Charity Forced to Substitute for Justice
Denmark Cancels Debts of Poorer Nations
by Thalif DeenDenmark, one of the world's most generous aid donors, has written-off nearly 635 million dollars in bilateral debts owed by the world's poorer nations.
Countries whose debts have been forgiven include Angola, Ghana, Cameroon, Senegal, Sierra Leone, Zimbabwe, Egypt, Bolivia and Nicaragua. The debt cancellations have accelerated since 1995 when Denmark introduced a number of criteria for writing-off bilateral debts, Danish officials revealed here.
Any country qualifying for a debt write-off by Denmark should either be a least developed country (LDC), described as the poorest of the poor, or a Highly Indebted Poor Country (HIPC).
Of the 48 LDCs, about 32 are in sub-Saharan Africa, including Benin, Burundi, Chad, Equatorial Guinea, Niger, Rwanda and Zambia. The 41 HIPCs include Uganda, Bolivia, Guyana, Burkina Faso, Ivory Coast and Mozambique.
The definition of the two categories of countries, as laid down by the United Nations and the World Bank, takes into account density of population, gross national product (GNP), external debt and per capita incomes.
Poul Nielson, Danish Minister for Development Cooperation, says that , so far, his country has cancelled about 42 percent of all development loans to developing nations. ''We will continue to use these criteria in our further debt write-offs,'' he told IPS.
Currently, Denmark is one of only four countries - the others being Norway, Sweden and the Netherlands - to exceed the U.N. target of 0.7 percent of gross national product (GNP) for development aid. In per capita terms, it is also the largest single donor of development aid to developing nations.
Last month Denmark took the unusual step of providing about 11 million dollars in financial assistance to Nicaragua so that the hurricane- hit Central American nation could pay off its debt to the Inter- American Development Bank. Since Nicaragua did not owe any money to Denmark, the Danish government decided to help write- off a third party debt.
Nielson said the decision to help Nicaragua was taken even before Hurricane Mitch hit that country two months ago. But as a result of the devastation caused by the hurricane, he said, Denmark decided to increase its funding: from a proposed 9.0 million dollars to 11 million dollars.
A call for cancelling Third World debts has been gathering momentum this week with appeals from both the World Council of Churches and Pope John Paul II.
At the conclusion of a 12-day meeting in Zimbabwe Tuesday, the World Council declared that ''the basic human needs and rights of individuals and communities and the protection of the environment should take precedence over debt repayment.'' The meeting, which was attended by more than 1,000 delegates from Protestant and Orthodox Churches, called for ''an end to the strangehold of debt on impoverished peoples.''
The Pope, in a statement Wednesday to coincide with World Day of Peace, singled out ''the frightening problem of the international debt of the poorest nations.''
In a 20-page message to heads of state and international organisations, the Pope said that ''an immediate and vigorous effort is needed, as we look to the year 2000, to ensure that the greatest possible number of nations will be able to extricate themselves from a now intolerable situation.''
A major effort to cancel debts is being led by the London-based non-governmental organisation Jubilee 2000 Coalition. One of its demands is for cancellation of all debts owed by the world's poorest nations. Until recently, international nstitutions such as the World Bank and the International Monetary Fund (IMF) have argued against such action.
Gamani Corea, a former Secretary-General of the U.N. Conference on Trade and Development (UNCTAD), says he simply cannot accept the World Bank argument against debt write-off.
''The Bank has refused on the ground that any cancellation of debts will affect its image in capital markets and its ability to raise money,'' he said.
This is not a very convincing argument, Corea said, because a bank's ability to raise money does not depend on the soundness of its borrowers.
The financial strength of the two financial institutions depend on the fact that industrial nations are their guarantors, he added. ''Writing off bad debts will improve their books, not make them worse,'' Corea argues.
Corea, who chaired a Non-Aligned Movement (NAM) Working Group on Debt, said that while some of the private debts and bilateral debts have been reduced, rescheduled or written-off, multilateral debts have remained untouched.
Meanwhile, a United Nations report released last October said that the world's developing nations, including the 48 LDCs, owed a hefty 2.2 trillion dollars in external debt by the end of last year.
This was an increase of some 76 billion dollars over the 1996 figure. The sharp increase - which also included debts owed by Eastern European countries - was the result of increasing economic turmoil in Southeast Asia and its far reaching impact on Africa and Latin America.
Asia and Latin America both accounted for 31 percent of the total, as compared with 16 percent for Africa, and 18 percent for Europe and Central Asia. But the study said that the core of the debt problems that remains to be solved is the ''unsustainable debt positions'' of the group of 41 HIPCs.
Their total external debt amounted to 245 billion dollars at the end of 1996, the latest available figures.
''As a group, those countries' debt burden remains severe, with a debt stock to export ratio of well over 300 percent (far above thr 200 percent threshold used to indicate a debt overhang) and a debt stock to gross national product (GNP) ratio of 127 percent in 1996, after several years of improvement,'' the study added. (END/IPS/td/mk/98)
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