Home : Poverty Alleviation

 email this page :  printer friendly page

Poverty Alleviation

Debt

Debt is necessarily the starting-point in explaining the state of siege that grips the economies of most developing countries today. That’s because the efforts by governments to pay their external debts, or at least calm the pressures exerted on them to make interest payments, are what have allowed officials of the International Monetary Fund (IMF) and the World Bank to take those countries’ economic policies hostage.

The remedies prescribed by these experts have only exacerbated the twin problems of debt and poverty.

Consider the following:

• In 1970, the world’s poorest countries (roughly 60 countries classified as low-income by the World Bank), owed $25 billion in debt.
• By 2002, this was $523 billion 
• For Africa, 
  • In 1970, it was just under $11 billion 
  • By 2002, that was over half, to $295 billion 
• Debts owed to the multilateral institutions such as the IMF and World Bank is currently around $153 billion 
• For the poorest countries debts to multilateral institutions is around $70 billion.
• $550 billion has been paid in both principal and interest over the last three decades, on $540bn of loans, and yet there is still a $523 billion dollar debt burden.
• The Link to IMF/World Bank Structural Adjustment

No single step would go further toward accomplishing the goals of the TFI Network than eliminating the enormous debts that have been heaped on Southern economies. The structural adjustment programs (SAPs) that today strangle over 80 countries are imposed by the IMF and World Bank precisely so that governments will save and earn hard currency to pay their debts. Agreeing to a SAP and thus qualifying for a structural adjustment loan is usually the only option left for a government to insure the minimum financial flows needed to keep running. SAPs compel countries to cut social spending, restrict credit, lay off workers, open up their economies to foreign corporations, and orient their productive capacities to low-wage assembly plants and export agriculture. SAPs also add substantial extra burdens to women, who already suffer disproportionately from poverty.

The massive debts that lead to the ceding of a country’s economy to international bankers are those owed by developing countries to other countries (as a result of loans and aid programs), to private banks, and to the multilateral institutions themselves -- the World Bank, the IMF, and regional development banks. These debts have accumulated in most of the world over the last twenty or so years due to the following factors: predatory lending practices by private banks; usury based loans for huge infrastructure projects which were poorly conceived or executed; the oil crisis of the mid-1970s; the dramatic jump in interest rates at the end of the 1970s initiated by the U.S. Federal Reserve Board; and the massive amounts of loan money which disappeared into the pockets of dictators and other corrupt government officials.

Who Really Pays the Perpetual Debts
Regardless of who has benefited from years of reckless lending and spending, it is entire countries and their citizenries, not government officials or bankers, who are held accountable for the loans. Well-paid bankers in Washington prattle about the "moral hazard" of setting the precedent of letting debtors off the hook, with no acknowledgment that the beneficiaries were contractors in the North (for infrastructure loans) and corrupt autocrats in the South. Those the institutions choose to see as the "debtors" are the poor people of Africa, Asia, and Latin America who have had no share in any gains from the loans and had no part in the decision to take them in the first place. Countries cannot file for bankruptcy protection; as long as they exist, their debts stay with them. In the world of international finance there is one inexhaustible resource, one player that can always be made to pay: the poor.

Impacts of the Debt

• The external debt burden of sub-Saharan Africa has increased by nearly 400% since 1980, when the IMF and World Bank began imposing their SAPs. For the developing countries as a whole between 1980 and 1992, the external debt burden doubled. 
• The flow of money between the North and South was reversed some time ago; developing countries now pay more in debt servicing than they get in new credit. Between 1982 and 1990, the South transferred a net $418 billion to the North. Between 1987 and 1995 the IMF received $4 billion more in debt repayments from the most indebted and impoverished countries than it has provided.
• Africa spends four times more on debt interest payments than on health care. In the mid-1990s, Uganda spent $3 on health for every $17 it paid in debt service, most of which went to multilateral lending institutions.
• In the early 1990s, 75% of the U.S.’s Agency for International Development (USAID) budget for Nicaragua went toward paying interest on the national debt and improving balance of trade figures. Nicaragua took in $631 million in "liquid resources" in 1994; over 70% of that money went toward paying the interest on the country’s foreign debt.
• Between 1990 and 1993 the government of Zambia spent $37 million on primary school education. Over the same period, it spent $1.3 billion on debt repayments. Repayments to the IMF alone were equivalent to ten times government spending on primary education.
• Of $2.9 billion provided by the World Bank’s soft-loan arm, the International Development Association (IDA), to the world’s poorest countries, fully two-thirds ($1.9 billion) was spent on repaying past World Bank loans. A good bit of the remaining third went to the IMF.
• External debt per capita for sub-Saharan Africa (not including South Africa) is $365, while GNP per capita is just $308. 
• The external debt for the region (again excluding South Africa), at some $203 billion in 1996, represents 313% of the annual value of its exports.
• Debt servicing for sub-Saharan Africa amounts to about 20% of its annual export income -- that is, everything the region earns from those goods it is able to sell for hard currency (dollars, marks, yen, etc.).
• In 1996, sub-Saharan Africa (minus South Africa) paid $2.5 billion more in debt servicing than it got in new long-term loans and credits.

Cancel the Debt – Eliminate Usury Based Loans!
TFI calls for an end to an obscene system that considers interest payments sacrosanct while the most minimal quality of life for citizens of indebted countries becomes a luxury to be splurged on if the debts have been paid. When Charles Dickens exposed the plight of the children of imprisoned debtors in London, the society reacted in horror and quickly reformed the system. Today entire societies are imprisoned, their children starved and deprived of health care and education, and yet the logic of international account balances exonerates the bankers who insist on seeing their profit line grow at the expense of entire generations.

The IMF has approximately $30 - $40 billion worth of gold; the World Bank likewise is comfortably endowed and makes a tidy profit (over $1.5 billion a year) on the loans it has made to its less-impoverished clients. Because no one pulls a trigger or pushes a button, we act as if the undeniable violence of enforced, needless poverty has no source and cannot be changed. This, truly, is the "banality of evil." We must insist on a new vision of economics, of banking, of resources, and of humanity. This outrageous undeclared war on the poor has gone on far too long.

^ top of page

< back