An Ebola treatment centre in Kenema, Sierra Leone, on the day of a visit from Anthony Banbury, Special Representative of the Secretary-General and Head of the UN Mission for Ebola Emergency Response (UNMEER). Credit: UN Photo/Ari Gaitanis

By Carey L. Biron
WASHINGTON, Nov 13 2014 (IPS)

The United States proposed Tuesday that the international community write off 100 million dollars in debt owed by West African countries hit hardest by the current Ebola outbreak. The money would be re-invested in health and other public programming.

U.S. Treasury Secretary Jack Lew will be detailing the proposal later this week to a summit of finance ministers from the Group of 20 (G20) industrialised countries. If the idea gains traction among G20 states, that support should be enough to approve the measure through the International Monetary Fund (IMF), where the United States is the largest voting member."The plan is for that money to be re-invested in social infrastructure, including hospitals and schools … to deal with the short-term problem of Ebola but also the long-term failure of the health systems that allowed for this outbreak.” -- Jubilee USA’s executive director Eric LeCompte

“The International Monetary Fund has already played a critical role as a first responder, providing economic support to countries hardest hit by Ebola,” Lew said in a statement to IPS.

“Today we are asking the IMF to expand that support by providing debt relief for Sierra Leone, Liberia and Guinea. IMF debt relief will promote economic sustainability in the worst hit countries by freeing up resources for both immediate needs and longer-term recovery efforts.”

These three countries together owe the IMF some 370 million dollars, according to the U.S. Treasury, with 55 million dollars due in the coming two years. Yet there are already widespread fears over the devastating financial ramifications of Ebola on Guinea, Liberia and Sierra Leone, in addition to the epidemic’s horrendous social impact.

Last month, the World Health Organisation warned that the virus now threatens “potential state failure” in these countries. The World Bank, meanwhile, estimates that the virus, which has already killed more than 5,000 people and infected more than 14,000, could cost West African countries some 33 billion dollars in gross domestic product.

Of course, much of the multilateral machinery is often too cumbersome to respond to a fast-moving viral outbreak. Yet there is reason to believe that the U.S. plan could have both immediate and long-term impacts.

That’s because the plan would see the IMF tap a unique fund set up in the aftermath of the 2010 Haiti earthquake, which facilitated the cancellation of nearly 270 million dollars of Haitian debt to the IMF. Called the Post-Catastrophe Debt Relief (PCDR) Trust, it is aimed specifically at responding to major natural disasters in the world’s poorest countries.

Originally, the PCDR Trust was capitalised with more than 420 million dollars. Today, a U.S. Treasury spokesperson told IPS, the trust has some 150 million dollars in it – money that would be available almost immediately.

“Our proposal is for the IMF to provide debt relief for these Ebola-affected nations from this trust,” the spokesperson said. “The U.S. would like to see around 100 million dollars put toward this effort, however the precise amount will need to be determined in consultations with the IMF and its membership.”

The IMF, meanwhile, says it is preparing to consider the proposal. In September the Washington-based agency made available 130 million dollars in immediate support to Guinea, Liberia and Sierra Leone.

“We are very glad that some donors have expressed an interest in increasing support for the Ebola-affected countries. We are reaching out to all donors to see how we might be able to take this forward … using all the tools available to us,” an IMF spokesperson told IPS.

“[Debt relief] decisions are made according to the merits of the particular case and this would be approached in the same way. We would expect the Board to be briefed soon on this topic.”

Ebola’s “natural disaster”

For development and anti-poverty advocates, debt obligations on the part of poor countries constitute a key obstacle to a government’s ability to respond to critical social needs, both in the short and long term.

In the West African epicentre of the current Ebola outbreak, many analysts have held chronic low national health spending directly responsible for allowing the epidemic to spiral out of control. And when looking at feeble public sector spending, it is impossible not to take into account often crushing debt burdens.

For instance, Guinea spent a little more than 100 million dollars on public health in 2012 but paid nearly 150 million dollars that same year on internationally held debt, according to World Bank figures provided by Jubilee USA, an anti-debt advocacy network that has spearheaded the push for the United States to make the current proposal.

“As bad as Ebola has been, some of these countries have far greater challenges with deaths from malaria than from Ebola,” Eric LeCompte, Jubilee USA’s executive director, told IPS.

“The amount is incredibly important because it cancels a significant portion of the debt completely. And the plan is for that money to be re-invested in social infrastructure, including hospitals and schools … to deal with the short-term problem of Ebola but also the long-term failure of the health systems that allowed for this outbreak.”

