TSUNAMI IMPACT: Delaying Debt May Not be Enough

By Sanjay Suri Reprint | | Print |

Sanjay Suri

LONDON, Jan 6 2005 (IPS) - World leaders need to cancel debts of poor tsunami- hit countries rather than just freeze them for now, leading campaigners say.

World leaders need to cancel debts of poor tsunami- hit countries rather than just freeze them for now, leading campaigners say.

The Britain-based Jubilee Debt Campaign and the World Development Movement say the plan by world leaders to introduce a moratorium on debt repayments by tsunami affected countries is ”welcome but inadequate”.

The groups say the affected countries need debt cancellation and not just temporary relief from debt repayments.

Several leaders have proposed a moratorium on debt repayments by tsunami- affected countries. These include Britain’s Chancellor of the Exchequer (finance minister) Gordon Brown, French President Jacques Chirac and German Chancellor Gerhard Schroeder. Canada has already begun to put a moratorium in place.

Brown has said he has secured ”full support” from G7 countries (the United States, Britain, France, Germany, Italy, Japan and Canada) for an immediate moratorium.

A decision on a moratorium is expected to be announced at a meeting of major creditors from the developed world, the so-called ‘Paris Club’ Jan. 12.

But a moratorium will not be enough, say the two groups who have been campaigning long for cancellation of the poorest countries’ debt. In a joint statement they repeated their long-standing demand that the debt stock of some of the countries involved should be cancelled as the ”most effective way to fund the long term alleviation of poverty, not just as a response to a disaster.”

They said damaging economic conditions such as opening up to free trade must not be a condition of receiving this debt cancellation.

Indonesia, which was worst hit by the tsunami could without at least a moratorium be spending more on debt repayments than the aid it gets over the tsunami, says Ashok Sinha from the Jubilee Debt Campaign.

”Sri Lanka and Indonesia are currently repaying more than three billion dollars a year, more than has currently been pledged in disaster relief,” Sinha told IPS. That could change in view of pledges of more aid, but this aid will not erase the debt burden, he said.

”A moratorium can help right now,” he said. ”But once the disaster period is over we will need cancellation to deal with the pre-existing problem of poverty. Many of the tsunami-hit countries will face heavy debt repayments after the aid period.”

Indonesia has a particular need for debt cancellation, the campaigners say. It is the world’s most indebted poor country, owing 132 billion dollars. Some debt campaigners figure that a large part of this is ‘odious’ and ‘illegitimate’ debt run up by the earlier, western-armed and financed dictatorship of Gen. Suharto.

Sri Lanka owes almost 10 billion dollars and Thailand 60 billion dollars, the groups say. ”The countries worst hit by the disaster – Indonesia, Sri Lanka, India, Thailand and the Maldives – pay 23.1 billion dollars a year to rich countries and multi-lateral institutions such as the World Bank and International Monetary Fund in debt repayments,” the groups say.

World Development Movement director Mark Curtis said in a statement that ”it would be obscene for rich countries to continue to receive billions of dollars of debt repayments in the midst of such suffering and when funds are desperately needed to start the long task of rebuilding shattered economies and infrastructure.”

Only debt cancellation will give these countries the ”long-term boost to the funds available to rebuild and to tackle poverty in a way that does not depend on the whim of rich countries,” he said.

The campaigners say a moratorium alone would also not give the security necessary to invest in the reconstruction of the economies as ”massive debt repayments could restart at anytime that rich countries chose.”

The two groups say the British government has already conceded a longstanding demand that debt cancellation should be granted on the basis of human need rather than the existing approach of complex calculations of debt sustainability.

The British government is under pressure now to do more not just in immediate relief but for long-term development goals in the tsunami-hit countries. Gordon Brown had declared before the tsunami that his goals for Britain’s EU and G8 presidencies include doubling aid from donor countries and eliminating debt owed by the poorest nations.

Brown has called for a ”Marshall Plan for the developing world”, combining ámassively increased aid, fairer trade rules and debt write- offs, particularly in Africa. Under British presidency of the EU and the G8 Brown believes that 2005 offers a ”once-in-a-generation” opportunity for change.

Brown’s push for change has been put to immediate test by the tsunami. Agreement on a moratorium on debt repayment has been forthcoming. It is less certain how much agreement will be possible on debt cancellation.