Jubilee 2000 / USA Campaign

Jubilee 2000 / USA is part of a worldwide movement of concerned people and groups seeking to cancel the debts of the poorest countries by the new millennium.

Why is debt a problem for poor countries?

In order to repay foreign debts, many poor countries are being forced to divert scarce government resources away from health care, education, and other vital services. The result has been to deny many children the chance to go to school, women access to prenatal care, HIV-infected persons access to counseling and treatment, and small farmers access to credit and technical assistance. African countries now spend twice as much on average repaying foreign debt as on providing health care. The United Nations Development Program in 1997 stated, "Relieved of their annual debt repayments, the severely indebted countries could use the funds for investments that in Africa alone would save the lives of about 21 million children by 2000 and provide 90 million girls and women with access to basic education."

How much do these countries owe?

The 41 countries defined by the World Bank as "Heavily Indebted Poor Countries" (HlPCs) -- 33 of them in Africa - owe about $220 billion in foreign debts. Each African child inherits about $379 in debt at birth. A child in Nicaragua is born owing over $2,000, while average yearly income there is only $390.

How did these countries get so indebted? Isn't it their own fault?

* During the Cold War, Western governments including the US often lent money to undemocratic or corrupt governments for political reasons and largely ignored how the borrowers used the money. Many leaders squandered money on badly designed projects, military spending or personal corruption.

* While some poor countries have suffered from adverse weather and armed conflicts, virtually all have endured long-term declines in world prices for their primary exports (e.g. items like coffee or cotton). As export earnings dropped, governments could no longer keep up interest payments, which were added to the unpaid principal of the debt. This compounding of interest and rescheduling of loans has led to situations in many countries where, despite years of making debt payments, the level of indebtedness has not been reduced. Indeed for many countries the debt is higher now than ever.

To whom do the poor countries owe money?

The main creditors are the world's wealthiest nations, such as the US, Britain, Japan, France, and Germany. Other important creditors include the large international financial institutions like the International Monetary Fund and the World Bank, which are controlled primarily by the world's wealthiest nations. Regional development banks, such as the Inter-American Development Bank, and many commercial banks also have outstanding loans to poor nations.

Why should Americans care? How does it affect us?

* Unrepayable debt, and the austerity measures that accompany new loans, can inflame social conflicts. That can lead to civil war and even genocidal campaigns, as in Rwanda. Many of these conflicts have resulted in costly humanitarian interventions by the U.S. and other nations.

.* A large debt burden motivates many poor countries to lower labor standards, as they engage in a desperate struggle to attract foreign investment and thereby earn enough "hard currency" from export revenues to repay foreign debt. That leads to lower wages and growing poverty around the world.

* Debt harms the environment, encouraging rainforest destruction and pollution as poor countries use cheap but environmentally destructive ways to earn export revenues To attract foreign investment to help pay the debt, countries often weaken the enforcement of international and national environmental standards and regulations.

Is debt cancellation really practical?

Most poor countries have tried very hard to repay these debts. In 1996 nations in sub-Saharan Africa paid $14.5 billion on their foreign debt. But in 1995, they could only pay 57% of payments due. The reality is that the debt cannot and will not be repaid, and it is senseless for creditors to pretend otherwise. Countries cannot develop healthy economies when millions of their people are being denied basic health care and education and earn wages so low they can barely survive. A bold step to cancel poor countries' debt is the most practical way to restart their economies, protect the global environment and reduce poverty.

Who has the power to cancel these debts.

Governments of the wealthiest nations, including the U.S.. They can provide financial resources to international agencies like the IMF and the World Bank and direct that the funds be used to write off poor countries' debts. They should require, however, that the debt be canceled in a way that benefits ordinary people and without conditions that lead to more poverty and environmental destruction.

Our government and others together have the power, and the resources, to do it: the only thing missing is the political will. That must come from the people

Has debt cancellation been tried before?

Yes. Debt has readily been canceled for many nations in the past, including Germany after World War II.

Won't debt cancellation cost a lot?

Because the world financial community knows full well that the official amount ("face value") of these debts will never be repaid, the market value of the debts is only a fraction of that amount. The contributions needed from wealthy nations to write off these debts would be based on this market value and, therefore, relatively small.

Won't debt cancellation just benefit corrupt leaders rather than help ordinary people?

While corruption remains a problem in many places, a growing number of poor countries have more democratic governments and active civic groups and non-governmental organizations working to hold those governments accountable. Inaction is no solution. That penalizes ordinary people, not the corrupt leaders. The real challenge is to ensure that the resources made available from debt relief are used for reducing poverty.

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Jubilee 2000/USA
222 East Capitol St., NE, Washington, DC 20003-1036
tel: 202-783-3566 fax: 202-546-4468
coord@2j2000usa.org
www.j2000usa.org.

Reforming the System

Jubilee 2000 Campaign