Tag Archives: debt audits

Unlocking the chains of debt – A call for debt relief for Pakistan

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In a hard-hitting new report from Eurodad member Jubilee Debt Campaign and Islamic Relief, the IMF is criticised over crippling conditions attached to $58 billion of debt.

Acoording to the report, Pakistan’s economy has been paralysed by an unpayable and largely unjust debt burden that is preventing the country reaching its poverty goals and hindering the development of democracy. Unlocking the Chains of Debt criticises the IMF for the crippling conditions attached to its loans, and calls for repayments to be frozen while the legitimacy of all debts is investigated.

Unlocking the Chains of Debt shows that Pakistan’s government foreign debt burden has doubled since 2006 to $58 billion. It warns that annual repayments are set to increase dramatically to $6 billion a year – over 20% of export revenues, and more than half what Pakistan currently spends on health and education combined.

The legitimacy of these debts is highly questionable, say Jubilee Debt Campaign and Islamic Relief, who are calling for an immediate freeze on repayments and an audit of all debts to establish which should be paid and which should be cancelled. The repayment burden is undermining the fight against poverty and is also a serious threat to the country’s stability.

As examples of Pakistan’s unjust debt, Unlocking the Chains of Debt points to:

  • A failed World Bank drainage project which caused widespread environmental harm and suffering among local communities, violating World Bank safeguard policies. $42 million has already been paid to the World Bank ($34 million of this in interest), with $231 million still owed.
  • Loans used to prop up military governments, including those of General Musharraf (2000-2008) and Zia-ul-Haq (1978-1988).
  • IMF ‘bailout’ loans. Pakistan has been subject to one of the most sustained periods of IMF lending of any country (borrowing for nearly three-quarters of all years between 1971 and 2010). Conditions have included tax reforms that increased taxes by 7% for the poorest households and reduced them by 15% for the richest.
  • Natural disaster loans like those given in the wake of the 2007 cyclone and the devastating floods in 2010, which should have been given as grant aid.
  • The ‘war on terror’, which has cost the Pakistan government between $68 billion and $80 billion, not to mention the many thousands of people killed or displaced.

The report supports campaigners’ calls for:

  • A public audit into the legitimacy of Pakistan’s debt;
  • A moratorium (freeze) on debt payments during the audit, with the subsequent cancellation of unjust debts;
  • Progressive taxation reforms, to ensure that Pakistan’s wealthy contribute more to giving the government the revenue it needs to tackle poverty and increase equality.

The World Social Forum reviews debt and taxes: who pays, who profits and why?

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By Bodo Ellmers

While most of the world’s population was reeling from one of the globe’s multiple crises, social movements and non-governmental organisations (NGOs) gathered at the World Social Forum (WSF) in Tunisia last month in search of alternatives. The country where the Arab Spring started in late 2010 was a great choice to host the WSF in 2013. Inspired by the successful campaign to overthrow the autocratic regime of Ben Ali three years ago, Tunisian civil society is amazingly active, highly motivated and convinced that civil society activism can actually make social change happen.

Tunisia: microcosm of a defunct financial regime

However, the Tunisian experience also shows that activism on a national level needs to be complemented by international solidarity and cooperation because nations that are integrated into a globalised world economy have limited space to determine their development. A mountain of external debt taken out by the former regime today is threatening public service delivery and constraining Tunisia’s progress. The tax system inherited from the Ben Ali regime is unjust and includes loopholes for tax avoidance and capital flight. Tax income is insufficient to finance even the current public affairs, causing high and additional borrowing needs to avoid austerity policies.

A balance of payments crisis looms as investment, export production and tourism in particular have been badly affected by concerns about instability. Tunisia is currently negotiating a loan agreement with the International Monetary Fund. Just a few years after the Ben Ali regime was overthrown, a new player that is not democratically elected and mandated by the Tunisian people is playing a substantial role in the nation’s economic and social prospects.

Tax-debt-development finance: promoting alternatives

One of the questions that concerned activists at the WSF was how to get out of the current mess – where governments depend on financial markets to fund public services, and nations depend on external lending to fund their development. These questions are inextricably linked to debt and taxes, which has been at the core of Eurodad’s work for many years. So we pushed the debt-tax-finance agenda in order to develop alternatives and promote new thinking.

Tax justice: Who pays matters

That domestic resources should play a stronger role in public and development finance became a global consensus position recently as the OECD aid industry is running out of steam, and even formerly aid-dependent countries’ governments are getting increasingly tired of foreign funding that comes with too many strings attached.

For the civil society activists gathered in Tunis, however, the question of tax justice is the primary concern. Regressive tax policies and loopholes for tax avoidance and capital flight caused the current situation – where poorer populations pay more than their fair share to national and global public goods. Consequently, the actions needed to create tax justice – in more technical terms: progressive taxes and tax rates; shutting down tax havens; automatic exchange of tax information; country-by-country reporting; and disclosure of real ownership of corporations – featured highly on the 2013 WSF agenda, including in its final tax declaration. Which reassures us at Eurodad that we are on the right track.

