-Caveat Lector- The Philadelphia Inquirer, June 18, 1999 http://www.phillynews.com/inquirer/99/Jun/18/international/DEBT18.htm -------------------------------------------------------------------------- Relief from debt may be in sight for world's poorest countries By Susan Warner INQUIRER STAFF WRITER Leaders of the world's richest nations, meeting in Cologne, Germany, this weekend, are expected to unveil a new package of reforms that would forgive some of the crushing debt held by the developing world. This pardon comes, in part, because of pressure from a global, grass-roots campaign called Jubilee 2000. The London-based coalition takes its name from commandments in Leviticus to proclaim a "jubilee" every 50 years, marked by the forgiveness of debt and the freeing of slaves. The movement has attracted supporters ranging from Pope John Paul II and the Archbishop of Canterbury to rock star Bono of U2 and Muhammad Ali. And it has set the year 2000 as the date for this modern-day Jubilee. "That's what makes it sexy and exciting. We've got a short burst of brilliant life to achieve something extraordinary," said Jamie Drummond, a spokesman at Jubilee 2000's London headquarters. The world's 40 poorest countries owe an estimated $105 billion - $200 billion with interest, according to World Bank figures. The debt includes an estimated $57 billion in loans from other governments and $48 billion from international agencies such as the World Bank and the International Monetary Fund. There is little, if any, private debt in these countries, because the credit risk is so high. Jubilee 2000 argues it makes no sense to saddle developing nations with this debt, much of which will probably never be paid off anyway. Take Angola, whose total economic output, or gross national product, is $3 billion a year. Its foreign debt is double that, and interest on the debt is about 20 percent of Angola's annual gross national product, according to the World Bank. While the Pope and other religious leaders raised the idea of debt forgiveness in the early 1980s, the formal Jubilee 2000 campaign began in 1993 in the United Kingdom. Since then, the campaign has spread to 60 countries. At last year's world leaders' summit in Birmingham, England, Jubilee organized a chain of 70,000 people holding hands, representing the chains of developing nations' indebtedness. A similar chain is planned for tomorrow in Cologne, to surround the meeting place of the world leaders. Jubilee 2000 combines religious determination and show biz. The movement has spread through parishes, Jewish congregations and Muslim communities, and has been celebrated at rock concerts, Comic Relief benefits, and through a cyber-petition drive on the Internet. "They have put together an incredibly useful grass-roots global machine to get the world concerned about this," said Anthony Gaeta, a spokesman for the World Bank. The use of Scripture gave the movement an extra kick, said Angela Berryman, coordinator of Latin American and Caribbean programs for the American Friends Service Committee in Philadelphia. "As we approach the millennium, that gave it a new twist," she said. "Many people have been talking about debt cancellation since the 1970s, but it has come together now." The debt-forgiveness movement lost an important enemy when German Chancellor Helmut Kohl was defeated last fall. In January, his successor, Gerhard Schroeder, surprised international finance ministers with support for debt relief. "That set off a political show of who can outdo the other," said Gaeta. Britain and Canada signed on, along with France, which had already been offering debt forgiveness to many of its former colonies in Africa. In March, President Clinton announced that the United States would support a new debt-forgiveness plan that would include about $120 million in new funding for debt relief. The Clinton administration has also endorsed a plan for the IMF to sell up to 10 percent of its gold reserves, valued at about $3 billion, for debt relief. Three years ago, the IMF and the World Bank started a debt-reduction plan aimed at the world's 40 poorest countries, known as the Heavily Indebted Poor Countries (HIPC). The HIPC plan was aimed at bringing countries' debt down to twice the size of their foreign export earnings. It also required them to maintain other economic reforms for at least three years. So far, only 10 countries have qualified for $8.5 billion in debt relief; three countries - Guyana, Uganda and Bolivia - have actually received some forgiveness. "In many of these countries the debt levels were five and six times their export revenues," said Gaeta. "They were so poor, they were essentially basket cases." But many argue the HIPC program was too tough. "It is clear the HIPC initiative has not yielded the results anticipated," said Abdessatar Ouanes, director of African and Middle East affairs at the International Institute of Finance in Washington, a private debt monitoring organization. Gaeta, of the World Bank, concedes the program fell short. "The criticisms are legitimate," he said. "The feeling is that the process was a great start, but has been too slow and hasn't done enough." While the United States and other countries may be willing to forgive much of the debt, they cannot just wish it away. Financial regulations require them to come up with new funding to pay off some of the debt on their books, even if it is only 10 cents on the dollar. Forgiveness comes at taxpayer expense. Jubilee proponents, however, argue the lender should take some responsibility for its bad loans. Ouanes said slightly better-off countries, the so-called emerging markets of Latin America and Asia, are given this courtesy by their private lenders, who routinely wipe away bad debt. But lenders and economists argue that freeing the poor countries from their debt creates a "moral hazard" problem: that debt relief will make borrowers think they won't have to pay next time, either. Jubilee argues that problem already exists with wide-scale "rescheduling" or extending the terms of debt. "We think the lenders have been irresponsible," said David Bryden, a Jubilee 2000 spokesman in Washington. "We think it's appropriate for them to take a hit." Bryden said Jubilee would not let all indebted countries off the hook completely. He said Jubilee wants each country evaluated to see how much debt it can realistically pay without cutting into basic services, such as health and education. "For some countries that might be 20 percent of their export revenues," he said, "for others, it might be nothing." In many countries the debts were incurred by former leaders who, in many cases, squandered the aid, said Ouanes. "So, the current generation must pay for aid it never received," he said. � 1999 Philadelphia Newspapers Inc. ================================= Robert F. Tatman [EMAIL PROTECTED] [EMAIL PROTECTED] Remove "nospam" from the address to reply. NOTICE: In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml POSTING THIS MESSAGE TO THE INTERNET DOES NOT IMPLY PERMISSION TO SEND UNSOLICITED COMMERCIAL E-MAIL (SPAM) TO THIS OR ANY OTHER INTERNET ADDRESS. 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