Debt & Debt Relief

Which countries have the largest debts? United States$ 13,750,000,000,000 United Kingdom$ 9,041,000,000,000 Germany$ 5,158,000,000,000 France$ 4,935,000,000,000 Netherlands$ 2,461,000,000,000 Ireland$ 2,356,000,000,000 Italy$ 2,328,000,000,000 Spain$ 2,317,000,000,000 Japan$ 2,231,000,000,000 Luxembourg$ 2,020,000,000,000 Belgium$ 1,354,000,000,000 Switzerland$ 1,305,000,000,000 Austria$ 832,800,000,000 Australia$ 799,800,000,000 Canada$ 781,100,000,000 Hong Kong$ 659,900,000,000 Sweden$ 617,300,000,000 Denmark$ 588,800,000,000 Greece$ 504,600,000,000 Portugal$ 484,700,000,000

What about Poorer Countries? The poorest 49 countries have debts totalling US $375 billion, The poorest 144 countries, it is over US $2.9 trillion. For every $1 in aid the developing world pays $13 on debt repayment (2000)

Which Countries are in Debt? Public Debt % of GDP

Why are countries in debt? Low industrial growth High interest rates Rise in old prices Falling commodity prices

Heavily Indebted Poor Countries (HIPC) Initiative Launched by IMF & World Bank -Endorsed by 180 governments -To relieve certain low income countries of their unsustainable debt to donors -Promote reform and sound policies for growth, human development & poverty reduction

How does debt relief work? At the decision point the country gets debt service relief after adherence to an IMF program and progress in developing a national poverty strategy At the completion point the country gets debt stock relief on approval by the world bank & the IMF of its poverty reduction strategy. The country is entitled to at least 90% debt relief from its creditors.

What is ‘debt service’ & ‘stock relief’? ‘debt service’ is the cash required over a given period for the repayment of interest and principal on a debt ‘stock relief’ is the cancelling of specific debts this will achieve a reduction in debt service over the life of a loan

HIPC Initiative Post-Completion-Point Countries BeninGuyanaNiger BoliviaHaitiRwanda Burkina FasoHondurasSão Tomé & Príncipe BurundiMadagascarSenegal CameroonMalawiSierra Leone Central African RepublicMaliTanzania EthiopiaMauritaniaUganda The GambiaMozambiqueZambia GhanaNicaragua Interim Countries AfghanistanDemocratic Republic of the Congo Guinea Bissau ChadCôte d'IvoireLiberia Republic of CongoGuineaTogo Pre-Decision-Point Countries ComorosKyrgyz RepublicSudan EritreaSomalia

Successful? Boosting social spending. On average, such spending is about six times the amount of debt-service payments. Reducing debt service. For the 35 countries receiving debt relief, debt service paid, on average, has declined by about 2½ percent of GDP between 1999 and Improving public debt management. Debt relief has markedly improved the debt position of post- completion point countries, bringing their debt indicators down below those of other HIPCs or non- HIPCs

WARNING MEDCS must at the same time: –Increase Official Development Assistance –Remove tariffs & quotas –Finance debt reduction to ensure sustainability Criticized by some for “half-hearted inadequate, piecemeal cancellation –Purpose to ensure repayment not cancellation