 hipcs
Debt structure (22 HIPCs)

  • G8 control World bank /IMF

  • Bilateral loans typically under Paris Club

JDC Web Group - Debt Slides


Hipc enhanced heavily indebted poor countries
HIPC (Enhanced)Heavily Indebted Poor Countries

  • HIPC covers 41 countries

    • Only 23 have reached agreement

  • So poor even the banks know they couldn’t pay

  • Conditions of sustainability set by IMF/WB –

    HIPC doesn’t cancel all debt; it reduces it to a ‘sustainable’ level

    Debt:exports>150%;Debt : Government revenue 250%

JDC Web Group - Debt Slides


Debt stock bn
Debt Stock –$ bn

JDC Web Group - Debt Slides


Debt service us bn
Debt Service $US bn

  • This is $64M /day

JDC Web Group - Debt Slides


Debt service education health
Debt service : education & health

JDC Web Group - Debt Slides


Conditionality
Conditionality

  • Problems with Debt Cancellation

    • Conflict

    • Corruption/ governance

    • Poverty reduction

  • PRSP –

    Poverty Reductions Strategy Paper

    • Civil society

    • Focus on poverty reduction

    • Dictatorial economic conditions

      • Market liberalisation,

      • Privatisation,

      • Service fees

    • USA congress has edicted NO fees!

JDC Web Group - Debt Slides


Campaign achievements
Campaign Achievements

  • Nominal $100bn debt to be cancelled!

  • 41 countries to be assisted

  • 24 million signatures collected

    • Every signature worth $4,000!

  • 50,000 demonstrators in Cologne

    • Enhanced HIPC added $50 bn

    • Every demonstrator worth $1,000,000!

JDC Web Group - Debt Slides


Impact of hipc
Impact of HIPC

  • HIPC has cut debt stock US$20bn

  • Debt stock 'slashed' from 60% of GDP in 1999 to 28% after HIPC which is 10% lower than the average for developing countries

  • 5 more could reach decision in FY02

JDC Web Group - Debt Slides


Impact of hipc debt service
Impact of HIPC-Debt Service

  • debt service will fall from 4% of GDP to 2% and from 27% of government expenditure to 12%

  • social expenditure will increase by US$1.7bn/a equal to 1.2% of GDP (driven by diversion of debt service into social expenditure)

JDC Web Group - Debt Slides


Challenge ahead
Challenge ahead

  • Big impact on first 23 HIPCs

  • Only halves debt for the 41 HIPCs

  • Long way to the Jubilee target

JDC Web Group - Debt Slides


Challenge d eeper debt relief
Challenge Deeper debt relief

  • Actual reduction in debt service is small (perhaps 1/3rd)

  • Relief is on future increases due!

  • No basis for poverty reduction targets 2015

JDC Web Group - Debt Slides


Challenge b roader debt relief
Challenge Broader debt relief

  • Minimal reduction in debt service –just 4%!

  • Payments reduced from $64 M/day to $61 M/day!

JDC Web Group - Debt Slides


Challenge wb imf rejection of 100 cancellation
Challenge – WB/IMF rejection of 100% cancellation

  • Claim – debt service now sustainable for 23 HIPCs

  • Unfair on other countries who need WB/IMF loans

  • Write off reduces loan capability by 5 times

  • Deplete asset reserves would reduce credit rating and hence increase cost of loans

JDC Web Group - Debt Slides


Challenge 2015 poverty reduction targets
Challenge2015 Poverty Reduction Targets

  • Free primary education for all

  • Halve the number below

    poverty level ($1/day)

  • Halve infant mortality (from 1:5 to 1:10)

JDC Web Group - Debt Slides


Challenge
Challenge

  • Debt sustainability measured against social spending

  • Grants/aid not loans

  • Independent arbitration of debt, not just WB/IMF –include UN/WHO

JDC Web Group - Debt Slides


Cancel the debt
Cancel the Debt

  • Faster

  • Broader

  • Deeper

  • Fairer

JDC Web Group - Debt Slides


Campaign arguments
Campaign arguments

  • Focus on poorest countries (say HIPC) or broader base?

  • What criteria for sustainability

  • Corruption/conflict

  • Move on to fairer trade rules

JDC Web Group - Debt Slides

Discussion


Motivation issues
Motivation issues

What will win wider public support?

  • Demonstrations?

  • Images of poverty

  • Health? Education?

  • Individuals/families/human interest stories

JDC Web Group - Debt Slides

Discussion


How should we campaign
How should we campaign?

  • How do we move the political process?

  • Letters/lobbying/vigils – as before?

  • Alternatives to G8/IMF venues?

  • It’s the media that set the agenda!

  • Post terrorism focus on poverty is the breeding ground?

JDC Web Group - Debt Slides

Discussion


Origins of debt 2
Origins of Debt –(2)

  • Vast petroleum dollar liquidity after the oil price rise in the 1960's

  • Cold war politics to 'buy' influence

  • Conversion of commercial debt into public debt *

  • Commodity prices crash

    • (IMF/WB had insisted countries focused on these cash commodities)

  • Little of the money was spent on poverty alleviation

    • It was known that much of the money was being spent on arms and corruption.

    • Large proportion for ‘Arms’ and western prestige projects

JDC Web Group - Debt Slides

Discussion


Structure of debt burden
Structure of Debt Burden

  • Multilateral banks – controlled by G8

    • World bank – primary responsibility loans for development

      • ODA -Overseas development aid –low interest/high risk countries

      • IDA International Development Association –loans, zero interest

      • IBRD: The International Bank for Reconstruction and Development

    • IMF –International Monetary Fund –primary responsibility global financial stability

    • Many regional development banks (IDB, AfDB, AsDB etc)

  • Bilateral loans –individual countries

    • Paris club

  • Commercial Banks –now negligible

JDC Web Group - Debt Slides

Discussion


Structure of debt burden1
Structure of Debt Burden

  • Multilateral banks – controlled by G8

    • World bank – primary responsibility loans for development

    • IMF –International Monetary Fund –primary responsibility global financial stability

    • Many regional development banks (IDB, AfDB, AsDB etc)

  • Bilateral loans –individual countries

    • Paris club

  • Commercial Banks –now negligible

JDC Web Group - Debt Slides

Discussion


Hipc countries
HIPC Countries

JDC Web Group - Debt Slides

Discussion


Remaining hipc
Remaining HIPC

Debt

Sustainable

Conflict Countries

According to World Bank

JDC Web Group - Debt Slides

Discussion


The jubilee extra countries
The Jubilee extra countries

JDC Web Group - Debt Slides

Discussion


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