debt –understanding the challenge
DESCRIPTION
Debt –Understanding the Challenge. The Injustice of the debt burden Background to the Debt Crisis Structure of Debt Campaign Achievements Challenge ahead. The Debt burden. Debt Service:- $64,000,000 every day $23,000,000,000 every year Debt stock $375,000,000,000. - PowerPoint PPT PresentationTRANSCRIPT
JDC Web Group - Debt Slides 1
Debt –Understanding the Challenge
The Injustice of the debt burden
Background to the Debt Crisis
Structure of Debt Campaign
Achievements Challenge ahead
JDC Web Group - Debt Slides 2
The Debt burden
Debt Service:- $64,000,000 every day $23,000,000,000 every yearDebt stock $375,000,000,000
52 counties identified by Jubilee Over 1 billion people live on less than $1/day
JDC Web Group - Debt Slides 3
Debt = death 19,000 die every day from poverty 1 in 5 babies die before the age of 5 Average age is falling!
2-3 Million AIDS 3.5 Million from Pneumonia 2 million TB 1 million Malaria
Because there is no money in drugs for the poor countries, less than 1 % of health research is in tropical disease
JDC Web Group - Debt Slides 4
Debt = lost opportunity Education has to be
paid for 125 million children
get no education Sometimes the state
pays just the teachers salary
Pay for books, paper, buildings, school clothes
Education is a route to empowerment
JDC Web Group - Debt Slides 5
Origins of Debt Vast petroleum dollar
liquidity after the oil price
rise in the 1960's Cold war politics to 'buy'
influence – Much of it military
contracts
Conversion of commercial
debt into public debt What does the 'G' stand for?..why, GREEDY !
JDC Web Group - Debt Slides 6
Debt structure (22 HIPCs)Total debt (NPV) for 22 HIPCs
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Traditional relief Enhanced HIPC + additionalbilateral
+ 100% IMF &WB
+ 100% ParisClub
$ m
illio
ns
IMF World Bank Other multilateralParis Club Non-Paris Club Commercial
G8 control World bank /IMF
Bilateral loans typically under Paris Club
JDC Web Group - Debt Slides 7
HIPC (Enhanced)Heavily Indebted Poor Countries
HIPC covers 41 countries
Only 23 have reached agreement
So poor even the banks know they couldn’t pay
Conditions of sustainability set by IMF/WB –
HIPC doesn’t cancel all debt; it reduces it to a ‘sustainable’ level
Debt:exports>150%;Debt : Government revenue 250%
JDC Web Group - Debt Slides 8
Debt Stock –$ bnDebt stock-EDT- HIPC and Jubilee 52
Countries $bn
0
50
100
150
200
250
300
350
400
HIPC -First23
HIPC - total41
Jubilee-Total 52
JDC Web Group - Debt Slides 9
Debt Service $US bn
This is $64M /day
Debt Service 1998 US$bn
0
5
10
15
20
25
HIPC/23 HIPC/41 Jubilee /52
JDC Web Group - Debt Slides 10
Debt service : education & health
HIPC Countries
01,0002,0003,0004,0005,0006,0007,0008,0009,000
10,000
Debt serv
ice
Reduced D
ebt Serv
.
Educatio
n+Health
Educatio
n
Health
$ M
illi
on
JDC Web Group - Debt Slides 11
Conditionality Problems with Debt Cancellation
Conflict Corruption/ governance Poverty reduction
PRSP –Poverty Reductions Strategy Paper
Civil society Focus on poverty reduction Dictatorial economic conditions
Market liberalisation, Privatisation, Service fees
USA congress has edicted NO fees!
JDC Web Group - Debt Slides 12
Campaign Achievements
Nominal $100bn debt to be cancelled!
41 countries to be assisted 24 million signatures collected
Every signature worth $4,000! 50,000 demonstrators in
Cologne Enhanced HIPC added $50 bn Every demonstrator worth
$1,000,000!
JDC Web Group - Debt Slides 13
Impact of HIPC
HIPC has cut debt stock
US$20bn
Debt stock 'slashed' from 60%
of GDP in 1999 to 28% after
HIPC which is 10% lower than the
average for developing countries
5 more could reach decision in
FY02
JDC Web Group - Debt Slides 14
Impact of HIPC-Debt Service debt service will fall
from 4% of GDP to 2% and from 27% of government expenditure to 12%
social expenditure will increase by US$1.7bn/a equal to 1.2% of GDP (driven by diversion of debt service into social expenditure)
JDC Web Group - Debt Slides 15
Challenge ahead Big impact on first
23 HIPCs Only halves debt for
the 41 HIPCs Long way to the
Jubilee target
JDC Web Group - Debt Slides 16
Challenge Deeper debt relief
Actual reduction in debt service is small (perhaps 1/3rd)
Relief is on future increases due!