LeCompte was also involved in the creation of the Post-Catastrophe Debt Relief Trust, in the aftermath of the Haitian earthquake. His office has advocated for the fund’s monies to be used since then – for instance, to react to flooding in Pakistan and Typhoon Haiyan in the Philippines.

But he says these and other proposals have been rejected by the IMF’s membership, on the rationale that these countries were developed enough to be able to mobilise financing in other ways. (The IMF says PCDR funds are for response to “the most catastrophic of natural disasters” in “low-income countries”, when a third of a country’s population has been affected and a quarter of its production capacity destroyed.)

Not only are Guinea, Liberia and Sierra Leone among the poorest countries in the world, but the Ebola outbreak there has a potentially direct impact on the rest of the globe.

“This is a very clear opportunity to point to the 150 million dollars left in that fund and to note that Ebola is every bit the same as the Haitian earthquake in terms of being a regional calamity,” LeCompte says.

“The difference is that this is also a long-term investment in the very problems that allow Ebola to spread. So we’d be not only addressing the current issue, but also the next disease outbreak in that region.”

It is unclear whether there is a mechanism in place to top up the PCDR Trust in the future. The IMF states that “Replenishment of the Trust will rely on donor contributions, as necessary.”

But for his part, LeCompte says the fund has the potential to fill a significant gap: offering a pot of money, immediately available, that could be quickly mobilised to deal with true crises afflicting the world’s poorest countries, from hurricanes to major financial defaults.

Edited by Kitty Stapp

The writer can be reached at cbiron@ips.org

Children affected by Typhoon Haiyan (local name Yolanda) wait for their turn to receive aid in Tacloban, Leyte, Philippines. Credit: UNICEF

By Samuel Oakford
UNITED NATIONS, Dec 23 2013 (IPS)

Since Typhoon Yolanda made landfall in the Philippines on Nov. 8, the country has sent holders of its debt close to one billion dollars, surpassing, in less than two months, the 800 million dollars the U.N. has asked of international donors to help rebuild the ravaged central region of the archipelago.

Even as the Philippines goes hat in hand to wealthier countries seeking disaster relief, it continues to diligently pay creditors in those same countries millions of dollars every day – much of it interest on debt that can be traced back to the corrupt regime of Ferdinand Marcos (1965-1986) , Cold War ally to the West.“We think it is always a bad idea and unjust to respond to a disaster by lending money." -- Tim Jones of Jubilee

When Philippine President Benigno Aquino III announced last week the staggering cost of rebuilding from the storm, the price tag – 8.17 billion dollars – and a pair of emergency loans to help meet that goal distressed debt reduction campaigners in the country who have for many years called for a cancellation of illegal debts.

“Every dollar of funding assistance will be used in as efficient and as lasting a manner as possible,” Aquino assured reporters. “The task immediately before us lies in ensuring that the communities that rise again do so stronger, better and more resilient than before.”

Yet every 12 months, the Philippines transfers to lenders nearly the same amount Aquino hopes to raise for reconstruction. And because Filipino law privileges the payment of debt over all other expenses, those installments could end up eating into rebuilding funds.

Even before the storm, education and healthcare spending in the country fell well short of global benchmarks; one in five Filipinos live in poverty and over 15 million are malnourished.

As the storm’s damage became clear, Aquino rushed to the World Bank and Asian Development Bank (ADB), both of which quickly inked 500-million-dollar emergency reconstruction loans and several small cash grants of less than 25 million dollars.

“From now until December 2014 we will be preoccupied with critical immediate investments such as the rebuilding and repair of infrastructure and the construction of temporary houses,” said President Aquino.

But the Philippines suffers on average seven to eight typhoons annually and climate change models predict storms like Yolanda will become more commonplace in the future.

Emergency loans set a troubling precedent, especially in a country where 20 percent of government revenue already goes to debt servicing, says Tim Jones, senior policy and campaigns officer at the Jubilee Debt Campaign.

“We think it is always a bad idea and unjust to respond to a disaster by lending money,” Jones told IPS.

The U.N. Framework Convention on Climate Change prohibits climate-related investments from increasing the debt of a country. But the statute is ignored in emergency situations.

If the tomorrow predicted by climatologists is already here, ask activists, what can be considered “critical immediate investments?”

As financial and climatic “crisis” insinuates itself into the everyday, temporary measures that further indebt nations can easily morph into long-term palliative care for the world’s most vulnerable countries.

“The logic of the loan, if there is any, is that the money is lent so the money can be repaid, and by definition that cannot happen in the context of a reconstruction loan,” said Jones. “What sticks in the throat even more is when the World Bank and ADB present these amounts as aid.”

