Our tenth general chapter states that, respect for the human person, its dignity and human rights are essential dimensions of evangelization ad gentes and of our ministry of consolation, (cf. 53). It thus urges the regions to hold meetings annually in order to study the social, economic and political reality of the countries where we work. “The point of departure for such exercise should be the life of the poorest and most marginalized in the society”. The idea behind such meetings is to create an awareness in the missionaries and to “invite them to participate actively in the initiatives of the various diocesan, national and international organizations of solidarity and defense of the poor.” (53)
The chapter recommendations have been subsequently strongly enforced by a bilateral meeting between our general council with the corresponding Consolata Sisters’ general council. Among other areas of mutual collaboration, the area of justice and peace received particular attention. In a mutually signed letter to the two congregations they stated: “Episcopal conferences and solidarity organizations are particularly active in the collection of signatures in order to send them to heads of government of the richest countries, requesting them to cancel or at least reduce the debt that the poor countries owe to the foreign countries. In order to obtain a significant outcome, such a campaign to sensitize the peoples must continue with intensity. We extend an invitation to the missionary sisters, priests and brothers to become promoters of this campaign… The two general directions will provide to all who need, illustrative material on the significance of this solidarity initiative in favour of the poor countries.” (Nepi, 16 December 1999).

Both the urgent encouragement by the General Chapter of the IMC members to step up our concern for matters pertaining to justice and peace and this concrete invitation to participate in the world-wide campaign in favour of the poor countries are signs of the awareness that we are developing about mission. Such theological and missiological policies as option for the poor and human promotion had for a long time limited our involvement to assisting the poor with the immediate needs, without looking beyond the poor to see where the roots of their poverty are grounded. These last ten years leading to the year 2000 have enabled us to get the true picture of the culture of poverty that our missionaries have been struggling to eradicate, especially for the last fifty years. In these years more than ever before, poverty in the third world has been intimately linked with the debt phenomenon.
In order for us to participate effectively in the campaign for the cancellation of the third world debt, we need to have some basic information on the origin, nature and structure of this debt. In addition to that, we need to expose how the debt is directly affecting the life of our people in the mission. In this paper we will explain how these debts came about, how they are increasing poverty, and how efforts are being made to find a solution to improving the situation.

The origin of the debts:
The problem really began in the 1970’s when the OPEC (Oil Producing Eastern Countries) raised the price of oil by over 400% in a very short space of time. A lot of money suddenly came into circulation and the oil producing nations wished to invest this money in European and American banks in order to gain interest on it. This large inflow of money into the European and American scene could have triggered hyperinflation if the banks did not dispose of it quickly. Africa and Latin America offered the most attractive possibilities as regards investing this money. Hence, billions of dollars were poured into the "underdeveloped" nations, at 6% interest rate.
Unfortunately, a lot of this money went straight into the hands of dictatorial governments and instead of being invested in the country, was immediately sent back into European and American Banks so that it would create interest for these dictators. Some of the money was spent on grandiose projects that did little to benefit the receiving countries.

However, the day of reckoning came and these countries had to pay back the money that was supposed to have been invested in them. By this time, the interest on the money had risen to 23% and above. Many countries found that their GNP (Gross National Product) output could not even cover the interest repayments, so the banks, and other lending institutions, called in the IMF (International Monetary Fund) to regulate the economies of these defaulting countries so that their economies would now be geared towards paying back the interest repayments. The debt problem has thus become a great noose around developing countries’ necks.
Besides the purely economic motivations, such as avoiding the inflation, there were also strong political motivations for forwarding loans to the third world. Much of poor country debt is related to the Cold War, when both sides pushed money at their supporters. Former Zaire, is an example of a poor country being rewarded by the rich friends with loans, in order to guarantee stability of western influence in the neighbourhood of communist Angola. The case of several Latin American countries and the far east are cited as examples of accumulation of political rather than economic debt.
Whenever economic interest was involved in forwarding the loan, the interest was first of all that of the rich country, not of the poor receiving country. Rather than originating from a genuine need from the poor countries, we could speak of it as loan “pushing”. In 1973, well before the debt crisis was obvious, the US Federal Reserve Governor, Andrew Brimmer, noted that “the main explanation” for the sharp rise in lending to less developed countries is the “failure of demand for loans from borrowers in developed countries to keep pace with the expansion of credit availability.” Even the IMF admits to an “irrational exuberance” that led investors and banks to underestimate the risks in emerging market countries. Brimmer explained that faced with a surplus of cash, many European banks “pushed loans to developing countries” by offering incentives such as very low interest rates. Indeed, in the mid-1970s, real interest rates were negative, meaning countries could pay less than they borrowed. But the hidden sting was that these loans had variable interest rates and, once poor countries were hooked on loans, real interest rates were raised by an incredible 15%. Countries could not pay and defaulted. In summary, the industrialized nations pushed Governments of poor countries to take loans they did not need, and then the lenders looked the other way when the money was squandered. Besides wilfully creating debtors, in order to secure interest, developed countries gained many other benefits from the loan facilities to the third world. For example, the US Treasury estimated that in 1993 the US provided $1.5 billion to multilateral development banks, such as the World Bank, but US firms won $2.7 billion of contracts on projects funded by those banks. That created 54,000 jobs in the US, the Treasury said. Of the Philippines debt of $29 billion, 10% is accounted for by a single project – a nuclear reactor built by the US company Westinghouse.

