Debt Cancellation
All across the globe, especially in the developing countries, high external debt is one of the key constraint for economic development. Few countries have unsustainably remained poor due to the high external debt and hence it has become a global challenge to curb this menace thus bridging the gap between the prospered and the poor nations.
The debt burden of the underdeveloped countries like Africa nearly accounts to $230 billion and nearly 33 regions out of the 44 regions in Africa are termed as "heavily indebted poor countries" by the World Bank. The IMF and the World Bank who are chiefly the creditors of these countries impose rather harsh interest rates and thereby increase the burden of debts. Simulteneously even the richer countries like U.S. are unwilling to writt off their debts but instead creating a tougher economic policies on the indebted countries.
But the African leaders recently have acknowledged the importance of being self-reliant rather than expecting aid from foreign lenders.Their main focus is to implement policies that alleviate poverty and restore confidence in the eyes of the foreign investors. They believe in introducing various economic, social, political and institutional reforms and frame policies to systematize the expenditure pattern. So also, the international communities must intervene the debt issue by developing trade relations, promoting sports culture and providing well-targetted relief to these economically distressed countries.
The G7 debate Currently the debate between the developed countries still remains intact as to which of the countries would be
benifitted by the exemption of Debt Cancellation. The G7 debate which was led by the U.K. proposed a plan of relieving only those nations that have practiced plans like economic, social and institutional reforms. In general all the countries that come under the perview of HIPC countries would receive the grants and would least concentrate upon the poor countries.
The IMF still chalks out the plans to increase the existing quantity of funds. The debt relief would be financed to these countries by disposing off the gold reserves of the IMF. But this particular plan was disregarded by the White House because the authorities of the U.S. congress were not eager to continue with this idea. But instead the White HOuse states to raise the funds for debt relief through the plans of World Bank's strategy of poverty reduction. But even this debt program was discarded as it required additional aid for the poorer countries and the developing countries would be neglected. The British plan invities increased contributions to the World Bank from its member states. After the deal made by the G8 countries in the year 2005, the IMF and the World Bank are increasing the number of countries to relieve them from debt burden by amending the terms of agreements. After the campaign of Jubilee U.S.A network, Africa will continue to receive the benifit of Debt Cancellation without any harmful conditions imposed. At the same time Africa has also initiated an educational tool to create an awarness regarding the illegimate consequences of debts to all the individuals.
African lenders emphasize four main aspects to kill the debt burden of the nation namely • eradicating corruption • inviting aids • conditions • connections.
Economic colonization through conditions: The project of Project on Global Economic liberty Ian Vasques mentioned in his speech at the campaign of Jubilee that the highly indebted poor countries have been receiving aids through strict conditions for some 20 years and therefore numerous studies have proved that the effect of the aids donated will not have any systematic effect. He advocated that the role of the IMF and the World Bank was so far not extensive.
But the IMF boldly stated that the measures undertaken by them involved their full fledged efforts. Most of the indebted countries depend about 70 % upon IMF as a source for Debt Cancellation. But these countries do not guarentee repayment. In order to raise funds to the IMF the maximum of the burden is pushed to the donor countries as the tax payments in their countries is charged even higher. The U.S. taxpayers contribute the largest amount of funds to the IMF and it roughly gave 290 billions to the IMF in the year 1999. About 17.6% of the IMF fund belongs to the funds raised from the U.S.
In the year 2003 President Bush pledged to sanction nearly 2.85 billion dollars to the World Bank's international development association and spend about $16 billion to only battle against perilous AIDS worldwide. It increased the rate of percentage from 38 to 54 towards the official Development Assistance wholly for AIDS, education & farming.
To be practical, the activist group such as Jubilee shold first consider the problems of indebted countries like dependency and inefficiency perpectuated by bad borrowings. They stress most vitally for the development of these poor countries. A different perspective should be overlooked in order to uplift these nations through self-reliance. The policy of free trade seems to be most promising.
The group of Jubilee advocates that relief would be provided to only those countries that have been committed towards effective utilization of resources. These countries recieve totally $10 billion in grants every year but after the HIPC initiatives is taken into account they receive 2 billion as a matter of debt service obligation. These countries should consistently maintain the net inflows of the nation through the means of exports, GDP and government revenues, otherwise they will not avail the benifit of HIPC debt relief. If the net inflows declines by 10% then total reduction in the Debt Cancellation would amount to 20% of the total aid.
As a measure of economic colonization in Africa and determining their eligibity for Debt Cancellation by the creditor nations is weakening their form of self-government. The developed nations are economically dominating over the African natives by imposing upon them repayment policies. If they are unconditionally provided assistance, then it will lead to increased privitization, free trade and would also improve their health care systems. As a result of utmost poverty Africa is stated as a nation badly ridden by various ailments. Therefore Africa claims that no knots should be attached to the loans provided to them by the wealthy nations. Because the conditions will worsen the ill-effects of diseased health.
Ultimately, inclination of the prospered nations is also necessary because they lavishly spend in their personal lives. They must follow a healthy and a regular expenditure pattern to reduce the individual debt. Because many people in the U.S face the problem of damaged credit record. Most of them are seeking for the courses like debt management to releive from the financial burden. Through credit counseling they can thouroughly scrutinize their spending habits and proportionately spend according to their needs.
To make the world free from debt burden the coordinated efforts of the prospered countries as well as the indebted countries are necessary to achieve the desired results.
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