Cost of cancelling Third World debt is less than a penny a day

As finance ministers prepare for the autumn meetings of the IMF and World Bank in Washington (Sept 25th - 28th), a new report, Unfinished Business, from Jubilee 2000 has released new data which shows that the cost of cancelling Third World debt is only one fifth of what has been claimed.

The report's findings are based on research by Harvard economist, Jeffrey Sachs. It shows that writing off the $350 billion (£215bn) owed by 52 of the poorest countries would cost the richer countries only $71 billion (£44bn). This is the real cost of debt cancellation -- only one third of one percent of the annual income of the richest countries. The cost to taxpayers in the richest (OECD) countries would only be one US cent a day, equivalent to less than 1p a day.

The report, using internal IMF and World Bank analyses, exposes the inadequacy of the Cologne Initiative. As a result of the G7's deliberations in Cologne, one country, Mali, will pay more in debt service than before treatment under the Initiative.

Ann Pettifor, Director of Jubilee 2000 said: "The creditors need to wake up and smell the coffee. The free market realistically values the debt at a fraction of its face value. They can no longer hide behind the myth that debt cancellation for the poorest countries is costly. This report show it is easily affordable and makes economic sense".

The report concludes that cost can no longer be held up as a reason for not providing desperately needed debt cancellation

Ms Pettifor said: “The G7 have no excuse. They must meet again before the Millennium – to complete the unfinished business of their Cologne Summit”.

Unfinished Business exposes the extraordinary lengths to which creditors will go to “hide the fact that these impoverished countries are bankrupt and cannot pay their debts”. It accuses the government and other major creditors of hypocrisy and double standards by using taxpayers' money -- supposedly aid to help impoverished nations -- to repay debts owed by the poorest countries to private banks, companies and the IMF and World Bank.

Professor Kunibert Raffer, of the University of Vienna, commenting on the report said: “A substantial part of these debts are uncollectable and thus already lost. Creditors are deluding themselves and the public with their over-inflated claims as to what debt cancellation will cost. These countries are effectively bankrupt. The world's poorest people are denied the most basic protection normally granted by insolvency procedures.”

• Executive Summary of 'Unfinished Business'
• To order a copy of the report