Some Causes of the Debt Crisis

· The recession of the70s and the fall of the commodity prices
As a consequence of the oil crisis of the 70s, developed economies went into recession. Therefore less manufactured goods were produced, and thus fewer raw materials were imported from developing countries, causing prices for these materials to fall. Moreover, the high investment in the agricultural sector of the developing economies had led to large increases in agricultural output; this “overproduction” collapsed those prices as well. The income of developing countries in the 70s decreased dramatically, so much so that debt obligations could no longer be fulfilled.

· The end of the Gold Exchange Standard (GES)
In order to stabilize international trade after World War II, the US$ was internationally accepted to be convertible in gold. Developing countries’ reserves were mostly in dollars, considered “as good as gold”. When in the late 70s the US, unilaterally, undid the convertibility of the dollar in an effort to lift its trade out of the recession, the value of the dollar dropped significantly, slashing the reserves (and the security for loans) of poor countries.

· Floating exchange rates and variable interest rates
Because of the drop in exports of developing countries and loss of part of the value of its reserves, the local currencies became increasingly sensitive to floating exchange rates, as hard currency for repayment of loans became more expensive. To safeguard themselves against the effects of floating exchange rates, creditors adopted the clause of variable interest rates, linking interest rates to the movement of the exchange rate. On both accounts, developing countries lost out!

· Misguided models of development and inappropriate industrialization
The developing countries in their attempts to catch up with the industrialized world have tried to copy western models of industrialization, while Western governments, having only their own experience, encouraged this process. Often there was no coherent and integrated model of growth, resulting in choosing wrong priorities, misallocation of personnel resources and mismanagement of funds and benefits.

· Unethical banking and corruption
The absence of an international insolvency procedure made it possible that creditors could lend to governments, no matter how corrupt, with the certainty that debts would be passed on to the subsequent governments if they were replaced or overthrown. As a result loans were granted to governments for projects that did not meet minimum standards of social, ecological or economic viability. At times, such loans have been used to enrich a small group of people or have been transferred out of the country to the private bank accounts of government officials.

The effects of the world debt
Millions of people around the world are living in poverty because of Third World debt and its consequences.
Latin America owes £365 billion in debts to other countries and banks (36 per cent of what it produces - its Gross National Product), while sub-Saharan Africa owes £140 billion (83 per cent of its total GNP). These enormous debts mean that repayments to Western Creditors take priority and ordinary people suffer: in poor health, in restricted access to education, in lack of employment and in limited ability to trade and provide for themselves.
Health
Spending on healthcare has fallen in many of the world’s poorest countries since the 1980s. This often means that people have to pay for healthcare, so the poorest cannot afford it and simply go without. In Zimbabwe spending per head on healthcare has fallen by a third since 1990 when a Structural Adjustment Program was introduced. In Uganda, £2 per person is spent on healthcare, compared with £11.50 per person on debt repayments.

Some improvements in health gained over the 1960s and 70s have been turned back or stopped in many countries since the 1980s when the debt crisis broke out. The number of children who die before the age of five, or before the age of one, has risen in many deeply indebted countries, including Zimbabwe, Zambia, Nicaragua, Chile and Jamaica, after decades of falling numbers. Diseases thought to be eradicated - tuberculosis, yaws, yellow fever - are making a comeback in some countries as treatment and vaccination coverage declines.
Education
As schools are forced to charge fees, fewer people are able to send their children and education is mainly available only to the better-off.
In sub-Saharan Africa the damage to education has been particularly significant: the percentage of 6-11 year olds enrolled in school has fallen from nearly 60 per cent in 1980 to less than 50 per cent in 1990. In Tanzania, school fees have been introduced as part of a Structural Adjustment Program, leading to a drop in primary and secondary school enrolment.
Employment
The IMF encourages hard-pressed governments to cut back spending and downsize government departments. This often means a rise in unemployment and a cut in wages.
Real wages in most African countries have fallen by 50-60 per cent since the early 1980s. In Mexico, Costa Rica and Bolivia average wages have fallen by a third since 1980. And unemployment has risen in many countries in Africa and Latin America since the 1980s. In Zambia, Tanzania and Ghana, over 20 per cent of the working population are unemployed. High levels of unemployment are counterproductive as there are fewer taxpayers to contribute to the public purse. So governments raise less through taxation.
Trade
SAPs mean that countries must increase their export crops. And, as many poorer countries are encouraged to grow the same crops, they cause a glut on the international market and prices fall. So the workers on plantations and farms get lower wages than ever.
Mexico first grew maize as a staple crop thousands of years ago. But today, thanks to IMF economic policies, it has to import 20 per cent of this staple food from the USA.
The IMF encouraged Mexico to replace its vital food crops with cash crops - like strawberries and exotic fruits. Kenya is another example where international trade pressures have pushed coffee farmers to cut down the coffee plantations and to replace them with roses which have a more competitive market! The IMF also made sure that any trade protection for the country’s agricultural goods was lifted. So poor countries’ export crops now compete with those from the developed countries, which are highly subsidised and protected, using all available techniques to improve their quality. Many African countries find imported sugar cheaper than the domestically produced sugar. The poor countries remain still the loosers, and thus the suffering of their people increases.

