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Debt relief: 'Too little, too slow'

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Protestors in Prague are claiming that international proposals for debt relief are doing too little to help the world's poorest nations escape the poverty trap.

Leading organisations fighting world poverty maintain that an initiative launched by the International Monetary Fund and the World Bank in 1996 is in many cases exacerbating the problems.

This initiative -- the "Heavily Indebted Poor Countries" (HIPC) Initiative -- was designed to "provide exceptional assistance to eligible countries following sound economic policies to help them reduce their external debt burden to sustainable levels."

The aim was to reduce debt to levels "that will comfortably enable them to service their debt through export earnings, aid, and capital inflows."

Sarah Finch, of the Jubilee 2000 international movement calling for the cancellation of unpayable debt, told CNN.com: "We welcomed the HIPC initiative as a huge step forward when it was first agreed.

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"But now we see it as too little, too slow, and as including too few of the world's poorest nations.

"A lot of countries included in HIPC will still end up paying more in debt repayment than on their entire spending on health and education combined."

She said some of conditions placed by HIPC on nations targeted for relief are actually increasing poverty in nations it is designed to help.

Public spending cut

"The conditions include the privatisation of state industries, which have led to job losses, and to cuts in public spending, which have led to even less being spent on health and education than before," she added.

Oxfam International also maintains that some of the world's poorest countries will emerge from the initiative still spending far more on debt than they are able to invest in priority social investments like health and education.

It is calling for the IMF to set a maximum amount of 10 percent of each country's total government revenue to be spent on servicing debt.

Oxfam said: "The limited budget savings provided through enhanced HIPC Initiative debt relief means that some of the world's poorest countries will continue to transfer far more to their creditors than they are able to invest in basic services.

"Debt repayments will continue to absorb a disproportionately large share of government revenue, amounting to more than 15 per cent in six countries, and to over 40 per cent in Zambia, Cameroon and Malawi.

"Some countries -- including Senegal, Tanzania and Zambia -- will emerge from the HIPC debt relief process in the perverse position of paying more on debt servicing.

"All but three of the twelve countries reviewed in Oxfam research will continue to spend far more on debt servicing than on health and primary education after they have received debt relief.

"Far deeper levels of debt reduction are needed to leave governments with the capacity to finance basic services. Oxfam recommends that a 10 per cent ceiling should be set on the proportion of government revenue allocated to debt servicing."

The HIPC Initiative has targeted 40 countries where the external debt situation is unsustainable, even with full use of traditional mechanisms of rescheduling and debt reduction.

The countries are: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Congo, Cte d'Ivoire, Democratic Republic of the Congo, Ethiopia, Gambia, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Lao PDR, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, So Tom and Prncipe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Yemen, and Zambia.

The IMF said: "The initiative is not a panacea. Even if all of the external debts of these countries were forgiven, most would still depend on significant levels of concessional external assistance.

"Their receipts of such assistance have been much larger than their debt-service payments for many years."

Ten of the 40 countries are currently receiving debt relief under the initiative. Current plans are for this number to rise to 20 by the end of the year.

Jubilee 2000 has called for another 12 countries to be added to the list. These are Bangladesh, Cambodia, Equatorial Guinea, Gambia, Haiti, Jamaica, Morocco, Nepal, Nigeria, Peru, the Philippines, and Zimbabwe.



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