The Threat of a New Debt Crisis in Developing Countries
Dr. Wolassa L. Kumo
July 27, 2009
Introduction
Developing countries faced catastrophic debt crisis in the 1980s following heavy borrowing after decolonization. Banks in the west freely lent money to newly independent developing countries often based on geopolitical concerns of the Cold War than financial prudence of the borrowers. The Cheap money that flooded financial markets in the 1970s was lent on to poor countries without regard for what it was spent on and whether it could be repaid. The ensuing global economic problems in the late 1970s with rising interest rates, deflation and falling commodity prices caught developing countries in a spiraling debt trap (UNIRIN, June 2009).
The Jubilee Debt Campaign also known as Jubilee 2000, a UK based charity concerned about unsustainable debt burden of poor counties in the world, is warning the global community that due to the current global credit crunch and economic down turn, poor developing counties are likely to face the second round of debt crisis reminiscent of the 1980s situation. The Jubilee Debt Campaign is calling for an immediate US$400 billion debt cancellation for developing counties to avoid a return to a 1980s-style crisis (UNIRIN, June 2009)
The Jubilee director, Nick Dearden, argues that debt cancellation would enable the World´s 100 poorest countries to fight poverty and relieve some of the devastating effects of the global recession on their economies. He states further that the US government's bail-out of one insurance company, American International Group (AIG), could have wiped out the entire debt of all sub-Saharan Africa countries.
The 2009 Jubilee report warned that even before the effects of the global slowdown began to be felt, the World Bank had calculated that 38 of 43 indebted countries "required substantial debt cancellation" to meet the needs of their people (UNIRIN, June 2009).
The Jubilee 2000 campaign for a one-off cancellation of the unpayable debts of the poorest countries, under a fair and transparent process, began in 1996 and led to a commitment by developed countries to write off $100 billion of poor country debt. Although developed countries indicated their willingness to fully cancel such debts of poor countries in 2005 that never happened until today.
The Impact of Debt on Economic Growth and Development
There is ample evidence in economic literature regarding the negative impact of debt on growth and development of poor countries. Elbadawi et al. (1996) showed a debt overhang effect on economic growth using cross section regression for 99 developing counties spanning SSA, Latin America, Asia and Middle East. They identified three direct channels in which indebtedness in SSA works against growth: current debt inflows as a ratio of GDP (expected to stimulate growth), past debt accumulation (capturing debt overhang) and debt service ratio. They also discussed the fourth and an indirect channel that works through the impact of the above channels on public sector expenditures.
They found that debt accumulation deters growth while debt stocks spurs growth. Other similar studies found that there exists a debt overhang and crowding out effects on private and public investment respectively. In general, a number of economic studies confirmed the negative impact of debt on economic growth in developing countries.
The Developing Country Debt Trap
Estimates indicate that, today developing countries' debt stocks stand at a staggering US$2.9 trillion, and every day the poorest countries pay the rich world almost US$100 million in debt repayments (UNIRIN, June 2009).
In Africa, by 2005, Nigeria, Africa´s largest oil exporter, had a US$30 billion debt from loans totaling only US$8 billion borrowed by the military regime in the 1970s. The Paris Club of a group of rich credit countries cancelled about US$18 billion of Nigeria´s debt leaving the balance of US$12 billion to be repaid by the democratic government. However, reports indicate that Nigeria had already paid over US$20 billion to Paris and London Club of creditors for the $8 billion loan it received in the 1970s with no further borrowing after 1992. Analysts describe this as the largest ever wealth transfer from poor to rich countries.
The Jubilee Charity criticized the British government, the largest creditor to Nigeria, for receiving debt payments from Nigeria in 2005 amounting Pound Sterling 1.7 billion. The entire repayment of over US$12 billion agreed among the Paris and London Club and the Nigerian government was to be received by the group of 7 industrialized countries (the G7).
The Charity stated that the payments meant that the G7 would receive more in six months from Nigeria than the 2005 Gleneagles G8 deal would provide to poor countries in a decade. Trisha Rogers, the then Jubilee's director, said: "It is obscene for G7 countries to take billions of dollars from one of the poorest countries on earth. In particular this means the UK will take from Nigeria almost exactly twice as much as it is giving in aid to the whole of Africa in 2005." She urged Britain, which chaired the G7, to take the lead in refusing to accept the payments (The Guardian, December 2005).
