By Klaus Teufel
December 2002

In his pre-budget speech UK Chancellor Gordon Brown announced that “…having already agreed $62 billion of debt relief for 26 of the poorest countries, our aim is now $100 billion for the 38 countries in total that stand to benefit from the cancellation of debt.” However, Mr. Brown makes the total of $100 billion appear as some kind of a new, more ambitious pledge to grant poor countries debt relief. In fact, however, it is just a repetition of what has already been promised 3 years ago at the G7 summit in Cologne in 1999. This need to repeat old targets and present them as something new seems to be a consistent feature of the HIPC initiative. As no real progress towards a solution of the debt problem is being made, officials can only rephrase, what they have already agreed upon – albeit on paper only – several years ago. To an informed observer, this repetition seems to be no less than an indirect admission of the HIPC initiative’s failure.

Furthermore, it has to be emphasized that only a fraction of the debt relief, which has been committed on paper, has actually been granted. Up to now, only 6 countries have reached completion point, where the bulk of the promised debt relief is delivered. Taking into account relief from the original HIPC initiative as well as from the enhanced initiative, relief for these 6 countries is supposed to amount to $34 billion in nominal terms. Again, this does not mean that the totality of this relief will actually ever be granted. As the case of Uganda shows, several creditors refrain from participating in the HIPC initiative, and some have even filed lawsuits with the recipient countries’ courts to gain the full repayment of their loans.

The remaining 20 countries are currently in the so-called interim period between decision and completion point and receive some interim relief from the IMF and the World Bank. As completion point is “floating”, which means that it is only reached after a country has satisfactorily fulfilled several conditions set out by the IMF and the World Bank, it is completely unclear when these countries will actually be granted the main part of their promised relief. The report on the HIPC initiative, referred to above, only states that many of them may take longer to reach completion point than initially anticipated. Considering this, it seems completely pointless to ask when the 12 countries, which are eligible for HIPC relief, but have not yet reached decision point, will actually see some of the promised debt relief being granted to them.

Mr. Brown also announced in his pre-budget speech that after holding discussions with finance ministers from several developed countries as well as with the heads of the IMF and the World Bank, “…Britain is proposing a new International Finance Facility, with public finance leveraged up by long-term international commitments, to raise the amount of development aid for the years to 2015 from $50 billion a year to $100 billion per year – so that we can meet by 2015 the Millennium Development Goals – including that poverty be halved, that child mortality be reduced by two thirds, and that every child has the right to primary education.” It was not possible to find more detailed information about this plan, so that its significance cannot yet be fully evaluated. Nevertheless, the announcement seems to be a step in the right direction.

However, if politicians from developed countries are really as keen on achieving the MDGs as they say they are, it is not understandable why they do not support Jubilee Research’s and other organizations’ call for a complete cancellation of the poorest countries’ debt. To increase aid to low-income countries, while continuing to force them to service their obligations towards their rich creditors, is not only contradictory, but also inefficient. In fact, as Jubilee Research’s reports show[1], the poorest countries would only have a chance to meet the MDGs by 2015, if all of their debts are written off and if they receive further development aid. Thus, there is an urgent need not only to increase development aid, but also to reform the whole HIPC process by speeding it up and by increasing the amount of debt relief. Otherwise, the pledges to meet the MDGs by 2015 will only be empty words and will do nothing to alleviate the suffering of billions of human beings around the world.