Though the Philippines has made progress in reducing its debt burden over the past decade – in large part due to one-time payments from wide-scale privatisations – the country may find itself in a similar state of climate-induced paralysis as soon as the next typhoon season.

Marcos’ legacy

President Marcos, who is said to have stolen as much as 10 billion dollars during his 21-year rule, borrowed 5.5 billion from the IMF and World Bank and a further 3.5 billion through bilateral deals with foreign governments.

Among the many fraudulent agreements Marcos was able to skim from were a set of U.S. loans earmarked for a Westinghouse-built Nuclear Power Plant on the Baatan peninsula. The structure, which was eventually built along a seismic fault line and next to a volcano and would cost the Philippines 2.3 billion dollars, never produced a single watt of electricity – though it did help finance Marcos’ wife Imelda’s infamous collection of over 3,000 pairs of shoes.

In 2008, the Philippine Congress suspended payments on 11 “illegitimate loans,” only to be reversed by then president Arroyo, under pressure from the IMF and fearful of interest rate repercussions.

Again, in 2011, Congress attempted a debt audit, but the committee chairman was quickly dismissed by President Aquino.

“They don’t want a precedent to be set,” said Jones.

Multilateral lenders, larger and more easily tracked than private bondholders, fear a forensic analysis of the debt could unearth billions in illegitimate loans, opening the floodgates for cancellation. Governments, for their part, fear that unilateral targeted defaults would be punished severely by investors.

Both the World Bank and ADB have been financially supportive – through both grants and loans – of innovative cash transfer schemes and climate change mitigation programmes in the Philippines. But neither would comment on questions of climate reparations or of a debt audit in any form.

Rogier Van Den Brink, the World Bank’s lead economist in the Philippines, told IPS the country’s immediate needs were paramount.

“It is critical that reconstruction begins quickly to minimise the economic impact and more importantly to reduce the hardship for people, especially the poor and vulnerable,” said Van Den Brink.

Though the loans offer grace periods of between eight and 10 years and yields barely above interbank rates, they are nonetheless debt, says Ricardo Reyes, president of the Freedom from Debt Coalition.

“Filipinos are being asked to pay without any consultation,” Reyes told IPS.

Reyes is one of many activists who, following Marcos’ overthrow in 1986, turned their attention to what they saw as his lasting legacy – a severe debt overhang made possible by complicit Western governments.

“The conversation of those in government after Marcos has been the same: ‘rely on foreign loans’ was always a mantra for them,” said Reyes. “I think taking these loans is a fatal mistake.”

Asked to what extent the Philippines’ debt could be tied to corruption, a spokesperson for Finance Secretary Cesar Purisima told IPS, “It is difficult to make a guess, your guess is as good as mine.”

But efforts to do more than guess have been successful elsewhere.

In 2008, Ecuador carried out an extensive audit of its foreign debt and decided to default on 3.2 billion dollars of loans. That decision, at the height of the financial crisis, was timed propitiously and the country recently announced plans to return to the international bond market in 2014.

“Economically and morally it is outrageous for the Philippines to be paying so much out of country in debt payments when it’s been hit by this disaster that’s been influenced by carbon dioxide emissions from the richest countries in the world,” said Jones.

COP19 delegates huddle to resolve the issue of loss and damage. Credit: Courtesy of ENB

By Stephen Leahy
WARSAW, Nov 24 2013 (IPS)

The U.N. climate talks in Warsaw ended in dramatic fashion Saturday evening in what looked like a schoolyard fight with a mob of dark-suited supporters packed around the weary combatants, Todd Stern of the United States and Sai Navoti of Fiji representing G77 nations.

It took two weeks and 36 straight hours of negotiations to get to this point."We need those promises to add up to enough real action to keep us below the internationally agreed two-degree temperature rise.” -- U.N. Secretary General Ban Ki-moon

At issue in this classic North versus South battle was the creation of a third pillar of a new climate treaty to be finalised in 2015. Countries of the South, with 80 percent of the world’s people, finally won, creating a loss and damage pillar to go with the mitigation (emissions reduction) and adaptation pillars.

Super-typhoon Haiyan’s impact on the Philippines just days before the 19th Conference of the Parties (COP19) amply illustrated the reality of loss and damages arising from climate change.  Philippines lead negotiator Yeb Saño made an emotional speech announcing “fast for the climate” at the COP19 opening that garnered worldwide attention, including nearly a million YouTube views

His fast would only end with agreement on a loss and damage mechanism – an official process now called the “Warsaw Mechanism” to determine how to implement this third pillar. Much still needs to be defined. Climate impacts result in both economic and non-economic losses, including the growing issue of climate refugees, people who are forced to move because their homelands can no longer support them.