But the Jubilee Debt Campaign argued further that Nigeria is one of the world's poorest countries - one in five children does not live to the age of five - and has already paid off $17bn of debt. The rest - consisting of penalties and interest - was run up by previous dictators. Regarding the use of the funds saved by debt relief, Jubilee stated that all proceeds from debt relief have been earmarked for poverty reduction and will be tracked through the World Bank-supported Virtual Poverty Fund (The Guardian, December 2005).
The key measure of the degree of debt trap is debt sustainability. The World Bank uses the ratio of a country´s export earnings to debt as an indicator of its debt sustainability. The threshold considered as sustainable by the Bank is a debt-to-export ratio of 150 percent. Most poor countries´ debt-export ratios are much higher than the threshold. For instance, in 2009 Zambia´s debt-export ratio is over 300 percent, double of the threshold indicating the severity of the country´s debt trap.
Debt Relief Under the HIPC Initiative
The Heavily Indebted Poor Countries (HIPC) Initiative is the first international response to provide comprehensive debt relief to the world's poorest, most heavily indebted countries. The HIPC Initiative was launched by the World Bank and the IMF in 1996, and was further expanded in late 1998 (Enhanced HIPC Initiative)(www.Worldbank.org).
The HIPC Initiative is a comprehensive approach to debt reduction for heavily indebted poor countries pursuing IMF- and World Bank supported adjustment and reform programmes. According tom IMF, to date debt reduction packages have been approved for 35 countries, 29 of them in Africa, providing US$ 51 billion (in end 2007 net present value terms) in debt service relief over time (www.imf.org)
The HIPC Initiative was first launched in 1996 by the IMF and World Bank, with the aim of ensuring that no poor country faces a debt burden it cannot manage. The Initiative entails coordinated action by the international financial community, including multilateral organizations and governments, to reduce to sustainable levels the external debt burdens of the most heavily indebted poor countries. Following a comprehensive review in 1999, a number of modifications were approved to provide faster, deeper and broader debt relief and to strengthen the links between debt relief, poverty reduction, and social policies. In 2005, to help accelerate progress toward the United Nations Millennium Development Goals (MDGs), the HIPC Initiative was supplemented by the Multilateral Debt Relief Initiative (MDRI). The MDRI allows for 100 percent relief on eligible debts by three multilateral institutions—the IMF, the International Development Association (IDA) of the World Bank, and the African Development Fund (AfDF—for countries completing the HIPC Initiative process. In 2007, the Inter-American Development Bank (IaDB) also decided to provide additional ("beyond HIPC") debt relief to the five HIPCs in the Western Hemisphere (www.imf.org)
To be considered for HIPC Initiative assistance, a country must: (1) be IDA-only and PRGF-eligible; (2) face an unsustainable debt burden, beyond traditionally available debt-relief mechanisms; (3) establish a track record of reform and sound policies through IMF- and IDA-supported programs; and (4) have developed a Poverty Reduction Strategy Paper (PRSP) through a broad-based participatory process (www.imf.org)
The IMF argues that for the 35 countries for which packages have already been approved, debt service paid, on average, has declined by about 2˝ percent of GDP between 1999 and 2007. Their debt burden is expected to be reduced by about 90 percent after the full delivery of debt relief (including under the MDRI). Yet for debt reduction to have a tangible impact on poverty, the additional resources need to be targeted at the poor (www.imf.org).
Jubilee Warns HIPC is Woefully Inadequate
According to Jubilee Charity, although HIPC was reformed in 1999, after G8 countries came under pressure from campaigners, it is still failing the world's poor. It is time to abandon HIPC, and ensure that there is 100% cancellation of all unjust and unpayable debts, without harmful conditions.
Jubilee argues further that HIPC is monitored and implemented by the World Bank and IMF. Although most other creditors - rich countries, regional development banks and some private creditors - are encouraged to take part not all do. Commercial creditors in particular often fail to deliver their share of debt cancellation under HIPC.
