DEVELOPMENT-ITALY: Cancelled Debt Should Be Reconverted to Aid

By IPS Correspondents Reprint | | Print |

Jorge Piña

ROME, Jun 16 2000 (IPS) - Italy stressed Thursday that the funds freed up by writing off the foreign debt of countries of the developing South should be used to fight poverty.

Italy first put that policy into practice in Morocco, where the Italian government agreed to reconvert 100 million dollars of the North African country’s debt. The agreement stipulates that Morocco is to earmark the funds for social investment and environmental conservation efforts.

Cancelled debt already represents 10 percent of Italy’s aid to countries of the South, the director-general of development aid of Italy’s foreign ministry, Claudio Spinedi, told an international conference on debt relief Thursday.

The conference, running Thursday to Friday in Rome, is part of a campaign by local non-governmental organisations and institutions fighting for the cancellation of Third World foreign debt before the end of the year.

Writing off the debt owed by poor countries is also one of the chief objectives outlined by Pope John Paul for the year 2000, the year of the Jubilee.

Rechanneling the funds freed up through debt relief poses a new challenge for governments, one that Italy has taken up, said Spinedi.

By writing off debt, Italy increases the funds it assigns to development aid, under a policy governed in the past two years by the guiding principle of poverty reduction, he added.

Spinedi also pointed out that official development aid, while it has dipped overall, remains an extremely important element, especially for the poorest countries, such as African nations — which along with the countries of the Mediterranean basin absorb 80 percent of Italy’s development aid.

In the battle to reduce poverty, Italy mainly acts through United Nations agencies like the UN Development Programme (UNDP).

Another characteristic of its aid policy is its close working relationship with local and regional bodies and non-governmental organisations worldwide.

“Starting in Central America, and to be extended to the Mediterranean and Africa, we have help create a network of local development agencies, which are now self-sustaining and autonomous,” explained Spinedi.

Italy earmarked 0.18 percent of Gross Domestic Product (GDP) to development aid last year, a proportion it plans to increase to 0.25 percent over the next five years — the current average shelled out by the members of the Organisation of Economic Cooperation and Development (OECD).

Nevertheless, that proportion is a far cry from the 0.7 percent of GDP pledged by the nations of the industrialised North in 1970.

Developing countries owe Italy a total of 30 billion dollars, 12 billion of which involves public sector debt and 18 billion corresponding to private sector debt.

On Dec 18, 1999, Italy enacted a law to write off the debt of highly indebted poor countries.

In a document presented at the conference, Italy proposed that of each dollar of aid received, creditor nations would restore 13 percent of debt servicing.

Every child in a highly indebted poor country is born into the world already owing 347 dollars, the report pointed out.