External debt is unpayable

When Cuban President Fidel Castro Ruz declared in the 1980s that the external debt of developing (he called them “underdeveloped) countries was unpayable and should be forgiven, many looked at him as a renegade spouting the ridiculous.

Over time however, officials who had left the employ of the World Bank and the International Monetary Fund began quietly making statements about the need for debt forgiveness for poor countries. The idea began to take root and there were increased calls for the economically powerful nations of the world to ease the debt burden of “developing” nations.{{more}}

In 1999, the summit of the G8 was greeted by the shocking “Carnival against Capitalism”, which called on the group to forgive the debts of developing countries. This trend continued with civil society groups continuing to raise the issue of the injustice of poor countries having to struggle to service their external debts.

The United States, for other reasons, in 2003 took the initiative of asking finance ministers to forgive the debts of Iraq to allow that war-torn nation to begin to get back on its feet. The basic idea was setting in.

Then in 2004, Jeffery Sachs a leading advisor to United Nation’s Secretary General Kofi Annan, called on developed countries to cancel the debts of African countries. He further called on those African nations to ignore their $201 billion debt burdens.

In fact, it was realized that in attempting the make payments on loans owed to the international financial agencies, the countries were being prevented from ever really being in a position where they could begin to truly develop. They would never ever be in a position to pay the interests on loans, much less so the principals.

It is clearer than ever that the playing field was not a level one, and was not ever going to become level enough to allow the disadvantaged nations of the world to begin to cover their debts and provide a decent standard of living for their populations.

It was against this background, and helped certainly by the force of massive and constant protests each time the members of the powerful G 8 met, that a landmark decision was arrived at. This week, the world learnt that the Group of Eight industrialized nations had announced the cancellation of more than 40 billion dollars in debt owed by the world’s poorest nations.

The deal will initially scrap $40-billion owed by 18 nations eligible for debt relief under the Heavily Indebted Poor Countries Initiative, including Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana and Mali. This, as was said this week, was based on an initiative launched by the World Bank and IMF in 1996. Certainly though, it was the constant pressure of worldwide public opinion which forced this.

But the G8 is hitting back with its own terms. They say a further nine countries, owing $11-billion, are expected to complete the program’s targets for good governance within 12 to 18 months in order to qualify as well. They want pre-qualifying nations to “meet the good governance standard to cut corruption, tackle fraud, free up their economies and liberalize trade.”

Interestingly, only one Caribbean nation has been included; that is Guyana. Haiti has been ruled out since that impoverished nation does not meet the good governance criteria, as the Latortue government has become an embarrassment for even the United States.

But, for all the politics behind this move, it is one that is welcomed and can only continue. While we prefer to trade and not just go cap in hand seeking aid, the reality is that our fragile economies will never be able to compete on an even keel with those of any of the major industrialized nations of the world.

The debt forgiveness must continue and be widened to include even more of our poor countries.

As Bob Geldof, who has been raising funds for poor nations of the world said: “… 280 million Africans will wake up for the first time in their lives without owing you or me a penny from the burden of debt that has crippled them and their countries for so long.”

We’d all love to be in that same position.