Another concern raised by Jubilee is the fact that HIPC is not open to poor countries (generally, those with annual income per head of $935 or less), that have debts that are more than one and a half times their annual export earnings (or, if they have lots of exports, more than two and a half times their government revenue), and that have a World Bank and IMF programme. In order to embark on the HIPC scheme, they have to have a "track record" with the IMF: that is, have done what the IMF says for at least three years! Then they have to comply with a large number of conditions in order to complete HIPC and get debts cancelled (www.jubileedebtcampaign.org.uk)
HIPC was heralded by rich governments as offering "an exit from unsustainable debt". What this meant was a reduction in debt to a level deemed 'sustainable' by the World Bank and IMF. That level - regardless of a country's circumstances - was set as debt of one and a half times the value of export earnings. On entering HIPC, countries get some relief on debt payments, and on completing HIPC (which can take many years), they get cancellation of debt to this 'sustainable' level. In 2005, thanks to an unprecedented level of campaigning on debt, this was extended. Under the MDRI, countries that complete HIPC now get cancellation of most debts to the IMF, African Development Fund and the World Bank. This is good news - but does not address the problems of HIPC conditions and structure, or the countries - and debts - left out (www.jubileedebtcampaign.org.uk).
Jubilee argues further that the conditions set out in ´Decision Point document´ for completion of HIPC is self contradictory. While these conditions stipulate measures to target poverty, the compliance requirements to all kinds of economic policy conditions can undermine poverty reductions efforts. The latter requires countries to cut public spending, privatize basic services such as water and electricity, and liberalize trade.
These typical neoliberal policy prescriptions have not even benefited the rich countries themselves let alone poor countries struggling with lack of access to basic social and economic services and with limited access to the global commodity markets. The neoliberal policies (the Washington Consensus) is now believed to be the origin of the current global financial meltdown and the consequent global severe economic down turn commonly accepted today as Great Recession the world has ever seen. Surely, the use of the neoliberal policy prescriptions to cancel the debts of HIPC countries is unjust and hypocritical. At present, the neoliberal policies are dead. To resurrect the HIPC initiative the World Bank and IMF must devise new policies for debt cancellation. In line with the ideals of the Great Charity, Jubilee, the only option the World Bank and IMF have is to fully cancel the US$400 billion of debt owed by 100 poor countries worldwide all at once!
Apart from the neoliberal policy prescriptions the HIPC initiative is ineffective in many other respects. According to Jubilee 2000 HIPC takes too long: more than 10 years for 24 countries or so to benefit; HIPC offers far too little, what is needed is total cancellation of unplayable and unjust debt; HIPC is too limited, many more countries need and deserve debt cancellation, HIPC does not include all debts: debts are only partially cancelled and some countries, banks and companies refuse or fail to take part in the HIPC process at all, HIPC is entirely controlled by the creditors: they do not accept responsibility for their part in creating and maintaining the debt crisis or hear the voice of then poor countries.
Concluding Remarks
The current global financial crisis and economic downturn has severely curtailed the ability of poor developing countries to finance their debts. In most cases, these debts were amazed by the previous dictators whose primary objectives were not to spur growth and development but to misuse them. Likewise, the lenders, the rich nations in the west, showered these dictators with such loans not to ensure growth but primarily to secure their geopolitical influence over these countries during the Cold War. Today, the victims of such irresponsible borrowing and lending are hundreds of millions of poor citizens in over 100 poor developing countries who live on less than a dollar a day and have no access, in many cases, to a single meal a day. In particular, most of the 43 heavily indebted poor countries are currently unable to meet the basic needs of their peoples if their debts are not fully cancelled.
The HIPC initiative of the World Bank and IMF is a right policy measure but is utterly inadequate. Apart from being too slow, limited in scope and fully donor controlled, the strings attached to it, the neoliberal policy conditionalites, are more damaging to the poor countries than the promised debt cancellation.
The poor developing countries, in particular, the heavily indebted poor countries need an urgent debt-bailout, i.e. and immediate once off and full cancellation of unjust and unpayable debt. If industrialized countries in the west are willing and able to bail-out private corporations that have lost their assets primarily due to excessive greed and speculative activities, why can they not cancel the unjust and unpayable debts of the poorest countries in the world whose citizens are dying of hunger and malnutrition every single day? And what these countries need is not even a trillion dollar bail-out! The fund used to bail out a single US insurance giant, AIG, can wipe out the entire debt of sub Saharan Africa, where 80% of the heavily indebted poor countries reside!
References
UNIRIN, 1 June 2009. Africa: Jubilee Warns of Another 1980s Debt Crisis
http://allafrica.com/stories/200906010798.html
Elbadawi, et al. 1996. Debt Overhang and Economic Growth in Sub-Saharan Africa.