“This Warsaw decision on loss and damage is a major breakthrough,” said Bangladesh’s Saleem Huq, a senior fellow at the International Institute for Environment and Development in the UK.

“There is a long way yet to go for an effective climate treaty,” Huq told IPS.

Overall, the results from COP19 are mixed, said Alden Meyer, the Union of Concerned Scientists’ director of strategy and policy, who has attended all but one of these climate negotiations over the past 19 years.

“Loss and damages is big but we have the bare minimum in the rest to keep going,” he told IPS.

The U.N. talks known as COPs are part of a complex and acronym-laden process to create a new climate treaty to keep global warming to less than two degrees C, and to help poorer countries survive the mounting impacts.

In 2009 at the semi-infamous Copenhagen talks, the rich countries made a deal with developing countries, saying in effect: “We’ll give you billions of dollars for adaptation, ramping up to 100 billion dollars a year by 2020, in exchange for our mitigation amounting to small CO2 cuts instead of making the big cuts that we should do.”

The money to help poor countries adapt flowed for the first three years but has largely dried up. Warsaw was supposed to be the “Finance COP” to bring the promised money. That didn’t happen.

Countries like Germany, Switzerland and others in Europe only managed to scrape together promises of 110 million dollars into the Green Climate Fund. Developing countries wanted a guarantee of 70 billion a year by 2016 but were blocked by the U.S., Canada, Australia, Japan and others.

“Rich governments have refused to recognise their legal and moral responsibility to provide international climate finance,” said Lidy Nacpil, director of Jubilee South, Asia Pacific Movement on Debt and Development.

The mitigation pillar in Warsaw is even shakier. Japan said they couldn’t make their promised emission reductions and gave themselves a new extremely weak target. Canada and Australia thumbed their noses at their reduction commitments and are increasing emissions.

Today’s reality is that slightly more than half of annual CO2 emissions are coming from the global south. In Warsaw, the big emitters like China and India refused to take on specific reduction targets. Instead they agreed to make “contributions”.  Specific details about reduction amounts and timing was deferred to a specially-convened leader’s climate summit in New York on Sep. 23, 2014.

“We need those promises to add up to enough real action to keep us below the internationally agreed two-degree temperature rise,” U.N. Secretary General Ban Ki-moon said here in Warsaw.

The one surprising success at COP 19 was an agreement on REDD (Reducing Emissions from Deforestation and Degradation). This will provide compensation for countries that could lose revenue from not exploiting their forests. Deforestation and conversion of forests to farmland contributes about 10 percent of total human-caused CO2 emissions.

“We now have a system in place to do REDD and reduce emissions,” said Victoria Tauli-Corpuz, an indigenous representative from the Philippines.

It’s a strong package that includes verification, monitoring and safeguards for local communities. Countries have to put all of this in place before they can access finance either through the Green Climate Fund or through carbon markets, Tauli-Corpuz told IPS.

“Hopefully, it will pump a lot of money into local communities and reduce deforestation,” she said.

Honouring land tenure or land rights of local communities to care for the forests is the key to making REDD work as intended and benefit local people and not corporations or national governments, she said.

Emissions from deforestation have been slowly declining. However, the vast majority of CO2 comes from burning fossil fuels, especially coal, and it continues to grow quickly. Those emissions will heat the planet for centuries and yet governments spend more than 500 billion dollars to subsidise these industries, said Kumi Naidoo, Greenpeace international executive director.

“Democracy has been stolen by corporations,” Naidoo told IPS. “While activists and protesters are arrested, the real hooligans are the CEOs of fossil fuel companies.”

The only avenue left to people is civil disobedience and 2014 will be the year of climate activism, he said.

“Now is the time to put our lives on the line and face jail time,” Naidoo said.

In what may be the first of many such actions, more than 800 members of civil society walked of the COP negotiations on the second to last day “in protest against rich industrialised countries jeopardising international climate action” they said.

While international negotiations inch along, climate scientists are growing increasingly alarmed by mounting evidence that climate change is happening faster and with larger impacts than projected.

To have a good chance at staying under two degrees C, industrialised countries need to crash their CO2 emissions 10 percent per year starting in 2014, said Kevin Anderson of the Tyndall Centre for Climate Change Research at the University of Manchester.

“We can still do two C but not the way we’re going,” Anderson said on the sidelines of COP 19 in Warsaw. He wondered why negotiators on the inside are not reacting to the reality that it is too late for incremental changes.

“I’m really stunned there is no sense of urgency here,” he told IPS.

