Debt relief

Debt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations. It concerns in particular the Third World debt, which started exploding with the Latin American debt crisis (Mexico 1982, etc.).

Debt relief for heavily indebted and underdeveloped developing countries was the subject in the 1990s of a campaign by a broad coalition of development NGOs, Christian organisations and others, under the banner of Jubilee 2000. This campaign, involving, for example, demonstrations at the 1998 G8 meeting in Birmingham, was successful in pushing debt relief onto the agenda of Western governments and international organisations such as the International Monetary Fund and World Bank. Ultimately the Heavily Indebted Poor Countries (HIPC) initiative was launched to provide systematic debt relief for the poorest countries, whilst trying to ensure the money would be spent on poverty reduction.

The HIPC programme has been subject to conditionalities similar to those often attached to IMF and World Bank loans, requiring structural adjustment reforms, sometimes including the privatisation of public utilities, including water and electricity. To qualify for irrevocable debt relief, countries must also maintain macroeconomic stability and implement a Poverty Reduction Strategy satisfactorily for at least one year. Under the goal of reducing inflation, some countries have been pressured to reduce spending in the health and education sectors.

The Multilateral Debt Relief Initiative (MDRI) is an extension of HIPC. The MDRI was agreed following the G8’s Gleneagles meeting in July 2005. It offers 100% cancellation of multilateral debts owed by HIPC countries to the World Bank, IMF and African Development Bank.

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