The Guardian, Monday 5 December 2005
http://www.guardian.co.uk/business/2005/dec/05
IMF, Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative
http://www.imf.org/external/np/exr/facts/hipc.htm
Jubilee debt campaign http://www.jubileedebtcampaign.org.uk/
World Bank, www.Worldbank.org
Developing countries faced catastrophic debt crisis in the 1980s following heavy borrowing after decolonization. Banks in the west freely lent money to newly independent developing countries often based on geopolitical concerns of the Cold War than financial prudence of the borrowers. The Cheap money that flooded financial markets in the 1970s was lent on to poor countries without regard for what it was spent on and whether it could be repaid. The ensuing global economic problems in the late 1970s with rising interest rates, deflation and falling commodity prices caught developing countries in a spiraling debt trap (UNIRIN, June 2009).
The Jubilee Debt Campaign also known as Jubilee 2000, a UK based charity concerned about unsustainable debt burden of poor counties in the world, is warning the global community that due to the current global credit crunch and economic down turn, poor developing counties are likely to face the second round of debt crisis reminiscent of the 1980s situation. The Jubilee Debt Campaign is calling for an immediate US$400 billion debt cancellation for developing counties to avoid a return to a 1980s-style crisis (UNIRIN, June 2009)
The Jubilee director, Nick Dearden, argues that debt cancellation would enable the World´s 100 poorest countries to fight poverty and relieve some of the devastating effects of the global recession on their economies. He states further that the US government's bail-out of one insurance company, American International Group (AIG), could have wiped out the entire debt of all sub-Saharan Africa countries.
The 2009 Jubilee report warned that even before the effects of the global slowdown began to be felt, the World Bank had calculated that 38 of 43 indebted countries "required substantial debt cancellation" to meet the needs of their people (UNIRIN, June 2009).
The Jubilee 2000 campaign for a one-off cancellation of the unpayable debts of the poorest countries, under a fair and transparent process, began in 1996 and led to a commitment by developed countries to write off $100 billion of poor country debt. Although developed countries indicated their willingness to fully cancel such debts of poor countries in 2005 that never happened until today.
The Impact of Debt on Economic Growth and Development
There is ample evidence in economic literature regarding the negative impact of debt on growth and development of poor countries. Elbadawi et al. (1996) showed a debt overhang effect on economic growth using cross section regression for 99 developing counties spanning SSA, Latin America, Asia and Middle East. They identified three direct channels in which indebtedness in SSA works against growth: current debt inflows as a ratio of GDP (expected to stimulate growth), past debt accumulation (capturing debt overhang) and debt service ratio. They also discussed the fourth and an indirect channel that works through the impact of the above channels on public sector expenditures.
They found that debt accumulation deters growth while debt stocks spurs growth. Other similar studies found that there exists a debt overhang and crowding out effects on private and public investment respectively. In general, a number of economic studies confirmed the negative impact of debt on economic growth in developing countries.
The Developing Country Debt Trap
Estimates indicate that, today developing countries' debt stocks stand at a staggering US$2.9 trillion, and every day the poorest countries pay the rich world almost US$100 million in debt repayments (UNIRIN, June 2009).
In Africa, by 2005, Nigeria, Africa´s largest oil exporter, had a US$30 billion debt from loans totaling only US$8 billion borrowed by the military regime in the 1970s. The Paris Club of a group of rich credit countries cancelled about US$18 billion of Nigeria´s debt leaving the balance of US$12 billion to be repaid by the democratic government. However, reports indicate that Nigeria had already paid over US$20 billion to Paris and London Club of creditors for the $8 billion loan it received in the 1970s with no further borrowing after 1992. Analysts describe this as the largest ever wealth transfer from poor to rich countries.
The Jubilee Charity criticized the British government, the largest creditor to Nigeria, for receiving debt payments from Nigeria in 2005 amounting Pound Sterling 1.7 billion. The entire repayment of over US$12 billion agreed among the Paris and London Club and the Nigerian government was to be received by the group of 7 industrialized countries (the G7).
The Charity stated that the payments meant that the G7 would receive more in six months from Nigeria than the 2005 Gleneagles G8 deal would provide to poor countries in a decade. Trisha Rogers, the then Jubilee's director, said: "It is obscene for G7 countries to take billions of dollars from one of the poorest countries on earth. In particular this means the UK will take from Nigeria almost exactly twice as much as it is giving in aid to the whole of Africa in 2005." She urged Britain, which chaired the G7, to take the lead in refusing to accept the payments (The Guardian, December 2005).
