Break of debt pledge stops development goals from being met

Several developing countries, including Jamaica, El Salvador and Pakistan, are failing to meet international development goals after rich countries reneged on a pledge to deal with their debts. Moreover, unjust debts in countries such as Greece, Portugal and Latvia are now increasing poverty at an alarming rate.

The new information comes in a report released today by Jubilee Debt Campaign (Life and debt: Global studies of debt and resistance) which compares debt crises in nine countries: Egypt, El Salvador, Greece, Jamaica, Latvia, Pakistan, the Philippines, Portugal and Tunisia.

Protest in Cairo against the proposed IMF loan to Egypt, August 2012 (Flickr / Gigi Ibrahim)
Protest in Cairo against the proposed IMF loan to Egypt, August 2012 (Flickr / Gigi Ibrahim)

The report finds that Jamaica’s government spends more on foreign debt payments than does Greece, a huge 33 per cent of its revenue. The Caribbean island is in its fourth decade of following IMF austerity policies in response to the debt crisis, yet the economy has not grown since 1990, whilst the number of women dying in childbirth has almost doubled in the last 20 years. Meanwhile Greece is now spending 29 per cent of revenue on foreign debt payments. After four years of IMF and EU imposed austerity, the economy has shrunk by 25 per cent, and 11 per cent of the population now live in extreme poverty.

Tim Jones, policy officer at Jubilee Debt Campaign, said:
“People in Jamaica, El Salvador and Pakistan have suffered for over thirty years from debt resulting from reckless lending. Moreover, IMF imposed austerity has failed to reduce these debts, whilst the same imposed policies are now increasing poverty dramatically in Europe. Such unjust debts should be cancelled, as leaders committed to do at the millennium, whilst the financial system needs to be brought under control to prevent debts increasing again.”

In 2000, as part of the Millennium Development Goals, rich countries including the UK committed to “deal comprehensively with the debt problems of developing countries”. Whilst $130 billion of debt has now been cancelled for 35 countries, mainly in Africa, others have been excluded.

In El Salvador, the debt originates from lending by the western world to the vicious military junta in the 1980s. The Central American country continues to spend 25% of government revenue on foreign debt payments, whilst hunger and extreme poverty are increasing.

Pakistan has received ‘temporary’ IMF bailout loans for 30 of the past 42 years, whilst continually implementing austerity policies such as cutting government spending and increasing sales tax. Yet the government is still spending 20 per cent of government revenue on foreign debt payments this year. Pakistan is unlikely to meet many of the millennium development goals, including those aiming to halve the proportion of people going hungry, eliminating gender disparity at all levels of education, and reducing by two-thirds the child mortality rate.

Latvia’s debt crisis was caused entirely by reckless borrowing by its mainly foreign-owned banks. Its government debt is still relatively low by European standards, but radical cuts were still introduced under an IMF programme. More than 200,000 people have left the country since the crisis began (1 in 10 of the population, the equivalent of 6 million people leaving the UK). For those who remain, extreme poverty has increased from 19% to 31% of the population.

The report also gives inspiring examples of the campaigns in countries for debt justice. A common demand in all the countries is for debt audits to identify where debts come from and who actually benefited from loans, in order to find unjust debts which should not be paid, and to force greater accountability on politicians and financial elites. In Tunisia and Egypt, audits into the debts inherited from dictators Ben Ali and General Mubarak have been key calls of the revolutions.

The report is being released at the start of the international week of action against illegitimate debt.

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