Poor nation debt calls for jubilee year relief.
We have not heard much talk of debt forgiveness during the 1996 primary debates. Third World debt is not exactly a household phrase. Yet the debt crisis can -- and must -- be solved, above all to give new hope and opportunity to the world's poorest countries but also to prevent new threats to global peace and security.
Thirty-two countries are now classified by the World Bank as severely indebted, low-income countries -- SILICs -- 25 of which are in sub-Saharan Africa. The overall debt stock of these countries stood at just under $210 billion in 1994. This was four times higher than in 1980.
Viewed globally, these debtor nations represent small change compared with wealthier rations' debts: around 10 percent of the total debt. However, measured in terms of ability to pay, the debtor-nation burden is insupportable. The precarious position of these debtors is reflected in their relentless accumulation of arrears on their debt payments.
Last year, repayments of $16 billion fell due to these nations, according to Oxfam International. This is equivalent to almost half of their export earnings. SILICs were able to repay less than half of this amount. The rest was simply added to principal and interest arrears. And the nations fall backward yet again.
Today, interest payments account for about one-half of total debt servicing. Arrears, meanwhile, have quadrupled since 1989 to $56 billion.
The case for debt forgiveness stems from a convergence of moral imperatives, economic logic and self-interest. The moral imperative for multilateral debt relief derives from a simple proposition: It is wrong to accept such large-scale suffering and the poverty caused by the debt. No nation should tolerate a situation in which an unpayable debt burden perpetuates the evils of mass malnutrition, disease and illiteracy.
The economic case for debt reduction is similarly overwhelming since it would release the productive potential of marginalized communities and help create a framework for more self-reliant growth. Investment in human capital is being undermined by repayments on debts that are self-evidently unpayable.
Meanwhile, the costs of these repayments are being borne mostly by poor women and children for whom debt is destroying opportunities for health, education and employment.
Additionally, in an increasingly interdependent world, the dangers to stability posed by the deepening poverty associated with debt -- such as the prospect of increased conflict, refugee flows and environmental degradation -- cannot be discounted.
Debt profiles are usually expressed in financial terms. But the ultimate expression of the debt crisis is to be found in the enormous human costs associated with it. Oxfam International offers these human examples:
* In Uganda, $3 per person is spent on health compared to $17 on debt repayments. This is despite the fact that one in five children in Uganda does not reach her or his fifth birthday because of diseases that could be prevented through investment in primary health.
* In Zambia between 1990 and 1993, the government spent $37 million on primary school education. Over the same period, it spent $1.3 billion on debt repayments. Repayments to the International Monetary Fund alone were equivalent to 10 times government spending on primary education.
* In Tanzania, spending on external debt is double the level of spending on water provision. Yet more than 14 million people lack access to safe water, exposing them to the threat of waterborne diseases, which are the main cause of premature death and disability.
* In Honduras, total public spending on debt represented more than spending on health and education. This is in a country where more than half of the population lives in abject poverty.
* Finally, in Nicaragua one of the most prominent factors contributing to the economic crisis is the burden of the national debt, which stands at $11 billion. Interest payments alone to international lenders sap $260 million from the country's budget each year -- more than Nicaragua earns from the products it exports, like coffee and meat.
International efforts to resolve the multilateral debt crisis are at a watershed. Last year, a World Bank task force acknowledged for the first time both the extent of the multilateral debt difficulties facing many countries and the need for debt reduction. Nevertheless, there is substantial resistance to debt reduction at the International Monetary Fund and the World Bank as well as among some recalcitrant governments.
Their message is that multilateral debt relief is unnecessary, or that it would have a potentially destabilizing effect on the international financial institutions, or that it would be "morally hazardous," that is, rewarding the indigent.
The truth is, that in many cases the culprits who borrowed the money to begin with have long left the scene of the crime and those who are paying it back through economic belt-tightening never saw its benefits in the first place. International lenders are not without responsibility either.
Digging to the roots of Third World poverty is never easy. Debt is one serious, but not the only, factor. Others include rapid population growth, instability and unrest caused by civil wars, widespread government corruption and business mismanagement.
Some have likened Third World corruption to the disease of alcoholism. Nothing much changes before the drinker first acknowledges the problem and takes steps to end long-established patterns. Some international development experts say they see little point in further investment until corruption and mismanagement end.
To get serious dialogue rekindled between debtor nations and international lenders, debt forgiveness, like today's international refinancing arrangements, will have to be tied to measurable development targets, like building hospitals and schools and ending gender disparities.
There is no reason, in principle, why a multilateral debt-forgiveness initiative should not be linked to specific development targets, with the savings from debt reduction used for investment in social priority areas.
Thank you, Cardinal Hume for reminding us that millions are trapped in desperate financial schemes from which there is no escape. The debt-forgiveness discussion will develop in the years ahead as linkages are made between forgiveness and reform. The essential need is to end the suffering and poverty. Once progress is made here, other concerns start to fall into place -- environment, population control, health, education, for example. If there is will, the paths can be found. Justice, mercy and self interest all require us to act -- and the beginning of a new millennium is the perfect time to get serious about the task.
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|Publication:||National Catholic Reporter|
|Date:||Mar 15, 1996|
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