But the Jubilee Debt Campaign argued further that Nigeria is one of the world's poorest countries - one in five children does not live to the age of five - and has already paid off $17bn of debt. The rest - consisting of penalties and interest - was run up by previous dictators. Regarding the use of the funds saved by debt relief, Jubilee stated that all proceeds from debt relief have been earmarked for poverty reduction and will be tracked through the World Bank-supported Virtual Poverty Fund (The Guardian, December 2005).
The key measure of the degree of debt trap is debt sustainability. The World Bank uses the ratio of a country´s export earnings to debt as an indicator of its debt sustainability. The threshold considered as sustainable by the Bank is a debt-to-export ratio of 150 percent. Most poor countries´ debt-export ratios are much higher than the threshold. For instance, in 2009 Zambia´s debt-export ratio is over 300 percent, double of the threshold indicating the severity of the country´s debt trap.
Debt Relief Under the HIPC Initiative
The Heavily Indebted Poor Countries (HIPC) Initiative is the first international response to provide comprehensive debt relief to the world's poorest, most heavily indebted countries. The HIPC Initiative was launched by the World Bank and the IMF in 1996, and was further expanded in late 1998 (Enhanced HIPC Initiative)(www.Worldbank.org).
The HIPC Initiative is a comprehensive approach to debt reduction for heavily indebted poor countries pursuing IMF- and World Bank supported adjustment and reform programmes. According tom IMF, to date debt reduction packages have been approved for 35 countries, 29 of them in Africa, providing US$ 51 billion (in end 2007 net present value terms) in debt service relief over time (www.imf.org)
The HIPC Initiative was first launched in 1996 by the IMF and World Bank, with the aim of ensuring that no poor country faces a debt burden it cannot manage. The Initiative entails coordinated action by the international financial community, including multilateral organizations and governments, to reduce to sustainable levels the external debt burdens of the most heavily indebted poor countries. Following a comprehensive review in 1999, a number of modifications were approved to provide faster, deeper and broader debt relief and to strengthen the links between debt relief, poverty reduction, and social policies. In 2005, to help accelerate progress toward the United Nations Millennium Development Goals (MDGs), the HIPC Initiative was supplemented by the Multilateral Debt Relief Initiative (MDRI). The MDRI allows for 100 percent relief on eligible debts by three multilateral institutions—the IMF, the International Development Association (IDA) of the World Bank, and the African Development Fund (AfDF—for countries completing the HIPC Initiative process. In 2007, the Inter-American Development Bank (IaDB) also decided to provide additional ("beyond HIPC") debt relief to the five HIPCs in the Western Hemisphere (www.imf.org)
To be considered for HIPC Initiative assistance, a country must: (1) be IDA-only and PRGF-eligible; (2) face an unsustainable debt burden, beyond traditionally available debt-relief mechanisms; (3) establish a track record of reform and sound policies through IMF- and IDA-supported programs; and (4) have developed a Poverty Reduction Strategy Paper (PRSP) through a broad-based participatory process (www.imf.org)
The IMF argues that for the 35 countries for which packages have already been approved, debt service paid, on average, has declined by about 2˝ percent of GDP between 1999 and 2007. Their debt burden is expected to be reduced by about 90 percent after the full delivery of debt relief (including under the MDRI). Yet for debt reduction to have a tangible impact on poverty, the additional resources need to be targeted at the poor (www.imf.org).
Jubilee Warns HIPC is Woefully Inadequate
According to Jubilee Charity, although HIPC was reformed in 1999, after G8 countries came under pressure from campaigners, it is still failing the world's poor. It is time to abandon HIPC, and ensure that there is 100% cancellation of all unjust and unpayable debts, without harmful conditions.
Jubilee argues further that HIPC is monitored and implemented by the World Bank and IMF. Although most other creditors - rich countries, regional development banks and some private creditors - are encouraged to take part not all do. Commercial creditors in particular often fail to deliver their share of debt cancellation under HIPC.
Another concern raised by Jubilee is the fact that HIPC is not open to poor countries (generally, those with annual income per head of $935 or less), that have debts that are more than one and a half times their annual export earnings (or, if they have lots of exports, more than two and a half times their government revenue), and that have a World Bank and IMF programme. In order to embark on the HIPC scheme, they have to have a "track record" with the IMF: that is, have done what the IMF says for at least three years! Then they have to comply with a large number of conditions in order to complete HIPC and get debts cancelled (www.jubileedebtcampaign.org.uk)
HIPC was heralded by rich governments as offering "an exit from unsustainable debt". What this meant was a reduction in debt to a level deemed 'sustainable' by the World Bank and IMF. That level - regardless of a country's circumstances - was set as debt of one and a half times the value of export earnings. On entering HIPC, countries get some relief on debt payments, and on completing HIPC (which can take many years), they get cancellation of debt to this 'sustainable' level. In 2005, thanks to an unprecedented level of campaigning on debt, this was extended. Under the MDRI, countries that complete HIPC now get cancellation of most debts to the IMF, African Development Fund and the World Bank. This is good news - but does not address the problems of HIPC conditions and structure, or the countries - and debts - left out (www.jubileedebtcampaign.org.uk).
