Partnerships crucial to reduce debt of poor countries

The 65th ordinary session of the General Assembly will open on Tuesday, Sept. 14, with His Excellency Mr. Joseph Deiss of Switzerland, serving as President. A High-Level Plenary Meeting, scheduled for Sept. 20–22, will focus on accelerating progress toward achieving the Millennium Development Goals by 2015. Five round-tables will focus on addressing the challenge of poverty, hunger and gender equity; meeting the goals of health and education; promoting sustainable development; addressing the special needs of the most vulnerable; and widening and strengthening partnerships.

As you know from previous briefings, progress in terms of the MDGs has been uneven at best, and there is great concern that some areas, Africa in particular, have experienced significant setbacks in their modest gains. One of the outstanding issues that contributes to countries’ inability to lift themselves out of poverty is that of debt. And, in order for countries to be freed from the onerous burden of debt, widening and strengthening partnerships between the developed and the developing world (MDG #8) are critical.

I recently had the opportunity to attend a discussion entitled, “An Exit from Debt: The Need for Fair and Transparent Arbitration for Sovereign Debt in Africa and Beyond,” sponsored by the Jubilee USA Network and the Third World Network. The major presentation was given by representatives from the African Forum and Network on Debt and Development (AFRODAD). It was pointed out that “time is running out…” for the most vulnerable countries, as debt has become the greatest impediment to development. Also, the current financial and economic crisis, as well as Greece’s debt crisis earlier this year, has drawn attention to the failure of the international financial architecture to deal with sovereign debt crises in an orderly, transparent and fair manner. The persistence of the debt crisis faced by heavily indebted low-income countries, and the inability of the international community to find both immediate and sustainable solutions highlights the need for structural changes at the global level. It also highlights the lack of political will to bring about this change.

A widely held assumption regarding debt is that the debtor countries are solely responsible for the crisis. While accepting part of the responsibility, due to lack of proper debt management, corruption and other shortcomings, the debtors point to external factors which have contributed to the debt crisis. These include unfair terms of trade and ongoing lack of access to global markets; natural disasters; and conditionalities imposed by the International Monetary Fund (IMF) and World Bank, which make it very difficult for countries to get out from under the burden of debt incurred. The creditors, on the other hand, never seem to be part of the problem. However, a significant percentage of the developing world’s debt is illegitimate and odious; and creditor nations have, in fact, been complicit in placing this unjust burden on the backs of some of the most vulnerable populations.

The concept of illegitimate and odious debt holds that any debt which is not founded upon the common good of the people for which it was contracted and lacks the consent or mandate of the people cannot be sustained. These are generally debts contracted by despotic governments. Nigeria is a case in point. During the rule of military dictatorships, debts rose to astronomical levels in the face of usurious lending rates and a failure of the government to pay the debts without compromising the development needs of her people. The Democratic Republic of Congo is another example. Loans advanced by Western countries (including the United States), the IMF and the World Bank during the dictatorship of Mobutu Sese Seko were given more as a support for a political agenda rather than to address the needs of the people. The IMF and World Bank served as instruments of U.S. policy during the Cold War, rewarding Mobutu for his fight against communism in Central Africa, while ignoring the corrupt, brutal and fraudulent tendencies of the regime.

The current framework for dealing with debt crises has not yielded benefits for debtor nations. Both the criteria and the conditions for debt cancellation are prescribed by the creditor nations, with little input from the debtors themselves. The creditor nations tend to see the protection of the current financial architecture as the basis of decision. Debtors, on the other hand, argue that a human rights criterion would better reflect the so-called partnership that is expected between the developed countries and the developing countries. AFRODAD, among others, advocates for a fair and transparent arbitration mechanism, based on the absolute necessity of resolving the power imbalance between creditor nations and debtor nations.

For more information on the issue of debt:

• African Forum and Network on Debt and Development: www.afrodad.org
• Jubilee USA: www.jubileeusa.org
• Third World Network: www.twnside.org.sg

Margaret Mayce, OP (DLC/Amityville) NGO in Special Consultative Status at the United Nations Dominican Leadership Conference 211 East 43 St. Rm 704 New York, NY 10017 email: Margaret Mayce, OP