Social unrest
From Argentina to Zambia, initial resistance took the form of strikes and demonstrations when the first price rises for basic goods followed the implementation of various programs based on the adjustment models of the IMF and World Bank. One of the most bloody IMF riots took place in 1984 in the Dominican Republic when the price of basic foodstuffs doubled and the price of medicines increased fourfold. Four days of rioting left 112 dead and 500 wounded. In Caracas, Venezuela, riots broke out following the adoption of an adjustment programme in 1989 which caused wages to collapse to less than half their 1980 level and prices to shoot up as subsidies were cut. Hundreds died (estimates vary widely from 300 to 1,500). Demonstrations, strikes and riots continued intermittently across various countries, highlighting the divisive and destabilising effects of these policies.
Solidarity with the poor debtors
Due to the constant increase of poverty, suffering and popular unrest in the third world, many people’s attention has been drowned to the question of the crisis. As debt and adjustment have continued, a more co-ordinated people’s response has emerged. Campaigning groups have formed in debtor countries and regions to raise awareness of how debt and structural adjustment underlie many of the economic and social problems people are facing. These groups campaign for debt cancellation, for radical changes in SAPs and the involvement of civil society - especially local non-governmental organisations - in dialogue on these policies.
Alternatives
In response to this mass opposition, policy-makers in the developing world have been putting forward various alternatives to the IMF’s SAPs. For example, the African Alternative Framework to SAPs (AAF-SAP) was put forward in 1989 by the United Nations Economic Commission for Africa (UNECA) under the leadership of Professor Adebayo Adedeji who later became an Under General Secretary of the UN. Later adopted by the Organisation of African Unity (OAU) and receiving the support of the UN General Assembly, debt cancellation was a key factor underlying the strategic approach of AAF-SAP. But the plan was ignored by the WB and IMF and Western leaders.

International Responses to the Debt Crisis

From the beginning of the debt crisis creditors have tried to recover the loans made to the indebted countries. Here is a reminder of 3 ways of debt relief that have been practiced: Debt Swaps, Rescheduling of Debt and Structural Adjustment of the economies in view of debt servicing. Through consistent advocacy NGOs have managed to hasten the World Bank and the IMF‘s positions to move from full compliance to debt servicing, to rescheduling of loans, to accepting debt sustainability and even partly debt cancellation!

Bilateral debt relief initiative
· Debt Swaps
Since the early stages of the debt crisis, creditors began selling “bad loans” they made to developing countries, to recover at least part of the money invested. This means they sold their rights as creditors, often at prices substantially lower than the nominal price of the loan, to governments, enterprises or NGOs. The market for debts selling became known as the secondary market. The new owner of the loan would then offer the debtor country to free an amount, equal to the balance between the nominal and secondary market value, for:
1. Investments in development or environmental protection projects by the debtor country;
2. Shares in a company in the debtor country;
3. Long-term bonds issued by the debtor country

· The Paris Club and the Special Terms Strategy

The Paris Club is an informal gathering of 20 to 30 creditor-countries members of the OECD (Organisation for Economic Co-operation and Development). Formed in 1956, it meets regularly with representatives of indebted countries to negotiate rescheduling of bilateral debts. Depending on the situation and means of the countries concerned, the Paris Club has over the years put down certain guidelines and conditions for debt rescheduling and reduction, known as “Special Terms”. These programs include a menu of rescheduling and cancellation of bilateral debts, of which both IMF and SAP programs are parts.

Multilateral debt relief initiatives

· 1982 – Cash flow provisions:
Especially hard hit by the consequences of the 1970s recession in the US, Mexico declared in 1982 that it could not service its debts and threatened to form a Union of Debtor Nations. Reasoning that countries could not go bankrupt, the US government, IMF, and World Bank diagnosed that the debt crisis in developing countries was a “cash flow crisis”, not a situation of insolvency. They offered fresh money, in the form of new loans to help the servicing of the debt stock and encourage those countries in their international trade.

· 1985 – Debt rescheduling without intention of debt reduction:
The IMF and World Bank policies focused on debt renegotiation without intention to reduce the debt. They looked at each country, case by case, refusing to admit the structural nature of the problem.

