Inter Press Service - September 27, 2004
Emad Mekay

UK Chancellor of the Exchequer Gordon Brown called for full debt cancellation for the highly indebted nations, adding that his government would put up 10 percent of the cost of the move. He challenged other governments to help finance debt forgiveness.

Leaders from the Group of Seven (G7) most industrialised nations have been debating recently how far to carry debt cancellation, with the U.S. Treasury department reportedly spending the past several months working on a scheme for the full cancellation of debt owed by the poorest countries to multilateral agencies like the Washington-based IMF.

Recent reports say the administration of U.S. President George W Bush, which is eager to get creditors of occupied Iraq to cancel over 100 billion dollars of debt, has lined up solidly behind an initiative first put forward by British Prime Minister Tony Blair at the Group of Eight (G8) Summit in the United States in June.

But differences remain between the rich nations' leaders.

G7 finance ministers will meet here this week at the annual meetings of the IMF and its sister agency, the World Bank. Debt will figure highly on the agenda.

On Monday, anti-debt campaigners backed Brown's call and appealed to the IMF to "seize a golden opportunity to drop the debt." They urged rich countries to revalue the fund's gold reserves and used the added worth to lighten poor countries' debt burdens.

Under the proposal the IMF would revalue its massive 100-million-ounce gold stockpile, which is currently undervalued at only eight billion dollars. That would release around 42 billion dollars more, according to the IMF's website, which activists say could be used to cancel poor countries' multilateral debts.

The fund holds the largest official reserves of gold in the world after the United States and Germany.

"The IMF knows that simply by revaluing its gold it could cancel billions of dollars in debts owed by poor countries," said Oxfam Policy Advisor Max Lawson. "The IMF is sitting on a golden stockpile it doesn't use while demanding debt repayments from poor countries that cannot provide basic education and health care."

According to Jubilee USA, a long-time advocacy group for debt forgiveness, the move would not affect the IMF's ability to lend nor would it cost taxpayers in rich countries -- which finance the institution -- additional money. The IMF was created following the Second World War to promote international monetary cooperation.

Both the IMF and World Bank are endowed with huge reserves and earn enormous profits each year, according to recent research by Debt and Development Ireland. It recommends that the IMF sell only 20 million ounces of gold, over a period of three to four years, to avoid negative influencing the gold market.

The fund is owed seven billion dollars by the poorest of indebted nations while the World Bank is owed 19.4 billion dollars.

Activists say that revaluing the IMF's gold could also free funds to finance future development in poor nations. "Any deal on debt must also include substantial increases in money going to poor countries if it is to achieve anything for the world's poor, and revaluing gold would enable this," said Lawson.

In 1999, as a response to the Jubilee debt relief campaign, the IMF re-valued a small portion of its gold reserves to kick start the initial Heavily Indebted Poor Countries (HIPC) scheme.

Under HIPC world leaders pledged to cancel 110 billion dollars of debt, yet less than 36 billion dollars has been cancelled to date under the programme, which is run jointly by the IMF and World Bank.

HIPC nations also owe debts to regional development banks, such as the African Development Bank and Inter-American Development Bank.

At least 11 countries that depend on debt relief to help fight poverty, including Ghana, Malawi, Uganda and Zambia, continue to spend more every year servicing their debt than they do on providing basic health services.

In Ethiopia, for example, average life expectancy is just 47 years and the country's infant, child and maternal mortality rates are among the highest in the world: one in 14 women die in childbirth, for example.

Yet the country's suffocating debt burden means the African nation is forced to spend more each year on repaying its debt to rich countries than it does on health care. Ethiopia's annual debt repayments equal 76.5 million dollars, while it spends only 73 million dollars on health.

The consequences of further delays on 100 percent debt cancellation for impoverished nations could be grave, say the groups and some development economists. In one month, 240,000 people die of AIDS and almost one million children will die of preventable diseases in those nations.

Anti-debt campaigners also argue that cancelling debt will ensure that future resources dedicated to develop impoverished countries will be effective and not simply siphoned back to creditors in the form of debt service.

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+Debt and Development Coalition Ireland (http://www.debtireland.org/resources/papers-World-Bank-and-IMF-Cancel-debt-intro.htm)

+Oxfam (http://www.oxfam.org)

+Jubilee USA (http://www.jubileeusa.org/jubilee.cgi?path=/take_action&page=countdown_070104.html)

+IMF (http://www.imf.org/external/np/exr/facts/gold.htm)

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