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Despite grand statements from world leaders, the debt crisis is far from over. Creditors have still not delivered on the promises they made seven years ago to cancel unpayable poor country debts. As a result, many countries still have to spend more on debt repayments than on meeting the needs of their people. Rich countries and the institutions they control must act to cancel all the unpayable debt of the poorest countries. They should not do this by depriving poor countries of new aid, but by digging into their own pockets and providing new money. The task of calculating how much debt should be cancelled must no longer be left to creditors concerned mainly with minimising their own costs. Instead, we need a fair and transparent international process to make sure that human need takes priority over debt repayments. International institutions like the IMF and World Bank must stop asking poor countries to jump through hoops in order to qualify for debt relief. Poor countries should no longer have to privatise basic services or liberalise their economies as a condition for getting the debt relief they so desperately need. Debt Relief Works! In Benin, 54% of the money saved through debt relief has been spent on health including 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. In More Detail(drop the debt) Debt cancellation is the unfinished business of the 20th century. At the Birmingham G8 in 1998, 70,000 campaigners surrounded the summit demanding an end to the debt crisis. Unprecedented numbers of protestors said they would no longer tolerate a situation whereby for every £1 given in aid, £3 was siphoned off in debt repayments. This demonstration of public support led the UK government to cancel 100% of the debt owed directly to it by many of the world's poorest countries, and to put in funding to allow multilateral creditors to cancel some of their poor country debt. The UK has now gone even further and agreed to cover its share of the debt service paid to the World Bank and African Development Bank by some countries. Despite these initiatives, in country after country governments are spending more on repaying debts than they are on health or education. Rich countries continue to pursue unjust claims on the budgets of poor nations, with devastating effects for the world's poor. In Malawi, for example, more is spent on servicing the country's debt than on health, despite nearly one in five Malawians being HIV positive. In Zambia, debt repayments to the IMF alone cost $25 million, more than the budget for education despite 40% of rural women being unable to read and write. Nine years ago poor countries were made a promise. The Heavily Indebted Poor Countries (HIPC) Initiative was supposed to free the poorest countries from their crippling debt burdens, and ensure that no poor country was burdened with an unpayable debt. The reality has been very different: Each year, Africa faces demands for over $10 billion in debt repayments. Little more than 10% of the total debt owed by the world's poorest countries has been cancelled. Although the HIPC Initiative was welcomed by debt campaigners, its scope is too narrow, its progress too slow and its priorities too dependent on the will of creditor nations. Calculations are made on the basis of what a country is considered able to pay, and not on what they need to combat poverty. The United Kingdom has shown welcome political leadership in unilaterally canceling 100% of the debt owed directly to it by many of the world's poorest countries, and agreeing to cover its share of the debts they owe to the World Bank and African Development Bank. It must now push other countries to follow its lead, and use its influence to ensure that the debts of the poorest countries are cancelled in full. Only 10% of the total debt owed by low-income countries has been cancelled. All unpayable debts must be cancelled if the benefits already felt by some countries are to be shared by all. Zambia: The Cost of Debt Zambia, formerly one of sub-Saharan Africa's wealthiest countries, is now one of its poorest and least developed. The living standards of Zambians are in free-fall and Zambia is now lower placed on the human development index (HDI) than in 1975. With a life expectancy of just 33 years, Zambians die earlier than people anywhere else in the world. The Zambian Ministry of Health has said that it expects that half the population will die of AIDS, and roughly half the teachers trained every year die of the disease. 28 The Zambian government is crippled by the massive debt recalled by international financial institutions. Debt repayments are making it impossible to respond to the health, educational and economic challenges facing Zambians. In 2004, Zambia used 7.35% of its Gross Domestic Product (GDP) ($377 million) repaying its debt. It spends twice as much repaying its debt as it does on education. Zambian students struggle to learn in classes containing 70 pupils on average. Zambia has endeavoured to meet the stringent conditions imposed by HIPC. At the behest of foreign governments it has privatised public utilities, removed subsidies, deregulated its markets and opened its doors to foreign imports. In spite of these efforts, by 2003 Zambia's debt had been reduced by only 5% of the levels promised under the HIPC initiative. The failure to cancel Zambia's debt in full is having catastrophic consequences for poor Zambians. Current trends suggest not only that Zambia will be unable to meet most of the Millennium Development Goals (MDGs), but also that it gets further from them as time goes on. Please help Drop
The Debt WHAT THE
G8 HAS AGREED: Cancellation of World Bank, African Development Bank and IMF debts for these countries. Recent statements had not included IMF debt - the fact that the deal does now cover it is a tribute to the determination of campaigners. The IMF debt cancellation is to be paid for out of 'internal resources' - probably including money from a previous sale of IMF gold - and possibly some additional donor contributions. Additional resources. This had been a sticking point. World Bank and African Development Bank debt cancellation will be paid for out of indebted countries' own aid allocations from the multilateral institutions. However, the G8 has promised to reimburse these institutions. These new contributions will not go just to the countries which have had their debts cancelled, but will be available to all poor countries. This means that debt cancellation for qualifying countries will not be fully funded; but on the other hand there will be some extra money available for other countries. Debt stock cancellation.
The deal writes off debt stocks in full, rather than just temporarily
cancelling debt service (as the UK, Canada and the Netherlands had promised
to do for some countries already). Campaigners had been calling for
this full write-off, to free countries from the ongoing relationship
of indebtedness. WHAT UK
CAMPAIGNERS HAVE DONE: Put pressure on world leaders by preparing for the biggest mobilisation ever on debt, trade and aid. The G8 knows it faces the prospect of tens of thousands of campaigners gathering in Edinburgh on 2 July to demand debt cancellation, trade justice and more and better aid - while millions watch worldwide. Forced politicians
to acknowledge your impact. Gordon Brown acknowledged the role of debt
campaigners in creating today's deal, and stated that Finance Ministers
know "the eyes of the public are upon us". Gordon Brown, Hilary
Benn and Tony Blair also showed the extent to which they are influenced
by debt campaigners in the statements to campaigners they released on
World Debt Day.
WHAT IS
NEEDED NOW: Ensure the deal is delivered. Debt campaigners know that ensuring public statements make a real difference for indebted countries takes continuing pressure. Ensure an end to economic policy conditions. Today's deal leaves the harmful and undemocratic conditions of the HIPC scheme intact. This is not acceptable. Ensure all countries that need debt cancellation get it. Jubilee Debt Campaign analysis shows that around 60 countries need total debt cancellation, just to meet the Millennium Development Goals. This is far more than the 18 that are currently getting it, and the 27 likely to. Multilateral debt cancellation for these countries would release over $10 billion per year for poverty reduction, rather than $1 to $2 billion. Those not included in this deal are not getting even bilateral debt cancellation. (See our report In the Balance for more details.) Ensure unpayable debts to all creditors are included. Even countries that are included are not having all debts cancelled. For instance, the four qualifying countries in Latin America will pay debt service totalling $216 million to the Inter-American Development Bank this year. Some countries also need help tackling burdens of commercial debt. Come to Edinburgh
on 2 July! Campaigners must keep up the pressure on debt, trade and
aid by making their voices heard at the Make Poverty History G8 rally. Government
and inter-governmental information on debt Useful information
on debt
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