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DEBT
By Gail Lerner,
Rebecca Desiree Lozada and Viola Torres
here is
a strong consensus in the international community that the debt burden
is a serious barrier to the creation of any meaningful development strategy.
The Secretary General’s report of earlier this year rightly identifies
debt as a significant obstacle to development in low-income, middle-income
and transition economy countries. It recognizes that debt financing
ought to be an integral part of a country's development effort and not
a hindrance.
The foreign debt is growing exponentially. Debt relief continues
to be an exercise of power and control through the conditionalities
imposed by the International Financial Institutions (IFIs). Structural
Adjustment Programmes (SAPs) impose unacceptable conditions on debtor
nations and drain them of precious resources. Present debt-management
proposals such as those devised by creditors—the Heavily Indebted Poor
Countries (HIPC) Initiative, to include the Enhanced HIPC—offer too
little, too late, to too few countries. Because these are designed
by creditors, their purpose is debt collection, not debt relief.
Both lenders and borrowers must take responsibility for the debt crisis.
It is unjust that creditors dominate the debt relief process. Unless
present debt-management plans are transformed into effective, equitable,
development-oriented and durable debt release opportunities, the devastating
cycle of debt accumulation will repeat itself, condemning millions more
people to suffering.
Debtor governments are obliged to prioritize debt repayments over spending
on health, education, sanitation, clean water and other social needs.
This undermines accountability by debtor governments to the people,
which in turn erodes local democratic institutions. Debt and loan
negotiations are always conducted in secret between elites in the North
and elites in the South, fostering corruption.
Finally, if the debt problem is to be resolved in a way that contributes
in an integral way to sustainable community, attention must be paid
to how concurrent channels of development financing contribute towards
the creation and expansion of external debt. For example,
attention needs to be given to how existing trade and investment agreements
might inhibit rather than enhance revenue-generating opportunities for
developing countries. Vigilance needs to be maintained so that
development efforts are not financed through modalities, instruments
or mechanisms that create additional burdensome debt.
International fora of civil society convened by the international
Jubilee campaigns call for the cancellation of all illegitimate debts
of all Southern countries. The prevailing opinion is that there
are several categories of illegitimate debt, which can be identified
as follows:
1. Debts that are illegitimate to repay, that is, they cannot
be serviced without causing harm to people and communities.
2. Debts incurred by illegitimate debtors and creditors acting
illegitimately which includes both “odious debt” (that is any debt incurred
not for the needs or interests of the state but to strengthen a despotic
regime that represses its own population).
3. Debts incurred for illegitimate uses, such as debts for projects
which were never built or did not befit the people as they were intended;
debts contracted for fraudulent purposes;
4. Debts incurred with illegitimate terms, included debts incurred
at usurious interest rates; debts that became unpayable as a result
of external factors (unilateral increase in interest rates) over which
debtors have no control.
Caught as they are at the divide between the productive and reproductive
spheres of life, women have borne the full impact of debt dependence,
adherence to SAPs and underdevelopment. In their multitude roles
of worker, caregiver, home manager, wife and mother, women’s time and
energies are stretched to breaking point as they strive to enable the
family to survive economic crises.
Instead of perpetuating this set-up, the Financing for Development process
must work for systemic, structural and policy changes and programmes
that will free countries from the debt trap, prevent the repetition
of these problems and promote political and economic democracy and equity,
gender equality, popular empowerment and sustainable communities.
From this framework and towards this end, we recommend that the international
community ensure the:
- Immediate cancellation of 100% of the debts of low-income
countries, immediate debt relief for severely indebted middle income
countries, and
cancellation of the illegitimate debts of all Southern countries
- Active participation of civil society in decision-making
processes that determine the allocation of funds from new loans and
debt relief
- Elimination of any conditionalities attached to new
loans and debt relief that perpetuate indebtedness, as articulated in the Poverty Reduction
Strategy Papers (PRSPs) and the enhanced HIPC initiatives, starting
with heavily indebted poor countries in Africa
- Introduction of a new, independent and transparent
arbitration process for negotiating and agreeing upon international
debt cancellation which ensures that losses and gains are equally
shared along with the introduction of ethical lending and borrowing
policies to prevent future recurrence of the debt crisis
September
2001
Gail Lerner, World Council
of Churches – Ecumenical Team (WCC/ET), and Rebecca Desiree Lozada &
Viola Torres, Freedom from Debt Coalition
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The
WEDO/UNIFEM FfD Women’s Consultation Briefing Paper
series is an advocacy tool compiled for the Third Financing
for Development Preparatory Committee in New York City, October 15-19,
2001.
For
further information, contact Janice Goodson Foerde, Janice@wedo.org,
or Nadia Johnson, nadia@wedo.org,
Women’s Environment
& Development Organization (WEDO) Tel: (212) 973-0325 / Fax: (212)
973-0335 / Website: www.wedo.org
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