Socialist Worker

This ‘historic’ debt deal is nothing but a sham

by Eric Toussaint
Issue No. 1956

Children in Malawi, one of Africa’s poorest countries

Children in Malawi, one of Africa’s poorest countries

The meeting of the G8 finance ministers on Thursday of last week ended with statements about a “historic” cancellation of the debt that burdens poorer countries.

But the proposals boil down to very partial debt relief given the name “cancellation” for propaganda purposes. In other words, it is a sham.

Today’s situation is a complete fiasco. And the various projects being lined up for the next G8 summit are also nothing but smokescreens.

Despite all the talk by leaders of the world’s wealthiest nations, financing the development of Third World countries has been the subject of long debate — without a single firm and satisfactory decision being taken so far.

Yet it would be very easy to ask the countries of the global South to put an immediate stop to repayment of their external public debt. They could then use this money for internal development, under the control of their own people and parliaments.

Gordon Brown’s new project only concerns the debt held by the World Bank and the African Development Bank.

And his proposal only covers repayments between now and 2015 — a far cry from a 100 percent debt cancellation.

Moveover, these debt relief measures always come with conditions that demand the opening up of indebted countries’ economies to the interests of transnational corporations.

Lender countries demand continued privatisation of the public services and natural resources of indebted countries — a logic that admits no hope of improved living standards for the populations concerned.

The major development donors would have us believe they will be freeing up funds for Africa. In reality they are being as tight fisted as ever.

Official development assistance remained below $80 billion in 2004, with a large part of it never reaching the communities that need it.

On the other hand, debt leads to a constant outflow of capital. Developing countries service their external debt to the tune of more than $370 billion a year.

The countries that are to “benefit” from the G8’s so called generosity are only a handful — 27 in all, representing less than 10 percent of the total population of developing countries.

The G8 decision represents a continuation of the “highly indebted poor countries initiative”, launched in 1996 and highly publicised ever since.

But this initiative has failed. It involves the imposition of heavily neo-liberal policies, such as privatisation of natural resources and strategic economic sectors to the benefit of transnational corporations.

We should demand that these neo-liberal conditions be scrapped — there must be unconditional debt cancellation.

And the people of the global South must be able to make sure that debt cancellation really benefits those who need to be helped.

The London initiative can solve neither the issue of the debt, nor the issue of poverty, since it bears on only 2 percent of the external debt of developing countries.

We need a massive mobilisation at Edinburgh and Gleneagles from 2-6 July as part of the Make Poverty History mobilisation, and at Fana in Mali from 6-9 July for the Fourth Peoples’ Forum.

Eric Toussaint is president of the Brussels-based Committee for the Cancellation of Third World Debt and co-author of Who Owes Who? 50 Questions About World Debt. For more details go to

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Sat 18 Jun 2005, 00:00 BST
Issue No. 1956
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