Time to write off the developing world's debt

For A Change, June-July, 1997 by Michael Smith

It hardly features in Western politics, even during election debates. Yet it affects the lives of more people on the planet than almost any other issue. Over a billion people in the developing countries suffer from the burden of debt repayments to the West, on loans incurred during the heady days of the 1970s oil price hike when Western banks were awash with petrodollars.

So great is the debt that, today, many African countries are paying three times as much in debt remission to the West as they receive in aid. The net flow of funds is from the South to the North, from the poor to the rich. In the 12 years from 1980 to 1992, developing countries paid off US$1.66 trillion. Yet the total debt of all developing countries is still estimated to stand at over US$1.3 trillion. Many sub-Saharan African countries are, in effect, bankrupt. In practical terms this means that schools, houses and hospitals don't get built, the poorest of the world's poor continue to suffer in abject poverty, and a volatile cocktail of disaffection bubbles to near exploding point.

Take South Africa, for instance, one of the more developed nations of Africa. It labours under a US$70 billion debt burden, incurred by the apartheid regime. Interest repayments alone constitute the nation's second highest budget expenditure, after education. The Archbishop of Cape Town, Njongonkulu Ndungane, points out that individuals or businesses can have their debts written off when they go bankrupt. But no such mechanism exists in international law for whole nations.

He is just one of a growing chorus of people around the world who call for the debt of the poorest countries to be written off. Others have coalesced around campaigns like Jubilee 2000, affiliated to the Debt Crisis Network, which sees the Millennium as an appropriate deadline for debt remission. To his credit, Kenneth Clarke, as Britain's finance minister, was one of those who pushed hardest for the world community to take action. Yet multilateral organizations like the International Monetary Fund and the World Bank, and donor nations, have dragged their feet. Meanwhile African children starve.

Some argue that the original loans were misappropriated by corrupt regimes, as if this should obviate the need for remission. But as Archbishop Ndungane points out, the ordinary people of these countries `were unaware that they were being dragged into a mire of foreign debt that would lead them into a sea of poverty'.

That is why this magazine welcomes campaigns like Jubilee 2000. Governments and multilateral organizations need to take action, and take it now.