Jubilee argues further that the conditions set out in ´Decision Point document´ for completion of HIPC is self contradictory. While these conditions stipulate measures to target poverty, the compliance requirements to all kinds of economic policy conditions can undermine poverty reductions efforts. The latter requires countries to cut public spending, privatize basic services such as water and electricity, and liberalize trade.
These typical neoliberal policy prescriptions have not even benefited the rich countries themselves let alone poor countries struggling with lack of access to basic social and economic services and with limited access to the global commodity markets. The neoliberal policies (the Washington Consensus) is now believed to be the origin of the current global financial meltdown and the consequent global severe economic down turn commonly accepted today as Great Recession the world has ever seen. Surely, the use of the neoliberal policy prescriptions to cancel the debts of HIPC countries is unjust and hypocritical. At present, the neoliberal policies are dead. To resurrect the HIPC initiative the World Bank and IMF must devise new policies for debt cancellation. In line with the ideals of the Great Charity, Jubilee, the only option the World Bank and IMF have is to fully cancel the US$400 billion of debt owed by 100 poor countries worldwide all at once!
Apart from the neoliberal policy prescriptions the HIPC initiative is ineffective in many other respects. According to Jubilee 2000 HIPC takes too long: more than 10 years for 24 countries or so to benefit; HIPC offers far too little, what is needed is total cancellation of unplayable and unjust debt; HIPC is too limited, many more countries need and deserve debt cancellation, HIPC does not include all debts: debts are only partially cancelled and some countries, banks and companies refuse or fail to take part in the HIPC process at all, HIPC is entirely controlled by the creditors: they do not accept responsibility for their part in creating and maintaining the debt crisis or hear the voice of then poor countries.
Concluding Remarks
The current global financial crisis and economic downturn has severely curtailed the ability of poor developing countries to finance their debts. In most cases, these debts were amazed by the previous dictators whose primary objectives were not to spur growth and development but to misuse them. Likewise, the lenders, the rich nations in the west, showered these dictators with such loans not to ensure growth but primarily to secure their geopolitical influence over these countries during the Cold War. Today, the victims of such irresponsible borrowing and lending are hundreds of millions of poor citizens in over 100 poor developing countries who live on less than a dollar a day and have no access, in many cases, to a single meal a day. In particular, most of the 43 heavily indebted poor countries are currently unable to meet the basic needs of their peoples if their debts are not fully cancelled.
The HIPC initiative of the World Bank and IMF is a right policy measure but is utterly inadequate. Apart from being too slow, limited in scope and fully donor controlled, the strings attached to it, the neoliberal policy conditionalites, are more damaging to the poor countries than the promised debt cancellation.
The poor developing countries, in particular, the heavily indebted poor countries need an urgent debt-bailout, i.e. and immediate once off and full cancellation of unjust and unpayable debt. If industrialized countries in the west are willing and able to bail-out private corporations that have lost their assets primarily due to excessive greed and speculative activities, why can they not cancel the unjust and unpayable debts of the poorest countries in the world whose citizens are dying of hunger and malnutrition every single day? And what these countries need is not even a trillion dollar bail-out! The fund used to bail out a single US insurance giant, AIG, can wipe out the entire debt of sub Saharan Africa, where 80% of the heavily indebted poor countries reside!
References
UNIRIN, 1 June 2009. Africa: Jubilee Warns of Another 1980s Debt Crisis
http://allafrica.com/stories/200906010798.html
Elbadawi, et al. 1996. Debt Overhang and Economic Growth in Sub-Saharan Africa.
The Guardian, Monday 5 December 2005
http://www.guardian.co.uk/business/2005/dec/05
IMF, Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative
http://www.imf.org/external/np/exr/facts/hipc.htm
Jubilee debt campaign http://www.jubileedebtcampaign.org.uk/
World Bank, www.Worldbank.org
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