· 1986 – The structural adjustment program (SAP)
Realising that many young economies were unstable, and that new loans alone would not help, IMF launched the SAP. It is a programme that offers new loans to defaulting countries, on condition that the country follows an economic reform program determined by the IMF. SAPs were designed to stabilize and restructure economies to insure full repayment of the debt stock. For the IMF.
a) stabilize faltering economies equals:
- devaluate the local currency to make export more attractive and slow down imports;
- encourage savings and local investments by increasing the interest rates;
- balance the national budget by stopping government overspending.
b) restructure the national economy equals:
- adhere to the free market system and stop government controls,
- remove subsidies on basic necessities,
- allow free import and export,
- create a liberal financial environment to attract investment.

In practice, these policies have implied austerity measures that have had a devastating impact on the standard of living of African people.

· 1987 – The enhanced structural adjustment facility (ESAF)
Realising that many low-income countries did not manage through SAP to reach a level of possible debt servicing, IMF launched ESAF, a medium term loan over 5 to 10 years in addition to the SAP loans to low-income countries. The condition for an ESAF loan is that borrowing countries submit a three-year austerity economic reform package to the World Bank and the IMF. The program is revised annually prior to the year’s disbursement.

· 1989 – The Washington consensus
For the first time the real nature of the problem, insolvency, is accepted. Consequently, the possibility of creditors not to recover their credits is envisaged. In an effort of “damage control” and keeping international trade going, IMF and World Bank accept the principle of cancellation of part of the debt combined with rescheduling of the other part to offer to Middle Income Countries (MICs). Rescheduling meant that Bilateral Debts could be taken over by International Financial Institutions (IFI), if debtor countries would accept close supervision on debt servicing and imports. For a while the involvement of the IFIs restored confidence in the financial market.

· 1996 – The heavily indebted poor country initiative (HIPCI)
Both the World Bank and the IMF acknowledge the unpayable character and the disastrous social consequences of the debt overhang. In yet another attempt to involve these countries in international trade and to recuperate at least some of the bad debts, the “Heavily Indebted Poor Country Initiative” was launched. HIPCI aims at establishing “sustainable levels of debt servicing” in countries that have been unable to obtain sustainability after having used all other bilateral and multilateral debt relief programs. The process consists in two 3-year rigorous SAP/ESAF programs to restructure the economy.

· 1999 – The Cologne debt initiative (CDI)
At the G7 meeting of Cologne in June 1999, the German government proposed a program for Debt Relief for the poorest countries. The achievements of the CDI are:
- that the criteria for debt sustainability were changed so that the debt-service-to-export ratio is reduced from 25% to 15%;
- that the Paris Club for bilateral loan renegotiations would grant in specific cases a debt cancellation of bilateral debts up to 90%;
- that the second term of 3 years for the HIPC initiatives would be limited to one year, cutting 2 years of severe SAP programming;
- an increase in existing Debt Swaps limits and cancellation of Official Development Assistance for HIPC countries
- a set of recommendations for the IMF and the World Bank to give more attention to the issues of development of sound social policy in designing its economic programs and to give particular priority to core budgets such as basic health, education and training.

· 1999 – The poverty reduction and growth facility (PRGF or HIPC2)
During the IMF/WB Annual Meetings in September 1999, governments proposed fundamental changes in the way the IMF and the World Bank operate in countries with developing economies. The proposal is called the Poverty Reduction Strategy Paper and intends to ensure consistency between, on one hand a country’s economic, structural and social policies and its goals of poverty reduction and social development on the other hand.

