Still a long way to go to reduce unjust debt of poorer countries
The IMF and World Bank have released their annual status report on the Heavily Indebted Poor Countries (HIPC) initiative. The HIPC process aimed to reduce the debt of many of the world’s poorest countries, (most of which are countries where VSO works) and was put in place partly as a result of sustained campaigning by development agencies and churches in the Jubilee 2000 coalition. The HIPC initiative is now coming to an end because the Bank considers the work to be ‘largely completed’.
Overall HIPC has been a positive process for many countries. Thirty-two countries have finished the initiative and had around $120 billion of debt cancelled. In 36 countries, poverty reducing expenditure has increased from 6.2% to 9.5 % of GDP between 2001 and 2010. Debt service payments have fallen by from 3.1% to 1% of GDP.
However there is still a long way to go in reducing the unjust debt which riddles the world’s poorest countries. Zimbabwe is still in ‘debt distress’, ie unable to pay its debts. Burkina Faso and The Gambia are still ‘at high risk’ of debt distress.
VSO is also concerned about South Sudan, the world’s newest country. We have recently started supporting health and education programmes in South Sudan and there is huge investment needed. South Sudan is currently debt free as on independence it was agreed that North Sudan would keep the country’s debt in return for having the opportunity to undergo a debt relief process. If this is not progressed within two years then South Sudan would have to take on half the debt. This would be a major set back to this fragile country.
VSO also notes with concern the level of debt Tajikistan faces, yet Tajikistan is not eligible for HIPC debt relief. On the other hand, Nepal, although eligible, has chosen not to join the initiative.
VSO regards debt as a major barrier to economic development, and supports the work of Jubilee Debt Campaign to continue to press for reforms to the world financial system.
Some people think countries should not have their debts forgiven, because it encourages them to overspend again in the future and ‘live beyond their means’. What do you think?