United States Bishops: that's why we care about international debt
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The Pontifical Council for Justice and Peace, with the support of the Adenauer Foundation, organized a seminar, in Rome on June 9 and 10, which gathered the leaders of international financial institutions (World Bank, International Monetary Fund, Inter-American Bank for Development), the presidency of the Latin American Bishops' Conference and representatives of the US and German Bishops' Conferences. The aim of the meeting was to exchange opinions on the priorities, programs and prospects for sustainable development in Latin America on the threshold of the Third Millennium. The participants included Cardinal Roger Etchegaray, the President of the World Bank James Wolfensohn, the Director of the International Monetary Fund Michel Camdessus, the President of the Inter-American Bank for Development Enrique Iglesias.

During his opening speech, Cardinal Etchegaray recalled that in order to be sustainable, economic modernization cannot disregard democratization and therefore the promotion of a person's rights, and social justice, which includes the elimination of major economic differences. Within this framework, the issue of foreign debt carried by poor countries takes on a central role, because on the one side the burden of the debt affects the very independence of many countries, on the other it prevents the adoption of necessary national development programs. And, from the point of view of the Jubilee, the debt problem must be addressed according to precise rules regarding remission contained in the Law. For these reasons, among the documents presented at the seminar we chose a text on foreign Debt by the Latin American Episcopal Council, and another on debt Reduction by the United States Bishops Conference.


Why do we care about international debt?

International debt is not like regular debt. If you take out a loan, you are responsible for paying it back. If you go bankrupt, you pay your creditors as much as you can, and they write off the rest. Your financial interests are protected by a court of arbitration. But when a country takes out a loan, the people pay for it. If the country goes bankrupt, it still has to pay its debts. There is no court of arbitration at the international level.

The 40 most heavily indebted poor countries are bankrupt. Mostly in sub-Saharan Africa, these countries do not have the resources to make their annual payments on debt and provide education, health care, or food for their people. Some, such as Mozambique, are emerging from civil conflict which added to that country's poverty and environmental destruction. Many countries have already paid back the principal on their debt but cannot pay back the interest, which grows every year.

We care about debt because it is an obstacle to development

In 1994, Tanzania spent $155 million on debt repayments, more than it spent on clean water and health combined. Uganda spends $3.5 per person per year on health and education, $17 per person each year on debt repayments. Who do these countries owe money to? The major creditors of the world: Commercial banks, other governments, known as bilateral creditors, and the international financial institutions such as the World Bank and International Monetary Fund (IMF).

Another reason we care is that the most vulnerable people in society were not responsible for contracting the debt, yet they pay the price for it. Some countries used borrowed funds to finance their militaries or projects benefiting the elites rather than for projects that would have benefited the poor. Poor people suffer the most by the diversion of scarce resources to debt repayments from human development.

Debt Relief Initiative

The major creditors decided a year ago that the level of debt in the poorest countries had reached an alarming level. They agreed on the Heavily Indebted Poor Country Initiative (HIPC) to reduce some of the debt of eligible poor countries. But Uganda, the first country to get relief, received only a 15% reduction in its total debt, despite exceeding the strict criteria for eligibility. We are concerned that the other countries to be reviewed, including Bolivia, Cote d'Ivoire, Guyana, Mozambique and Nicaragua, do not have as good track records as Uganda, and will therefore get even less.

In Washington, we have been meeting with the US representatives to the World Bank and IMF along with many other officials from these institutions to express our concern about the level of relief. We are working closely with Catholic Relief Services and the Catholic relief and development agencies CAFOD (United Kingdom), Misereor (Germany), Koordinierungsstelle (Austria), Bilance (Netherlands), Manos Unidas (Spain) and Caritas International, a network of 250 national development organizations, to raise awareness of the issue and to build advocacy in Africa and Latin America.

Debt Campaigns

In the next two years, we plan to do a lot of work on the debt issue. We will continue to press the World Bank, IMF, and US government for more substantial relief for the countries that qualify under the new initiative. We will work with CRS' partners in Africa and Latin America who want to do their own work on debt. We will also support more exchanges of bishops and clergy from countries that are deeply indebted. Keep your eyes out for material and information on campaigns, especially the Jubilee 2000/USA campaign for debt cancellation which will be launched soon by a coalition of ecumenical organizations.