Debt Relief and Jubilee 2000

Third Quarter 1998

WASHINGTON, D.C.—One of the topics on the agenda of the big-power economic summit in Birmingham, England, last May was debt relief for the world's most heavily indebted countries, most of which are in Africa. There is no simple solution to the debt crisis. Clearly, the most heavily indebted poor countries (HIPC) will never be able to advance economically if they cannot overcome their debts. Yet corrupt governments still rule in some countries. Commodity prices cannot arbitrarily be set higher. And national and international lending institutions cannot guarantee the economic progress of HIPCs simply by writing off their debts.

What to do?

One movement now under way is the World Bank's HIPC initiative. Another is the privately supported jubilee 2000 advocacy plan.

The HIPC initiative was ably explained by the World Bank's Axel Van Trotzenburg at a May 7 roundtable in Washington, hosted by the Institute on Religion and Democracy It is a careful, thorough, but perhaps too cumbersome effort to draw all major national and international lenders into a debt-relief program for the HIPCs. The aim is to help some of the indebted countries come to grips with their debts and improve their economic positions over the long term.

The international jubilee 2000 program advocates that governments and international lending institutions should simply cancel the debts once and for all (not entirely without conditions), recognizing that foreign creditors also bear a great deal of responsibility for the debt burden. Give the poor countries a Year of jubilee experience. In the end, everyone will benefit.

The editors believe that debt relief should deal with the full reality of the problem, as the HIPC initiative intends, but needs to unfold more rapidly and with greater leniency on the part of the creditors. In this respect, we believe the Jubilee 2000 advocates are on to something, even though they misapply the biblical metaphor, because the debts were not incurred by HIPCs within a framework that anticipated a Year of jubilee, as was the case in ancient Israel. We urge Christian economists and economic policy makers, such as those organized in the Association of Christian Economists, to respond to both of the programs mentioned here and to offer alternative recommendations. We will consider such responses and recommendations for publication in these pages.

—The Editors

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HIPC Debt Relief

Enables heavily indebted poor countries (HIPC) with good policy performance to escape from unsustainable debt and focus all their energies on striving for sustainable development and reducing poverty.

Represents a commitment by the international community to act in a coordinated way to reduce the debt to a sustainable level.

Deals with HIPC debt problems in a comprehensive way, enabling countries to exit from the debt rescheduling process.

All creditors participate in providing debt relief beyond current mechanisms to reach debt sustainability.

Creditors share the costs of HIPC assistance on the basis of broad and equitable burden-sharing and provide relief on a basis that is proportional to their share of the debt. For more information, contact the HIPC initiative at the World Bank, 202-458-1600, or at http://www.worldbank.org

Jubilee 2000

Recommends canceling the international debt of countries that are unable to meet the basic needs of their people or achieve sustainable development.

Recommends conditioning the cancellation of debts in ways that will benefit ordinary people.

Recommends not tying debt cancellation to policy reforms that will perpetuate or deepen poverty or environmental degradation.

Proposes acknowledging the responsibility of both the lenders and the borrowers, and recovering the resources diverted to corrupt regimes, institutions, and individuals. For more information contact jubilee 2000/USA, 222 East Capitol St., NE, Washington, DC 20003; 202-7833506; e-mail: coord@j2000usa.org; website.