Odious debt
In 1982, at the height of lending to apartheid South Africa, two lawyers from the First National Bank of Chicago wrote an article in the University of Illinois Law Review in which they warned their employers and other banks of “the consequences of a change of sovereignty for loan agreements”. They noted that “if the debt of the predecessor is deemed to be ‘odious’, i.e. the debt proceeds are used against the interests of the local populace, then the debt may not be chargeable to the successor.”
The Archbishop of Cape Town, Njongonkulu Ndungane, made the case for writing off the odious debts of apartheid-era South Africa, speaking in Southwark Cathedral in April 1997. He said, “South Africa is a prime example of a country that has had governments that systematically oppressed the majority of its people. In 1973 the United Nations began to describe apartheid as a crime against humanity. Nevertheless, the international financial community, aided and abetted by the Nationalist Party government, continued to make loans to Pretoria, particularly in the critical 1980s, for which the new government is now held responsible. Clearly such loans were not in the interests of the majority of the people of South Africa.” Ndungane concluded, “as we approach the new millennium, the time has come to invoke the Doctrine of Odious Debt. In the case of South Africa, its foreign and domestic debt was incurred, by and large, under the apartheid regime, and should ... be declared odious and written off.”
The archbishop’s counsel in this matter is the world’s undisputed legal scholar on the succession of public debts, Alexander Sack, dead in body but alive in spirit through his 1927 treatise on the subject. Mr. Sack, a former minister of Tsarist Russia who became a professor of law in Paris after the Russian Revolution, was no radical. He believed the liability for public debts should remain the obligation of the state ¾ the state being the territory, rather than a specific governmental structure ¾ based not on some strict dictate of natural justice, but on the exigencies of international commerce. Without strong rules, chaos would reign in financial relations between nations.
But Mr. Sack believed that debts not created in the interests of the state ¾ which he termed dettes odieuses ¾ should not be bound to this general rule. "If a despotic power incurs a debt not for the needs or in the interest of the State, but to strengthen its despotic regime, to repress the population that fights against it, etc., this debt is odious for the population of all the State," he explained. "This debt is not an obligation for the nation; it is a regime’s debt, a ’personal’ debt of the power that has incurred it, consequently it falls with the fall of this power." Mr. Sack also included debts that "serve interests manifestly personal" as odious.
Moral hazard as consequence of odious debt
Moral hazard exists when the provision of insurance against a risk encourages a behaviour that makes that risk more likely to occur. In the case of IMF lending, the concern about moral hazard stems from perceptions that the availability of financial assistance may weaken policy discipline, encourage international investors to take on greater risks in the belief that they will only partially suffer the consequences, or both.
International lenders, including the IMF itself, have lent to pariah states like apartheid South Africa or to corrupt regimes like Mobutu’s or Suharto’s, knowing that the money will not be productively invested. They are confident that the international community will force the repayment of those loans. This is a classic case of moral hazard – banks, governments and multi-lateral institutions can lend to the most heinous dictators with impunity and be sure that the loans will be repaid, even when those dictators are overthrown.
The “moral hazard” is that those who lend to dictators are rewarded. Banks lent to apartheid South Africa, despite the most massive sanctions campaign in history. If those loans are repaid, then lenders in future will argue that it is profitable and sensible to ignore and evade sanctions. Bad lending will be discouraged only if it is penalized. Thus, the only way to avoid “moral hazard” and prevent bad lending in the future is to ensure that past immoral loans are not repaid. Teaching this lesson to lenders is critical in avoiding future debt crises. It should be seen as a priority and must take precedence over questions of who benefits if debts are not repaid.
Creditors and the international financial community all too easily see the issue of moral hazard through the wrong end of the telescope. Rather than accept their own share of responsibility for the build-up of odious debt, they instead stress that debt cancellation carries with it the “moral hazard” that if debtors are let off without having to pay, they will quickly get into debt again, on the assumption that future debts will also be cancelled. Even the IMF questions that: “From a borrower’s perspective, it is hard to believe that a country would deliberately risk a financial crisis simply because it can count on IMF assistance.”
Nevertheless, the real moral hazard is that if “odious” loans to pariah regimes, such as apartheid South Africa, or a genocidal government in Rwanda, are forced to be repaid by the victims, it will “reward” those who make odious loans and encourage them to do so in the future. There is strong evidence that the IMF and World Bank lent to Mobutu in Zaire on political grounds – so that he would back the US in the Cold War – against their own best fiscal advice. Those lenders may try to collect from the US or from Mobutu’s Swiss bank accounts. They should not ask the people of new Democratic Republic of the Congo, already the victims of Mobutu’s regime, to pay again for the darkest period in their recent history.
Back to present-day South Africa, whose post-apartheid government of Nelson Mandela, shortly after taking office, cancelled Namibia’s debt. "[We] did not ask whether the debt was payable or unpayable. Nor did we impose any conditions on our neighbour. We merely declared those debts as immoral, odious debts incurred while Namibia was occupied by the apartheid regime," says Archbishop Ndungane, in asking the rich countries to follow their example.
Yet the archbishop’s clarion call has hit a chord with South Africa’s citizenry that reverberates around the world. Earlier this year, the Latin American and Caribbean Jubilee 2000 Coalition described the foreign debt of member nations as "illegitimate because, in large measure, it was contracted by dictatorships, governments not elected by the people, as well as by governments which were formally democratic, but corrupt. Most of the money was not used to benefit the people who are now being required to pay it back." To understand how the debt was created, these activists want tribunals to conduct audits that fully disclose just where the money went. Legitimate debts, they believe, should be repaid, illegitimate ones torn up.
While Jubilee 2000 activists sometimes stray from the strict legal definition of odious debts -- arguing, for example, that the debilitating social effects of debt repayment make the debts odious -- they are demanding reforms for financial accountability that their governments have eschewed for the past 50 years, and which, ironically, echo demands made by fiscal conservatives in Western countries intent on restraining government excesses. To ensure public knowledge and approval of public debts, they advocate referenda and caps on public borrowing. To stop foreign aid financing for massive hydro dams and other state vanity projects as the famous huge African airports built in the middle of nowhere, they would tie repayment to those projects’ profits, rather than allow creditors to claim general state funds. The activists cite "moral hazard" -- the tendency of lenders to make reckless loans when they are confident governments will bail them out -- to buttress their call for odious lenders, not taxpayers, to take the hit.
Only if lenders are forced to genuinely take responsibility of their loans will odious loans be made uneconomic, as well as immoral. Much the same applies to loan pushing and even to export credits. We can only discourage governments from pushing questionable export credits, particularly for luxury projects and arms, if governments see there is a real chance that they may not be repaid.
Debtor countries, and civil societies within them, are looking to the future and want to ensure that they are not quickly burdened with new unpayable debt. They want to ensure that banks, governments and international institutions do not make new loans for white elephant projects, or fill the foreign bank accounts of compliant dictators.
Thus, there is concern that mechanisms for debt “relief” should carry with them the seeds of a better system. In particular, this requires a new degree of transparency but also requires a different kind of creditor-debtor partnership.
The most serious “moral hazard” is that lenders will feel that they can make new loans with impunity and need not consider political, moral, or fiscal risk; and that the international community will ensure that loans made to the most corrupt and brutal dictators will be repaid by the successor governments. Future lending can only be controlled if lenders exercise some caution.
Various proposals have been made for international regulations, for example, for insurance schemes, for arbitration panels involving both creditors and debtors (including civil society) and for an international insolvency system, which would allow the national governments the same protection against creditors that local governments have in many countries.
In all cases, this involves some independent judgement, both of payability of debt service and of the legitimacy of past loans. Thus, for example, allowing a ruling that odious debts cannot be enforced. Most importantly, this would end the total dominance of corrupt and immoral lenders.
Morality and common sense demand a change in the power relationships. North and South, working together, can change that relationship – to prevent the moral hazard that the North can lend with impunity and to ensure that debt relief and future lending really benefits the poorest.