A recent U.S. court ruling over a fight between Argentina and its creditors on Wall Street will increase global poverty by making it easier for “vulture funds” to seize the assets of indebted nations, according to anti-debt campaigners who are urging the U.S. government to overturn the decision.

In 2001, Argentina suffered an extreme economic crisis that led it to default on nearly 100 billion dollars in debt. Since then the country has settled with 93 percent of its creditors on a plan to pay back about a third of what was originally owed.

The seven percent who are holding out, however, insist that Argentina must pay the full value of its defaulted bonds, despite the fact that many of those now holding those bonds never paid the full value themselves, having purchased the debt in the immediate wake of the 2001 crisis for a fraction of what they are now demanding.

The International Monetary Fund (IMF) has argued that a victory for Argentina’s holdout bondholders would undermine efforts to renegotiate debt held by other nations while also risking another major debt default in Argentina, which could have major consequences for global financial markets."[The case against Argentina] will set a precedent that will just have huge repercussions in terms of global poverty."
-- Eric LeCompte

In a Jul. 23 statement, the IMF said it was “deeply concerned about the broad systemic implications” of the case. The administration of U.S. President Barack Obama has similarly argued that how Argentina handles its debt is a matter of national sovereignty. However, the administration cancelled an IMF plan to side with Argentina in the U.S. legal system, maintaining that such support was premature.

That excuse may no longer hold. On Aug. 23, the U.S. Court of Appeals for the Second Circuit  – the last step before the Supreme Court – upheld an earlier decision that Argentina must pay its bondholders in full, to the tune of 1.3 billion dollars, rejecting claims of negative impacts on global financial markets as “speculative” and “hyperbolic”.

“We believe that the interest – one widely shared in the financial community – in maintaining New York’s status as one of the foremost commercial centres is advanced by requiring debtors, including foreign debtors, to pay their debts,” the court ruled.

The government of Argentina has appealed the case to the Supreme Court. Its creditors, meanwhile, have spent millions of dollars on a lobbying and public relations campaign aimed at increasing the political cost to the Obama administration of siding with Argentina before the high court.

Paul Singer – the billionaire CEO of Elliot Management and a major Republican donor whose subsidiary NML Capital is the lead plaintiff in the legal fight against Argentina – has singlehandedly spent millions of dollars funding right-wing think tanks, pundits and politicians who have painted Buenos Aires as an increasingly lawless ally of Iran, as previously reported by IPS.

The campaign has included position papers and letters from Singer-supported members of Congress suggesting Argentina may even be helping the Islamic Republic develop nuclear weapons.

A victory for Singer and Argentina’s other creditors could make Singer hundreds of millions of dollars. It could also have devastating consequences for the world’s poor.

Increasing profits and poverty

The hedge funds pursuing legal action against Argentina “are profiting off the backs of the poorest people in the world,” Eric LeCompte, executive director of Jubilee USA, told IPS. Wealthy by global standards, those suing Argentina also hold the debt of the some of the world’s poorest nations – and the case against Argentina is crucial to their long-term business strategy.

“Essentially, it will set a precedent that will just have huge repercussions in terms of global poverty,” LeCompte said. Representing a coalition that includes organised labour and hundreds of religious groups and anti-debt campaigners, LeCompte said his group is urging the Obama administration to maintain its support for Argentina in the U.S. legal system while also pursuing a legislative solution in Congress.

If the hedge funds prevail, “poor countries will have less access to credit, and it will be much more difficult to restructure debt,” LeCompte said. If Argentine bondholders successfully hold out for the full value of their bonds, that could encourage the holders of other defaulted debt to do the same, miring indebted nations in poverty.

Even if a nation in default has already renegotiated its debt payments with the vast majority of its creditors, as has Argentina, all it takes is one firm to hold a nation hostage. Instead of funding domestic priorities such as education and health care, developing countries and others facing economic distress could be stuck paying off foreign creditors for a generation or more. The cost of credit for these countries will rise as financial institutions balk at the increased risk of lending.

This has happened before. In countries such as Zambia and the Democratic Republic of Congo, U.S. hedge funds used courts around the world to seize assets of poor nations they claimed owed them money. They are planning to do the same elsewhere.

“These vulture funds have been buying up distressed debt across Eastern Europe, in Greece, in developing countries, waiting for the precedent of this case being set,” said LeCompte. He hoped the Obama administration would not be cowed by the public relations campaign against Argentina and would continue to stand up for the right of sovereign nations to renegotiate their debt, before the Supreme Court and elsewhere.

“If the Supreme Court doesn’t take the case or takes the case and rules against Argentina,” said LeCompte, “we would hope the Obama administration would take executive action to protect the international financial system from this reckless behaviour.”