Global Policy Forum

Leaks Reveal G8 Debt Deal Faces Funding Shortfall

World Development Movement and Jubilee Debt Campaign
August 2, 2005


Debt campaigners today revealed leaked documents showing that far from granting 100 per cent debt cancellation immediately for the poorest countries the G8 has only promised enough money to meet the debt repayments of 18 developing countries for three years. The World Bank claims it may have to shift funding from other programmes to meet the G8's promises.

Crucially the leaks passed to debt campaigners also show the World Bank is exploring the conditions under which debt repayments would be reimposed on a country. WDM's Head of Policy Peter Hardstaff today said: "There is a massive gap between the debt deal described by Gordon Brown to campaigners marching in Edinburgh last month and the technical reality taking shape at the World Bank."

The document details options being put together by World Bank officials for implementation of the G8 debt deal which will be discussed at a meeting of World Bank Executive Directors in Washington today. A final proposal will be signed off by the World Bank's Development Committee (which includes Hilary Benn) when it meets in September. WDM today called on the UK Government to make public all documents showing its position in these negotiations.

The leaks raise questions about what debts are included in the programme and reveal that the World Bank is already planning ways to lend more money to those countries that get debt relief. According to the documents debt cancellation would occur through developing countries having their debt servicing payments met for the period until the loans are paid off, rather than the full value of the debt being cancelled immediately on completion of the qualification process. The documents show the World Bank considering the circumstances under which repayments could recommence. It focuses on a key phrase in the G8 Finance Ministers Communiqué of 11 June (which was rubber stamped by the G8 leaders in Gleneagles) that indicates that debt payment relief will only be provided to countries that are "on track with their programmes…" The World Bank asks: "Does this mean conditionality?"

Stephen Rand, co-chair of the Jubilee Debt Campaign said: "The G8 debt deal as described by Gordon Brown fell short of our demands in several ways. Not enough countries were included and in order to qualify, countries would still be forced to open their markets, deregulate multinationals and privatise key services. However, it did seem to concede the key principle that once countries have completed the onerous task of getting debt relief they would have all their debts cancelled immediately with no chance that repayments could recommence under any circumstances. This now appears from these documents to be in question."

"There is a major difference between the debts being cancelled now forever, and developing countries having their debt repayments met on the condition they continue to implement World Bank programmes." "Put simply it is the difference between a legal agreement that you no longer owe the bank your mortgage and someone agreeing to write you a cheque for your repayments each month."

Peter Hardstaff said: "The G8 are serial promise breakers and for the past twenty years they have used the debts of the poorest countries as a way to impose privatisation, free trade and deregulation on developing countries. Unless these debts are irreversibly lifted from developing countries we have no faith that rich countries will not use international institutions to impose damaging free market conditions in the future."

According to the World Bank the G8 has committed only to finance the first three years of the proposal: "full donor financing is key for viability of the proposal." Peter Hardstaff said: "These documents show not only that the debts won't necessarily be immediately cancelled in full, but that the G8 haven't even put up the money to fund their own decision. There is no firm commitment by the G8 to continue to meet the cost of the repayment for the rest of the life of the loans. They may have to divert money from other parts of the World Bank to meet their promises."

The documents come less than two weeks after the leaking of IMF documents to debt campaigners that showed some European representatives at the IMF are suggesting major modifications to the G8 debt deal. These could delay or even halt the debt cancellation promised to 18 countries by the G8 and maintain an IMF stranglehold over developing country economies even after they qualify for debt cancellation.



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