Tag Archives: debt relief

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

Posted on by

 

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 responsible lending and borrowing imperative: addressing the root causes of poverty

Posted on by

Jubilee USA  just published ’’The Responsible Lending and Borrowing Imperative Addressing the Root Causes of Poverty’’. The report analyses the causes of the international debt crises and synthesises concrete proposals for how governments can implement responsible lending and borrowing standards.

“With the international debt crises migrating from the global south to the north – our work to win a real transformative Jubilee and advocating for solutions of the root causes of the debt crises has never been more relevant.” Says Eric LeCompte at Jubilee USA.

For over two decades, the international community has implemented a series of measures to address unsustainable debt burdens in low-income countries (LICs).  While milestone achievements in debt relief have been made, the ongoing impact of unsustainable debt burdens on LICs’ development still demands redress. 

“As a means of demonstrating the need for more responsible lending and borrowing practices, this study integrates examples from around the world that illustrate the problems of the current system and the manner in which unsustainable debt could have been avoided had such principles been taken into account by creditors before approving or granting loans.”  LeCompte continues.

Debt relief and cancellation are necessary but not sufficient.

The lack of transparency, accountability, and respect for democratic processes and information-sharing surrounding loan agreements and international financing has serious implications. The report calls for a reassessment  of the holistic explanations for the creation of the debt crisis considering the interplay of political, economic and institutional factors, both domestic and external. A new holistic analysis is needed to develop long-lasting solutions to the root causes of structural and chronic poverty’.

The recommendations in the report reflect Eurodad’s Responsible Finance Charter, a set of recommendations for lenders as well as public and private investors. The global financial crisis will leave lasting scars on the global financial system and will have protracted impacts on poor people across the world. In a context where global finance to developing countries is increasingly volatile, it is ever more important to ensure that inflows will contribute to sustainable and equitable development, benefitting the poor. In the absence of binding responsible lending and investment standards, inflows to developing countries are still offset or outweighed by debt repayments, foreign investment profit repatriation, and illicit financial flows.

Download the full report: ’’The Responsible Lending and Borrowing Imperative Addressing the Root Causes of Poverty’’