Cracks open up amongst creditors on HIPC Consensus

Clear signs have emerged at the IMF/World Bank meetings in Prague that the creditor consensus over the Heavily Indebted Poor Country Initiative is becoming increasingly fragile.The first crack came with Canadian finance minister, Paul Martin, calling for a moratorium on debt service for countries in line to receive debt relief. He said that: "We made a commitment last year to faster action and we must make good on this commitment. We must ask ourselves whether we cannot do more. For example, why should we not consider an immediate moratorium on debt payments from eligible countries?"

Paul Martin's proposal reflects growing frustration by campaigners at the slow pace of HIPC, the enormous number of conditions imposed, and the simple fact that the initiative is not delivering as it should.

Earlier in a statement to the Development Committee Martin described as ”absurd” the fact that the indebted islands of Sao Tome and Principe off the west coast of Africa had to meet 106 IMF and World Bank conditions before qualifying for debt relief. This is a country whose debt repayments consume two thirds of the government budget. Earlier last week Commonwealth Finance Ministers called for conditions of debt relief to be simplified and made more coherent.

However, Mr Martin's call failed to impress his G7 colleagues. UK Chancellor Gordon Brown, who chairs the key International and Monetary Finance Committee, said that the IMF and World Bank planned to speed up debt relief to ensure it is granted to 20 countries by the end of the year. He considered this a way of "achieving the spirit” of the Canadian proposal.

Despite the cool response to the Canadian proposal, Mr Brown said that a further rise in the oil price could have "devastating consequences" on the world's poorest countries. The joint session of the IMFC and Development Committee confirmed that in the case of adverse oil shocks the option exists in HIPC for increasing debt relief at the completion point - the final stage in the programme, when debt cancellation is actually delivered. These are further indications of the recognition that HIPC relief is inadequate.

Despite these developments no substantial progress has been made, and creditors continue to adhere to an initiative that has become increasingly discredited. Ann Pettifor, the Director of Jubilee 2000 UK, said that said she was "angry and deeply disappointed. The empty rhetoric on debt relief and poverty reduction rings even more hollow.” U2's Bono called on the IMF and World Bank to cancel 100 per cent of the debt owed to them by the poorest countries. He said that every day 19,000 children die as a result of the debt crisis. If this were happening on the streets of London, New York or Prague, it would be described as a "holocaust". However, creditors were ready to tolerate this when it concerned countries like Mozambique, Chad and Tanzania.