No basis for poverty reduction targets 2015
JDC Web Group - Debt Slides 17
Challenge Broader debt relief
Minimal reduction in
debt service –just
4%!
Payments reduced
from $64 M/day to
$61 M/day!
Debt Service Reduction from Enhanced HIPC - US$bn
0
5
10
15
20
25
HIPC/23 HIPC/41 Jubilee /52
Before HIPC
After HIPC
JDC Web Group - Debt Slides 18
Challenge – WB/IMF rejection of 100% cancellation
Claim – debt service now sustainable for 23 HIPCs
Unfair on other countries who need WB/IMF loans
Write off reduces loan capability by 5 times Deplete asset reserves would reduce credit
rating and hence increase cost of loans
JDC Web Group - Debt Slides 19
Challenge 2015 Poverty Reduction
Targets
Free primary education for all
Halve the number below
poverty level ($1/day)
Halve infant mortality (from 1:5 to 1:10)
JDC Web Group - Debt Slides 20
Challenge
Debt sustainability measured
against social spending
Grants/aid not loans
Independent arbitration of
debt, not just WB/IMF –
include UN/WHO
JDC Web Group - Debt Slides 21
Cancel the Debt
Faster
Broader
Deeper
Fairer
JDC Web Group - Debt Slides 22
Campaign arguments Focus on poorest countries (say
HIPC) or broader base? What criteria for sustainability Corruption/conflict Move on to fairer trade rules
Discussion
JDC Web Group - Debt Slides 23
Motivation issues
What will win wider public support? Demonstrations? Images of poverty Health? Education? Individuals/families/human interest
stories
Discussion
JDC Web Group - Debt Slides 24
How should we campaign? How do we move the political
process? Letters/lobbying/vigils – as before? Alternatives to G8/IMF venues? It’s the media that set the agenda! Post terrorism focus on poverty is
the breeding ground?
Discussion
JDC Web Group - Debt Slides 25
Origins of Debt –(2) Vast petroleum dollar liquidity after the oil price
rise in the 1960's Cold war politics to 'buy' influence Conversion of commercial debt into public debt * Commodity prices crash
(IMF/WB had insisted countries focused on these cash commodities)
Little of the money was spent on poverty alleviation
It was known that much of the money was being spent on arms and corruption.
Large proportion for ‘Arms’ and western prestige projects
Discussion
JDC Web Group - Debt Slides 26
Structure of Debt Burden Multilateral banks – controlled by G8
World bank – primary responsibility loans for development ODA -Overseas development aid –low interest/high risk countries IDA International Development Association –loans, zero interest IBRD: The International Bank for Reconstruction and Development
IMF –International Monetary Fund –primary responsibility global financial stability
Many regional development banks (IDB, AfDB, AsDB etc) Bilateral loans –individual countries
Paris club Commercial Banks –now negligible
Discussion
JDC Web Group - Debt Slides 27
Structure of Debt Burden Multilateral banks – controlled by G8
World bank – primary responsibility loans for development
IMF –International Monetary Fund –primary responsibility global financial stability
Many regional development banks (IDB, AfDB, AsDB etc)
Bilateral loans –individual countries Paris club
Commercial Banks –now negligible
Discussion
JDC Web Group - Debt Slides 28
HIPC Countries
02468
1012141618
Benin
Bolivia
Burkin
a Fas
o
Camero
on
Chad
Gambia
Guinea
Guinea
-Bis
sau
Guyana
Hondu
ras
Madag
ascar
Malawi
Mali
Maurit
ania
Mozam
biqu
e
Nicara
gua
Rwanda
Sao Tom
e
Senegal
Tanza
nia
Ugand
a
Zambia
< HIPC > HIPC
Discussion
JDC Web Group - Debt Slides 29
Remaining HIPC Remaining HIPC -Debt Stock -EDT
0
5000
10000
15000
20000
25000
Angola
Burun
di
Cote
d'Ivo
ireCAR
Comor
os
Congo
-Dem
Rep
Congo
-Rep
Ethiop
ia
Ghana
Kenya
Lao
PDR
Liber
ia
Mya
nmar
Sierra
Leo
ne
Somali
a
Sudan
Togo
Vietna
m
Yemen
$ M
Debt Conflict Countries Sustainable
DiscussionAccording to World Bank
JDC Web Group - Debt Slides 30
The Jubilee extra countries
Jubilee 11
0
10000
20000
30000
40000
50000
60000
$M
Discussion