Debt: who shouldn’t pay matters too

But since public debt levels in many countries of the global north and south are high and surging, and governments’ debt service is ever increasing, there is a risk that the tax regime will become an exploitation mechanism – that governments will use citizens’ tax payments for the benefit of creditors rather than citizens. So, while tax income needs to go up, debt levels need to come down to make public finance work for everyone.

Activists in Tunis challenged the current creditor-biased debt regime with the slogan “we don’t owe – we don’t pay” – and promoted a variety of exit options from the straitjacket of debt dependency that has trapped many people around the world. Among these options were comprehensive debt work-out mechanisms and debt audits that would unveil and assess the origins and legitimacy of debt.

A debt audit is currently being debated in Tunisia, with the support of local activists. The findings might provide interesting insights for responsible financing and into the question: what happened to all the money that Western banks and international financial institutions generously lent to former dictator Ben Ali, and why did they lend it to him in the first place?

Eurodad-Glopolis International Conference: Debt, finance and economic crisis

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by Alessandra Garda

The current public debt crisis compromises development objectives and poverty eradication across the world. How should we move from discussion of root causes to focus on solutions? What should the roles of the state and the private sector be in overcoming debt crises and creating alternatives? How do we need to change our thinking and economic structures to prevent future crises?

The Eurodad biennial conference – which takes place in Prague from the June 3-5, 2013 – offers the perfect opportunity for thorough discussion of the concerns outlined above and to prepare the ground for future joint strategising and thinking on crucial issues of finance and development.

Co-organised by Eurodad Czech member Glopolis, the conference is a leading forum for discussion, idea-sharing and collective strategising for civil society groups advocating for reform of development finance. The Eurodad conference will bring together more than 100 leading civil society thinkers from around the globe working on issues ranging from debt, tax justice, aid, private finance, the International Financial Institutions (IFIs) and global monetary reform. There will be significant Eastern Europe and Southern participation.

Focus on solutions

The debate this year will be focused not only on the consequences of the world economic crisis but mainly on the solutions. By the time of the conference, an increasing number of developed and developing countries are likely to have suffered further debt distress, with negative consequences for their economies and people. EU countries will face decisions about collectivisation of national debts – implying stronger EU regulatory, fiscal and political union or national defaults and possibly Eurozone break-up. The Eurozone debt crisis threatens further regional – and possibly global – recession with obvious consequences for public debt accumulation.

The root causes of the current public debt crisis are multifaceted, and much debated. Many argue that rising public and private debt levels have been driven by the increasing dominance of the financial sector over the real economy. History shows us that financial crises are always followed by public debt problems as the public sector underwrites losses and economies suffer. But the roots of this crisis – and previous crises – go deeper, and it is clear that major change is needed to overcome this crisis and prevent future recurrences. But what kind of changes?

What can be learned from countries that have weathered the current crisis well? Which proposals for change should civil society groups be emphasising now? This is a topic that is extremely relevant in North and South, East and West – and the conference can provide a forum for genuine sharing of experience and ideas. It’s time to take us beyond analysis of the problems to a focus on solutions.

Eurodad’s biennial conference has been held at least every two years for more than a decade, offering Eurodad members, allies and partners the opportunity to broaden understanding of key issues, identify and move forward on collective struggles, forge new alliances and meet inspiring people.

Find out more about the conference here.

Norway takes a bold step towards debt justice: First creditor ever to carry out a debt audit

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Brussels, 15 August 2012

Today the Norwegian Minister of Development Heikki Holmås announced that Norway will make an assessment of the legitimacy of developing countries’ debt to Norway. This means that the Norwegian government will be the first to ever carry out a creditor’s debt audit.

Gina Ekholt, Director of SLUG, the Norwegian Coalition for Debt Cancellation, said: “This is a historical day! Not only for debt campaigners who have been fighting for this for years, but also for the people across the world that are suffering from unpayable and illegitimate debt burdens. This is an important tool to promote responsible lending and to take responsibility for past loans. We hope that other creditors will be inspired by Norway’s debt audit.”

Since being elected in 2009, the Norwegian government has promised to carry out a debt audit, as well as working to establish binding guidelines for responsible lending. Today, Holmås promised that the audit will now be launched, to be followed up with new and stronger guidelines for responsible lending. 

Øygunn Sundsbø Brynildsen, Senior Policy and Advocacy Officer at Eurodad, said: “The ongoing global financial crisis is only one example of the devastating consequences of reckless lending. Today’s initiative has the potential to be a game-changer in the move towards more responsible finance. We hope other countries will be bold enough to follow Norway’s lead towards policies that can help avoid future unjust debt burdens.”