Achievements of Jubilee 2000 campaign

The difference between South and North is that groups from the South witness daily the suffering that comes from the debt and from the imposition of the conditionality, whereas the groups of the North look more at the process, at the campaign development. From the North point of view, what have been the achievements? No doubt, the greatest success of Jubilee 2000 is the world-wide mobilization of people against this fundamental injustice of the debt issue. Moreover, the very fact of the emergence of the Jubilee South Movement can only be a source of joy as the people from the debtor countries now take the lead in the ongoing struggle. They make come true what Kenneth Kaunda, former President of Zambia, declared years ago:
“It will be public opinion and public outrage that will bring about change to cancel the debt.”

On November 19th 1999, in a meeting with Jubilee 2000-USA, after the Congress passed a bill for Relief of Debts Owed the US by 36 Nations, Treasury Secretary Larry Summers credited the groups with rescuing an agreement that had been on life support. He called the groups “a formidable force” and stated, “Your pressure was decisive”.

It is clear that the Charter of Jubilee 2000 will not be achieved by its target date, 31st December 2000. Looking at the aims set in the Jubilee 2000 Charter, it is clear that, over the years, a great many (baby) steps have been taken in the right direction.

Some Successes:
· The remission of the backlog of unplayable debts owned by highly indebted poor countries is at least in principle accepted, though too few countries still can profit from the promised cancellations.
· If not yet the creditors themselves, the general public in the North accepts responsibility for the high levels of indebtedness.
· Poverty Reduction is now the objective of both IMF and World Bank policies as the idea that funds from remission of debts should be channelled into social development policies is accepted and applied in negotiations.
· The Jubilee Debt Campaign has in many countries in the South been a catalyst for activating Civil Society, forcing the governments to be more transparent in economic management, social policies and human rights record. IMF programmes are now developed in consultation with government and civil society.
· The acceptance of the notions of Middle Income Countries, Lower Income Countries and Heavily Indebted Poor Countries, etc. in IMF policies allows hope for a respectful and just treatment of the countries of each of these categories of countries.

If there are some successes, modest as they may be, there are also some points of the Charter that have had no success:

· There is no “onece-and-for-all”, unrepeatable act, tied to the celebration of the millennium.
· There is no instrument of arbitration, composed of an equal number of members from creditor and debtor countries.
· The Debt Relief policies fundamentally remain a means of quasi-colonial control over the poor economies.

The position of the Jubilee South

At the “Jubilee South/South Summit” held at Johannesburg in November 1999, 130 delegates from countries from the South built a perspective for the debt campaign for the year 2000. Jubilee South reminds us that the biblical idea of jubilee embraces, apart from debt cancellation, the restoration and reparation concepts.

The groups in the south don’t focus any longer on the debt only, but also assess the inequity structure of the world economy. Their experience of post-colonial years until the early 80’s, is that northern economies maintained control by propping up dictatorships such as those of Mobutu, Suharto, Marcos, etc. In the 80’s the debt emerged as a new means of control, especially through the SAP and the Conditionalities focus. As the 90’s draw to a close they fear that agreements, such as the Multilateral Agreement on Investments (MAI) or the Trade Related Intellectual Property Rights (TRIPS) which would allow all living organism to be patented, may be emerging as the next form of control. For groups from the South, the reality of loss of sovereignty is at stake.

Unless this system of domination is changed for the better, debt relief or cancellation alone will make little difference to their countries. As Jubilee South stated: “Cancelling the debts of HIPC does not and cannot in anyway alter the power balance and stakes of creditors in the global financial architecture”.

