Debt relief

From Wikinfo

Debt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations.

Debt relief for heavily indebted and underdeveloped developing countries was the subject in the 1990s of a campaign by a broad coalition of development NGOs, Christian organisations and others, under the banner of Jubilee 2000. This campaign, involving for example demonstrations at the 1998 G8 meeting in Birmingham, was successful in pushing debt relief up the agenda of Western governments and international organisations such as the International Monetary Fund and World Bank. Ultimately the Heavily Indebted Poor Countries (HIPC) initiative was launched to provide systematic debt relief for the poorest countries, whilst trying to ensure the money would be spent on poverty reduction.

To the disappointment of some activists, the HIPC programme has to some extent been subject to conditionalities similar to those often attached to IMF and World Bank loans, requiring structural adjustment reforms, such as privatization of public utilities.

Contents 1 Arguments in favour of debt relief 2 Arguments against debt relief 3 See also 4 External links 4.1 References

Arguments in favour of debt relief

Supporters use a variety of moral and economic arguments to make the case for debt relief. Much of the debt was incurred by different regimes than those that currently govern the debtor nations. Supporters of debt relief believe that people in developing countries should not be burdened with debts acrued by dictators, especially as the borrowed finance was so often used for the benefit of the ruling elite, on prestige projects and to bolster the military.

Since the beginning of the HIPC programme, benificiary countries have used the money saved on debt repayments for social programmes:

• In Benin, 54% of the money saved through debt relief has been spent on health, including on rural primary health care and HIV programmes.
• In Tanzania, debt relief enabled the government to abolish primary school fees, leading to a 66% increase in attendance.
• After Mozambique was granted debt relief, it was able to offer all children free immunisation.
• In Uganda, debt relief led to 2.2 million people gaining access to clean water.

Arguments against debt relief

Opponents of debt relief argue that the move creates a moral hazard for debtor nations � that is, it would encourage them to take on excessive debt in the future, confident in the fact that they would be bailed out by Western creditors. They also claim that it would be unfair to third-world countries that managed their credit successfully.

See also

• International development
• International Monetary Fund
• World Bank
• Anti-globalization movement

External links

• Debt Relief under the Heavily Indebted Poor Countries Initiative, International Monetary Fund.
• Debt Relief for Heavily Indebted Poor Countries, World Bank.
• Debt Relief International, Development Finance Group.
• Jubilee Research at New Economics Foundation.
• HIPC Debt Relief: Myths and Reality (Jan Joost Teunissen and Age Akkerman (eds.), Fondad, 2004, book, pdf)

References

• Adapted from the Wikipedia article, "Debt_relief" http://en.wikipedia.org/wiki/Debt_relief, used under the GNU Free Documentation License