G-8 Finance Ministers Forgive Debt of 18 Countries

The finance ministers of the G-8 nations (that’s the 7 richest countries in the world, plus Russia for no real good reason) met in preparation for the G-8 summit next month and agreed to cancel all the public debt of 18 highly indebted poor countries [HIPCs]. The total comes to $40 billion, which critics will say could have been spent on schools, healthcare and pensions were it to be repaid. But the point is there wasn’t going to be repayment, and this allows a fresh start, not unlike corporate bankruptcy.

The 18 nations (Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda, and Zambia) have reached the so-called “completion point” in stabilizing their economies and establishing a strategy for development. Another 9 (Cameroon, Chad, Democratic Republic of Congo, Gambia, Guinea, Guinea Bissau, Malawi, Sao Tome, and Sierra Leone) have reached the “decision point” in the HIPC process, which means debt relief is starting to become available, and their completion points (when all their debt is cancelled) probably lies a year away.

The reviews are largely positive, but there are always those who believe that more could have, and should have, been done. South Africa’s Archbishop Desmond Tutu, said: "It is a splendid start and one hopes that they will, from here, go on to cancel all debt for most of the countries - I gather it is about 62 countries - who are heavily indebted." And he’s right, but to cancel the debt without a plan and without the structures in place to benefit from a clean debt slate only ensures that the same problem exists in 20 years’ time.

What can happen now, and what probably should have happened long ago, is more private capital can flow into these countries for commercially viable development projects. While private development does create inequalities in traditional societies and can cause environmental harm, its record is vastly better than public projects which need never create a profit. The HIPCs (which is the lastest term for less developed countries, developing countries or Third World countries – as if changing the term would alter the bone-crushing poverty most of their people suffer with on a daily basis) are littered with huge projects that never really contributed to the economy and were built because some general became president in a coup and convinced Washington or Moscow to build something he could name after himself.

As for the rich nations that have forgiven the debt, well, they really weren’t ever going to get it back. They will recapitalize the World Bank and African Development Bank to keep them afloat and functioning. And maybe this time around, things will get better in these nations. Since they really can’t get much worse, a fresh start can only be a hopeful sign.



© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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