What does the southern perspective suggest?

· An up-front commitment to debt cancellation by all creditors to redress injustices done by odious, illegitimate and onerous debt.
· Full reparation by creditors for human, social and environmental damage caused by debt policies, structural adjustment programs and other economic policies.
· End the structural adjustment policies and withdraw from IMF.
· Rechanneling of public funds away from debt servicing so that public funds are used for welfare, basic services and equitable and sustainable development.
· Transformation of the global economic system based on equitable and inclusive principles rather than domination.
· Disclosure of information and transparency on processes and policies regarding governments’ borrowing, debt servicing and allocations and spending of public funds.
· Place ceilings on borrowings
· Demand national participatory reviews of the impact of structural adjustment and neo-liberal policy.
· The United Nations are to set up an international instrument to regulate and monitor speculative capital and investigate cases of odious, fraudulent and criminal loans and stolen wealth.

Africa / Europe Faith and Justice Network (AEFJN)
"The network that offers a new way of mission for Europe / Africa today"

In January 1987, 38 Religious Missionary Congregations came together in order to pool their resources and to work out a new strategy in relation to the changing face of Mission in Europe & Africa. As the local Church in Africa was growing and becoming more autonomous and the European mission scene was one of aging personnel and returning missionaries, the challenge lay in seeing how both of these new realities could be harmonized to work together to bring greater solidarity and justice to this new emerging scene in Africa. The AEFJN was born out of this inaugural meeting and it has continued to consolidate itself as a networking unit between missionary Congregations in Europe/Africa.

The aims of the AEFJN include:
· To gather and disseminate information about justice issues in Africa and about European policies affecting Africa;
· To make recommendations for advocacy and action so as to influence in a positive way decisions taken in the European Union which affect people in Africa.
· To raise public awareness and co-ordinate urgent action in support of requests from members involved in crisis situations in Africa.

To achieve the above aims, a Secretariat was established in Brussels in order to have direct contact with the policy makers at the European level. This Secretariat is presently being staffed by a small team of religious and laity.
As members, we are part of all the initiatives of the network.

AEFJN Calls its members To lobby African and European Members of Parliament, Political Parties and Governments to accept:

The cancellation of all illegitimate debt

Members are asked to monitor closely the efforts of the governments, both in Africa and Europe, to address the cancellation of all illegitimate debts, be they unpayable debts, debts that have been paid in real terms of interest, debts for wrongly designed projects and programmes and odious debt incurred by political leaders for their own benefits or repression of the people.

Members are encouraged, especially in Africa, to work for a “DEBTOR’S CARTEL”, urging the governments of African countries to join forces and, with the civil societies, establish a common stance to fight illegitimate debt.

Priority is poverty reduction and human development

Members are asked to monitor closely the PRGF/HIPC2 programmes of the WB and IMF. The fact that IMF and WB reform their way to operate by putting poverty reduction as a special focus into their programs, is a recognition that the current system has not produced the results expected and were indeed unjust. The WB and IMF need to improve their track record on poverty reduction. Other donors and the UN system must be convinced to participate in the system to ensure that poverty issues are discussed in a genuinely open way.

In Africa, a particular task will be to monitor the implementation of policies that regulate the proceeds of debt cancellation. Our aim is that these proceeds go to meet basic human needs and restoring of the environment.

Continue putting pressure on the IFI

Members are asked to assure that civil society and parliaments are given enough voice in the process of policy design and this should not be only limited to Washington or by a few Ministry of Finance officials. We are more aware than ever before of the power of civil society organisations, South and North, to put pressure on these institutions. The challenge is to prove wrong IFIs when they say that a country is doing well if growth is high, but poverty remains unchanged, worsens or is being reduced too slowly. We will have to measure the success of their programs against poverty reduction and impact on vulnerable groups.

Increase debt relief provided

The UK Prime Minister, US President, Canadian Finance Minister have recognized (and promised) to do more to improve CDI. They pledged to support 100% cancellation of bilateral debt for HIPC, and potentially increased multilateral debt relief. It still remains a challenge to make true these promises and to transform these into firm actions. We call on members to demand that the ratio of 15% for debt servicing to export earnings be lowered, and that all G7 countries grant a 100% reduction of bilateral debts.

Specifically in Africa we call on members to bring up the issue of Domestic Debt owed by the states to their citizens, which in itself is a great injustice done to the people and the development of the country concerned.

International Insolvency Guidelines

Members are asked to lobby for clear international insolvency guidelines that would provide for debt standstills and debtor-in-possession financing, combined with debt restructuring mechanisms. This would make it easier to reschedule loans in order to prevent financial crisis, and to write-off bad debts in cases where unsustainable repayment levels threaten to undermine national poverty reduction efforts.

Appeal to Legal Processes

Members in Africa are asked to contribute positively to the emerging trend of appealing to legal rather than political processes to resolve the debt crisis. In a number of countries, this has proved effective with indigenous land rights. The process as it is being planned in most cases is to form public tribunals where the people with expertise pool their knowledge and conduct hearings to determine true accountability for the debt, how the money was used, and so on, and to find legal protection for poor countries from being required to pay debts for which they have no just accountability.