The Norwegian government has previously admitted their responsibility as a creditor for dirty debts attached to a particular set of loans for developing countries to buy Norwegian ships. In 2006 the government announced that they would cancel debts for seven countries because the original loans had been a “development policy failure”.

The Norwegian Coalition for Debt Cancellation (SLUG) has done its own investigation of debts owed to Norway. The research reveals that a part of Indonesia’s current debt to Norway is clearly illegitimate. SLUG shows that the people of Indonesia is still paying for a wave power plant that was never built, and failed technology for sea monitoring systems.

In the UK, the UK All-Party Parliamentary Group is conducting an inquiry into UK Export Finance, part of the Department for Business, which backs loans to foreign companies and countries to buy British exports. Norwegian Christian Democrat MP Hans Syversen MP gave evidence to the inquiry, saying of the ship export loans: “we had to acknowledge that this procedure was quite hurtful to the people that we thought we did something good to and even the ships that were built were not of good quality.”

Tim Jones, Policy Officer at Jubilee Debt Campaign in the UK, said: “Norway is yet again setting a fantastic precedent that lenders are responsible for the debts they create. The Liberal Democrats have similarly pledged to carry out an audit into debts owed to the UK. But Vince Cable has refused to do so, despite being in charge of the department responsible. People in Iraq, Indonesia and Egypt are today repaying loans to the UK government given to past dictators for military equipment.” 

Norwegian initiatives have led to the establishment of international principles for responsible lending and borrowing in the UN Conference on Trade and Development (UNCTAD). The principles will be applied in the Norwegian debt audit. In April, the UK government unsuccessfully tried to stop UNCTAD working on responsible lending and borrowing principles.

Jostein Hole Kobbeltvedt, Eurodad representative at the UNCTAD expert group on responsible sovereign borrowing and lending, said: “To apply the UNCTAD Principles in the Norwegian debt audit is a solid way of showing that the Norwegian government takes the Principles seriously and that they take their responsibility as a creditor seriously.”

Development Minister Holmås announced that the plan is for the audit to be concluded within a year.

Read more:
Breaking new grounds: International perspectives on a creditor audit in Norway. SLUG, 2011
Eurodad’s Responsible Finance Charter, Eurodad 2011
Is Indonesia’s debt to Norway illegitimate? By Magnus Flacké (SLUG) and Nikmah Khoirun (INFID)
Unctad’s Principles on Promoting Responsible Sovereign Lending and Borrowing, UNCTAD 2012.
Norway makes ground-breaking decision to cancel illegitimate debt (October, 2006)
Creditor Responsibility and the Norwegian Ship Export Campaign, By Kjetil G. Abildsnes (SLUG and FORUM)

Contact:
Oslo: Gina Ekholt, Director of SLUG, the Norwegian Coalition for Debt Cancellation:
+47 959 70 226
London: Tim Jones, Policy Officer at Jubilee Debt Campaign:
+44 (0)20 7324 4725 or +44(0)7817 628196
Brussels: Øygunn Sundsbø Brynildsen, Senior Policy and Advocacy Officer at Eurodad:
+32 (0)2 894 46 44

 

European and North African civil society coordinates against the harmful effects of debt and austerity

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By Carlos Villota,

As Europe broke for Easter, debt activists gathered in Brussels and formed the International Citizens Audit Network. The network brings together European and North African CSOs that use debt audits as a tool for demanding information about the origins of the public debt of their countries.

Activists from twelve different countries attended this first Euro-Mediterranean meeting: Portugal, Italy, Ireland, Spain (Eurodad member ODG), Greece, Poland, the United Kingdom (Eurodad member Jubilee Debt Campaign), France, Germany, Belgium, Tunisia and Egypt. Across these countries citizen’s audits of public debts and campaigns against the harmful effects of debt and austerity are taking place.

Participants shared experiences and information between the various organisations, networks, and social movements behind debt audit initiatives in the different Euro-Mediterranean counties. They also planned joint actions and mobilisation strategies.

Furthermore, the meeting laid the foundation for improved communication and major coordinated action by the international network. Participants drafted a common calendar highlighting key dates for mobilisation such us International Workers‘ Day on 1 May; global level mobilisations on 12 and 15 May around the Spanish Democracia real ya! Movement (also know as 15M) first anniversary; and to organise activists meetings and a demonstration around the European Central Bank in Frankfurt 16 – 19 May. Eurodad member Erlassjahr is also involved in the preparation of the Frankfurt activities.

Greek activists’ proposal for a global day of action against debt and austerity in October, in solidarity with Greek people, was enthusiastically received. It was proposed that this day of action should occur during the annual Global action week against debt and IFIs on  8 – 15 October. This year it will coincide with the 25th anniversary of the death of Thomas Sankara, the former President of Burkina Faso who called for repudiation of debts and who was murdered due to his radical stance against social, economic and political exploitation. 

The meeting ended with Greece activists’ presentation of the trailer for Catastroika a film by the makers of Debtocracy.