The Challenge to Cancel Debts

of the Poorest and Most Highly-Indebted Countries

June 1999

In the weeks leading up to the meeting of the planet's greatest economic powers, known as the G-7 (or G-8 when Russia is included) in Cologne, Germany, this June, several debt relief proposals have been advanced by world leaders. Each of them acknowledges the problem of the unpayable debts of the poorest countries and expresses willingness to act to change this situation. Also implicit in each of these statements is a critique of the World Bank/International Monetary Fund's (IMF) 1996 announcement of a plan to definitively tackle the problem.(1) This flurry of activity is a sign of hope for the highly-indebted poor countries, as well as an indication that the worldwide Jubilee campaigns have been registering some success with wealthy creditor governments.

How successful have the Jubilee debt initiatives been? What is the Canadian government position on international debt relief? What is likely to be achieved at Cologne? What additional steps may be needed in the future?

This analysis of the CCCB Social Affairs Office will attempt to briefly address these questions and update CCCB members on this question.

How successful have the Jubilee debt initiatives been?

In Canada, thanks particularly to the Canadian Ecumenical Jubilee Initiative (CEJI - see the debt petition campaign has been an outstanding success. On May 11, 1999, at a special ceremony on Parliament Hill, more than 615,000 signed petitions were presented to Mme Diane Marleau, Canada's Minister of International Cooperation.(2) Since then, another 10,000 petitions have arrived and they will be joined with millions of signatures from all over the world and presented to the G-7 meeting in Cologne.

The Canadian response was unprecedented. Approximately 2% of the Canadian populace signed this petition. It is to the credit of Canada's bishops and religious and especially the Canadian Catholic Organization for Development and Peace that half a million signatures were obtained by our networks alone.

Additionally, the Canadian Ecumenical Jubilee Initiative has successfully lobbied the federal government to adopt a more active policy of debt relief. Due to pressure from CEJI, the Canadian government responded to the natural disaster of Hurricane Mitch in Honduras and Nicaragua by offering more than emergency assistance. The Churches argued that the generous response of the Canadian public to this disaster (for example, CCODP collected over $10 million) would be minimal if these two Central American states were forced to continue to make payments of over $2 million daily on their international loans. Thus, in November 1998, Canada suspended repayments of principle and interest on $29.5 million in official debt owed by Honduras.(3) While falling short of the requested debt cancellation, this was nonetheless an extremely important precedent.

What is the Canadian government position on international debt relief?

In Winnipeg, on March 25, 1999, Prime Minister Jean Chrétien announced Canada's strategy for debt relief.(4) Although this seven-point policy will be debated at Cologne and has many fine elements that push the debate forward, it remains totally incapable of leading to substantial debt cancellation before the year 2000.

Some of the Canadian position restated past policies and practice, such as cancelling development assistance debts to poor countries and calling upon all wealthy countries to grant assistance in future, as opposed to making loans that demand repayment. Although these statements are laudable, Canadian international development assistance is scandalously low, at 0.27% of our Gross National Product in 1998, and should be increased substantially.(5) Debt relief packages should be in addition to, and not come at the expense of, commitments in development assistance to the poor.

The high point of the Canadian policy is that it calls for more countries to be assisted with debt relief more quickly and more generously. The policy urges special consideration for countries suffering natural disasters (suggesting that full cancellation of Honduras' bilateral debt could soon be announced). For a few of the poorest countries, Canada even calls for 100% debt forgiveness, and promises unilateral action should other G-7 countries not take up the challenge. This is the best aspect of Ottawa's plan, an area where it is significantly out ahead of other creditor nations.

Criticism of the Canadian position however, rests in the fact that these proposals are all made in terms of an acceptance of the parameters of the HIPC Initiative. Canada would only tinker with this fundamentally flawed construct. The major objection to the HIPC framework is that it demands structural adjustment conditionality; in other words, poor countries must agree to a unilateral imposition of government spending cuts that increase hardship on the poor, privatize industries, open up their economies to foreign corporations, and grant privileges to export industries, all in order to get insufficient HIPC assistance.

As of February 1999, however, only two countries had actually received debt relief under HIPC terms, and only 12 of the 41 countries considered eligible under HIPC had been evaluated by the IMF and the World Bank. In short, the call for full debt cancellation for over 50 poor countries before 2000, the Jubilee Year, will never become a reality unless massive change is quickly advanced.

What is likely to be achieved at Cologne's meeting of the G-7?

The leaders of the globe's strongest economies will include positive-sounding statements on international debt relief in their Cologne communiqué. However, colleagues in the European Jubilee committees who are watching developments closely are becoming increasingly discouraged. They report that it looks likely that the summit will provide very little in terms of new debt relief, and that agreement will centre on the lowest common denominator of the proposals from various countries rather than the highest.

Apparently the G-7 will agree to ask the IMF to sell some of its gold stocks in order to finance debt relief(6) and will broaden HIPC eligibility criteria to include more countries faster. It is also likely that, according to the British Jubilee 2000 director, "the effect will have virtually no impact on the indebted nations."

What additional steps may be needed in the future?

The present priority is to create as much attention as possible on the Cologne summit of the G-7 leaders. There will be huge demonstrations supporting Jubilee campaigns in Germany, as well as meetings to attempt to lobby the leaders. Whatever the outcome at Cologne, the Jubilee campaigns will continue to grow around the world. It is of major significance that a meeting of the Southern campaigns is being organized in 2000 in South Africa, and members of Northern campaigns such as CEJI will only likely be invited as observers! Increasingly, the voices of those suffering from the disaster of international indebtedness need to develop the opportunity to have their voice heard.

On the international scale, after Cologne the next focus of lobby efforts will be directed toward the autumn 1999 meetings of the World Bank and the IMF. It is here where the declarations concerning multilateral debts made at Cologne must be carried so that they become actual policy. In Canada, CEJI will strive to hold the Canadian government accountable to the bilateral commitments made in its March policy announcement.

For the Canadian Ecumenical Jubilee Initiative, post-Cologne strategies will include the circulation of a "Jubilee pledge" and continuation of work toward the theme of the redistribution of wealth. This will not only encompass work on the international debt issue, but may also include the question of child poverty in Canada and support for the international march of women in the year 2000. By the year 2000-01, a campaign can also be anticipated to return land to its rightful owners, by which specific aboriginal land claims in Canada will be highlighted and supported.

CCCB Social Affairs Office

June 1999

1. Called the HIPC Initiative (Highly-Indebted, Poor Countries), it has been described as "too little, for too few, and too slow."

2. Archbishop Marcel Gervais, Bishop Brendan O'Brien and Mr. Fabien Leboeuf participated in this important event.

3. CEJI had advocated for the outright cancellation of Honduras' debt to Canada, but the Canadian announcement of a moratorium was a step forward, saving the country about $5.5 million annually. Nicaraguan debt to Canada had been previously converted in a debt for environment swap, so there are no arrears.

4. The Prime Minister's speech is available at while the policy papers explaining the details of the plan can be obtained from the Finance Ministry's internet site, at

5. The Liberal Party's Red Book promised aid spending of 0.7% of GNP. Non-governmental organizations are lobbying the government to target 0.35% of GNP by 2005-06.

6. To its credit, Canada, a gold-producing nation, supported this strategy. But selling IMF gold also limits the need for governments to commit new resources to debt relief.