JAPAN: To Forgive Or Not to Forgive Debt, That is the Question

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Apr 14 2000 (IPS) - As host of the forthcoming summit of industrialised countries, Japan is facing mounting pressure to take the lead in endorsing an international call for debt relief for the world’s poorest countries. “The Okinawa Summit is an opportunity for Japan to take political leadership by taking the bold action of endorsing debt cancellation for the world’s poorest people,” said Professor Jeffory Sachs head of the Center for International Development, Harvard University.

“If Japan takes the decision other G-7 members will support it,” said the internationally respected economist during a recent visit to Tokyo.

Sachs was in Japan to lobby with the International Jubilee 2000 movement, the London-based non-governmental group, that is spearheading the campaign for third world debt cancellation.

Japan, the world’s largest donor, is facing intense pressure to respond to calls from Jubliee 2000, which has twisted the arms of the United States, the United Kingdom, Canada and Italy to support a programme launched after the Cologne Summit last year, to cancel 100 percent of the debts owed by the world’s 41 poorest countries under a special IMF- World Bank scheme.

Activists say debt cancellation programs have been going slow despite promises from governments, and point out that a clear decision at the Okinawa summit in July is crucial to pushing the issue forward.

Aware that the world will be expecting some gesture from Japan as host of the G-8 summit in Okinawa, the Cabinet Secretary Mikio Aoki said this week that Tokyo would cancel all non-official development assistance loans to highly-indebted poor countries (HIPCs) which owe Japan a total of 140 billion yen (1.3 billion U.S. dollars).

In addition, he said, Japan will contribute a further 190 million U.S. dollars to a World Bank-administered debt relief trust fund, which was set up in the early 1990s to assist HIPCs with debt repayment problems. It earlier chipped in 10 million dollars to the fund.

But there’s nothing much more to expect from the government, unless Tokyo decides to make a surprise announcement closer to the summit.

Yoko Kitazawa, head of the Japan chapter of Jubilee 2000 says, forgiving the poorest countries that owe a total of 10.5 billion U.S. dollars in official development assistance (ODA) and non-ODA loans to Japan, or 44 percent of the total G-7 credit, will not be difficult for Japan.

Debt cancellation, she explains, should not cost Japanese taxpayers that much as it is just like financing the construction of a 100-metre stretch of highway.

“There is no excuse,” she says, pointing out that Jubilee is asking relief only for the poorest countries, excluding Myammar, in order to allow those governments to increase financial assistance for providing better health, education and other social programmes for the people.

Zambia, for example, spends more on debt repayments than on health and education combined. Tanzania under a rescheduled debt relief program, will still continue to pay an average of 150 million U.S. dollars year. Half of Nigeria’s debt is due to compounded interest because the African country could not pay back loans on time.

“It’s hard to say what will really happen,” Kitazawa said, after Jubilee lobbied lawmakers and met with top bureaucrats recently to drum up support for debt relief. “But I think the government is in a corner now.”

More than half a million signatures has been collected in Japan to support the debt cancellation campaign and thousands of supporters formed a human chain around the Foreign Ministry on Tuesday as a gesture of solidarity.

Japan has maintained that it has always put the concerns of poor nations in its agenda, and has thus been pushing its own program to ease their debt problems.

Late last month, Japan agreed to extend 95.98 million yen (less than one million dollars) in debt-relief grants to India, said the foreign ministry. Earlier, it committed 4.59 billion yen in debt-relief grants to Bangaladesh to cover the principal and interest on yen-dominated loans that matured in the second quarter of fiscal 1999.

“Japan believes that cancellation of debt repayment will not solve poverty in poor countries. Rather there should be better poverty reduction programs developed to help these countries,” said a Foreign Ministry official who declined to be named.

The government has long held the view that Japan, the biggest creditor nation, will be the worst affected in a debt cancellation program. Tokyo has also maintained that repaying debt is a moral obligation of the borrower and encourages responsibility and accountability in recipient governments.

Government officials hold in high esteem their country’s experience in its post-war economic development when Japan moved from borrower status to net lender after repaying loans borrowed from international lending institutions and other creditors.

Indeed, based on this conviction, Japan has put forward a policy of not extending new loans to countries requesting debt relief. That’s why it is all praise for the Indonesian government, which, although deep in debt, has not broached the idea of debt forgiveness by Japan, its biggest creditor.

President Abdurrahman Wahid, during his visit to Japan late last year, told his hosts Indonesia will not seek debt relief despite tremendous domestic difficulties.

In return, Jakarta received a promise from Finance Minister Kiichi Miyazawa of a new loan intended to help reschedule Indonesia’s debt. It also won praise for being considerate to its biggest donor.