Debt Cancellation

Many factors contribute to poverty in developing countries, such as economic history, political stability, poor government control and armed conflict.

In half the world’s poorest countries, unreasonably high debt has also become a significant factor restraining development. Developing countries spend an incredible portion of their national income paying rich countries and international financial institutions rather then using that money to feed the starving in their country, educate their children or develop their nation.

Reducing poverty is currently the world’s central challenge and debt cancellation is one of the key issues that would help alleviate it in poorer countries by allowing them to reinvest their national income in the development of their country.

At the G8 Summit in July 2005 in Gleneagles, Scotland, world leaders vowed to cancel the debt of the world’s most heavily indebted countries
This was to be provided by the World Bank, the International Monetary Fund and the African Development Fund to the countries that had ‘graduated’ from the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
On the 29th of June 2006, the World Bank announced that the Multilateral Debt Relief Initiative (MDRI) was to commence on the 1st of July 2006.
According to the Multilateral Debt Relief Initiative (MDRI), 19 countries would initially receive 100% cancellation of their debt. The majority of these countries are in Africa.

“Additional debt relief will help these countries channel resources into programs that directly help the people who need it most — the poor who need and deserve a better education, better health services, greater access to clean water, and greater opportunities to escape poverty.” Paul Wolfowitz, World Bank President.

Does ‘Debt Cancellation’ work?
In Benin, 54% of the money saved by debt relief has been used to provide better healthcare, including rural medical facilities and HIV programs.
In Burundi, elimination of school fees thanks to debt relief allowed an additional 300,000 children to attend school.
In Uganda, 2.2 million people gained access to clean water thanks to debt cancellation.

While the G8 acknowledged some of the demands of GCAP, Make Poverty History and the Live8 Concerts and took some action, there is much more that the can and must do to achieve these demands; our demands; your demands!

However, we need to accelerate this process. Poor countries should not need to privatize basic services or relax their economies just to qualify for debt relief. Despite all these initiatives, poor countries spend more money on debt repayment than they do on health or education.

How is that possible?
In Malawi, more is spent on repaying debt than on health, even though one in five Malawians is HIV positive.

Despite the HIPC Initiative, Africa faces demands for over $10 billion in debt repayment every year. While the G8 took a few of the initial steps only 10% of the debt owed by HIPCs has been cancelled. We need to fight for the complete cancellation of unsustainably high debts in order to combat growing poverty in these countries and allow the people to obtain necessary healthcare and education.