In conclusion, we hope that this article will enable members to have a better picture of what is the main issue at stake concerning the debt crisis. We as missionaries have a great and indispensable role to play both at the local church level and at the international level. We have the responsibility of drawing the attention of the people we work with to the main issues that can help change the situation of poverty in the third world.
Most immediate, as is clear, is to turn all the people’s attention towards the governments through mass appeal. So far we have been invited to collect signatures from all those who have the problem of debt at heart and send them to the relevant organizations which will be able to present them with credibility to the international community. There is planned a meeting of the G7 in Japan next autumn, and the popular rumour is that these heads of states are weary of the issue of debt and that they are trying to ignore it this time. All religious all over the world are being encouraged to sign personally an already drafted letter, addressed to the Japanese head of state, requesting him to include in the agenda the debt issue. This is one of those small initiatives which, when done in masses becomes a decisive pressure to change the situation of many.



Further Information

BOOKS
BARRAT BROWN, Michael (1995): Africa Choices
CHOSSUDOWSKY, Michel (1997): The Globalisation of Poverty.
GEORGE, Susan (1988): A Fate Worse than Debt
GEORGE, Susan (1991): The Debt Boomerang. How Third World Debt Harms us All.
MADELEY, John; SULLIVAN, Dee & WOODROFFE, Jessica (1995): Who Runs the World?
HAYTER, Teresa (1987): The Creation of World Poverty
HUSEIN, Ishrat & FARUQEE, Rashid (1994): Adjustment in Africa
PETTIFOR, Ann (1996): Debt – the most potent form of slavery
NON ALIGNED MOVEMENT AD HOC ADVISORY GROUP OF EXPERTS ON DEBT, Report (1994): The Continuing Debt Crisis of the Developing Countries
MISTRY, Percy S. (1994): Multilateral Debt – an emerging crisis?

PAPERS OR DOCUMENTS
HANLON, Joseph (April, 1998): HIPC Heresies and the flat earth response
HANLON, Joseph (September, 1998): We’ve been here before. Debt, default and relief in the past – and how we are demanding that the poor pay more this time.
JUBILEE 2000 COALITION (1996): The debt Cutter’s Handbook
MORRISON, Kevin (1999a): Understanding Debt Relief; Overseas Development Council Issue Brief; August; pp. 4
MORRISON, Kevin (1999b): Don’t Make Debt Relief a Burden; Overseas Development Council Issue Brief; September; pp. 3
SIEGEL, Michael T. (1999): The Cologne Debt Initiative of the G7 and The Jubilee 2000 Campaign for Debt Relief Cancellation. Report to The Society of the Divine Word, The SEDOS Word Debt Working Group and JPIC Commission UISG/USG on…; August; pp. 32
VAN HEES, T.; VAN VOORST, M.; PICHLER, S. (June, 1998): Debt and Structural Adjustment in ACP Countries; EURODAD Background paper; pp. 41

SITES IN INTERNET
Africa Policy Information Centre: http://www.africapolicy.org/index.shtml
ECOSOC: http://www.un.org/esa/
Europe’s Forum on International Co-operation: http://www.oneworld.org/euforic/index_uf.html
International Monetary Fund: http://www.imf.org/
Jubilee 2000 Coalition : http://www.jubilee2000uk.org
Jubilee South : http://www.jubileesouth.net/
One World: http://www.oneworld.org
Overseas Development Institute: http://www.oneworld.org.org/odi:index.html
Oxfam International: http://www.heinemann.co.uk/oxfam
Structural Adjustment Participatory Review Initiative: http://www.igc.org/dgap/saprin/index.html
The Development Group for Alternative Policies: http://www.igc.org/dgap/
The Halifax Initiative: http://www.sierraclub.ca/national/halifax/index.html
UNCTAD: http://www.unctad.org/en/enhome.htm
World Bank: http://www.worldbank.org/
World Institute for Development Economics Research of the UN University: http://www.wider.unu.edu/
Africa Reparations Movement: http://the.arc.co.uk/arm/home.html
Cologne Initiative no solution for the debt crisis: http://www.jubilee2000uk.org/cologne.html
G7 Statement: http://www.G8Colognede./03/00126/index.html
G8 Communiqué Köln 1999 : http://www.G8Colognede.07/
Jubilee South Rejects CDI as a Cruel Hoax: http://www.jubilee2000uk.org/cologne.html
Towards a Comprehensive Solution to ,the Debt Problem: http://oneworld.org/eurodad comprehensive.html
Unpayable, illegitimate, odious and immoral debt: http://www.twside.org.sg/souths/twn/title/debt-cn.htm
Outcome of IMF/World Bank September 1999. Annual Meetings: Poverty Reduction and Debt relief. (Oxfam International): http://www.jubilee2000uk.org/policy_papers/oxfam1511.html