Debt relief, exemption mooted for poor states
Sydney, May 16:
‘Jubilee Australia’, the faith lobby, called today for debt relief to be extended to 66 countries and made a strong case for cancelling the debts of Indonesia, the Philippines and Bangladesh.
Almost 80 million Filipinos, Indonesians and Bangladeshis are living on less than one dollar a day. These countries have massive debts, mostly incurred by former ‘corrupt’ regimes, and lack sufficient funds to address the health and educational requirements of their large populations. Indonesia and the Philippines spend three times more on debt repayments than on health and education.
Karen Iles, co-director of AID/WATCH said, “Indebtedness harms the country’s economic prospects by hindering foreign investment and encouraging indebted governments to take part in unsustainable and ecologically unsound economic practices that will do long term damage to their countries”. At the 2005 Gleneagles meet, G8 countries signed a Multilateral Debt Relief Initiative (MDRI) deal, since ratified by the International Monetary Fund (IMF) and the World Bank, to cancel debts of 18 (now 19) heavily indebted poor countries (HIPC).
Ten more countries are likely to become eligible for similar debt cancellation in the coming years. This amounts to injecting $37 billion into the budgets of these countries over the next 40 years. “The deal means that from 2006 July, 290 million people will be free from debt slavery, but this deal only affects one in 10 people in the developing world. There are many more than that who need debt relief and Australia needs to be more proactive in its role as a global citizen,” said Luke Fletcher, Jubilee Australia’s national coordinator.
Australia remains at the bottom of the international donor table allocating just 0.30 per cent of the gross national income (GNI) on aid in 2006-2007. The international average amongst OECD nations is now 0.47 per cent of GNI.
Australia has agreed to cancel 80 per cent ($668 million plus $221 million) of Iraq’s debt by 2008 even though Iraq is not among HIPC. It has also cancelled the bilateral debt owed to it by countries that have qualified for the HIPC programme, such as Nicaragua and Ethiopia and has agreed to fund its share of the recent G8 debt deal to the tune of approximately $136.2 million.
“Unlike Iraq, the Australian government’s approach doesn’t recognise the illegitimate debts of other dictatorial regimes, such as in the Philippines and Indonesia, as worthy of cancellation,” said Fletcher and Iles.
Jubilee Australia’s two research papers, ‘2006 Policy Platform’ and ‘A Case for Debt Relief’, launched at the New South Wales parliament house on Monday, the eve of World Debt Day, made a strong case for further debt relief and urged the Australian government to put it as a key agenda item at the G20 meeting, scheduled for November 2006 in Melbourne.
The ‘2006 Policy Platform’ paper says eligibility for debt relief programmes must be extended to all 66 countries that the World Bank considers poor enough to grant highly concessional loans; and a country’s poverty reduction needs and the ability to meet the Millennium Development Goals (MDG) should be the primary and most important consideration when considering eligibility for debt relief.
‘A Case for Debt Relief’ examines how countries like Zambia and Tanzania have spent debt relief money on health and education. Dorothy Makasa, a Zambian now living in Sydney said, “While visiting my home country, I saw the havoc wreaked by years of debt and also how political maturity of a pro-active government was using debt relief funds for lifting people from poverty. The latter raises hope, but developed nations must do more and cancel all debt”.
One of 12 siblings, Dorothy explained how her father, who was a teacher, had provided them with good education and health care, told her that he would have been unable to afford these basic amenities on his teacher’s salary and like other grandparents would have been looking after his children’s orphans as a result of the AIDS epidemic. Subsidies in agriculture have been removed and privatisation of companies had led to many of her brothers not receiving salaries for three months. On the other hand, this year, Australia has announced a $10.8 billion surplus in the budget.
However, there has been only a miniscule increase of 300 million in aid, mostly to forego Iraqi debt. Peter Garrett, shadow parliamentary secretary for reconciliation and the arts said, “The current announcements of debt relief for the most part address Iraq, but there is greater need in our own region. A sizeable amount of our windfall should have gone towards addressing poverty in our region and cancelling bilateral debt to Indonesia and the Philippines”.
Debt relief is a highly effective form of aid and can go a long way in combating poverty. Prof Ross Buckley of the Tim Fischer Centre for Global Trade and Finance said, “The biggest long-term return for the dollar and cents is putting food in the mouth of children and educating them. Its time bankruptcy laws that came into effect in many western countries over a hundred years ago are applied internationally”.