Transition Unit How the world works The Debt Crisis Explained Part 2 Activity 5

International Debt ……. A story of 3 main problems …..

Problem 1: Debt: It’s Loads of Money The total external debt of the South is almost $ 3 Trillion. Countries of the Global South continue to pay over US$ 100 million per day in debt repayments. Cause: Reckless loans given out in 1970s and 80s that led to a vicious cycle of debt. Despite some debt cancellation, Southern debts remain enormous due to continued dependence on loans.

Problem 2: People’s Human Rights Much of this debt is ‘unpayable’. What does ‘unpayable’ mean? -Meeting the loan payments means that the basic human needs of people in the Global South cannot be met: e.g. Kenya paid 20% of its national budget in 2005 on debt repayments.

Problem 3: Unjust relationships Between North and South Much of the remaining Southern debt is unjust or ‘illegitimate’. What is an illegitimate loan? Loans given on unfair terms Loans given for damaging projects Loans causing human rights abuse Loans with damaging conditions attached

World Bank & IMF The World Bank and IMF give loans and implement debt cancellation deals What is the role of the World Bank? It’s a global development organisation; It’s mission is: to fight poverty; It gives long term development loans Role of IMF? ‘Lender of last resort’; Emergency lender; global economic advisor Rich countries are the main decision-makers in both organisations

Global Movement for Debt Cancellation There are social movements & campaigns all over the world calling for more debt cancellation. Some debt cancellation has been won so far due to campaigning: approx US$ 100 billion BUT many indebted countries are still left out. Alert!: There is a new debt crisis on the horizon due to new loans being given to the South to deal with the current global economic crisis.

Ireland’s Role? The Irish government does not lend directly to Southern countries. (It gives grants directly through its aid programme). However, Ireland lends money to Southern countries through its payments to global lending organisations including: the World Bank, the IMF and the Asian Development Bank.

Get Involved! Learn more about Ireland’s role and responsibilities in the global debt problem: Contact: Debt and Development Coalition Ireland, ;