Debt mustn't stand in the way of recovery

Published: 1 November 2005

Rich countries meeting in Paris today must not only suspend all debt repayments from tsunami affected countries, but go further and cancel a substantial proportion of the debts permanently, international agency Oxfam said today. Any cancellation or moratorium should only have one condition; that it is spent transparently on poverty reduction and reconstruction.

The ‘Paris Club’ of rich country creditors are gathering to decide what if anything to do about the huge debts owed to them by the countries devastated by the tsunami.
 
These debts are massive, to give an idea of the scale of these repayments:
  • With just one day's debt repayments Indonesia could instead afford 100 desperately needed aid flights. With a months debt repayments they could pay for three thousand flights.
  • India could help provide 18 million people with emergency clean drinking water with just one day’s repayments.
Oxfam is today calling on rich countries in the ‘Paris Club’ to not only suspend debt repayments – only to land poor countries with hefty repayments later - but cancel enough debt to make repayment feasible in the future.
 
“The countries affected by the tsunami need significant amounts of debt cancelled not simply postponed, to invest in reconstruction and poverty reduction. Only then will they be able to build a better future rather than simply rebuilding the poverty of the past.
 
“The tsunami has highlighted the pernicious impact of debt on poor countries. But it’s not only these countries that need debt cancellation. Debt repayments contribute to global poverty that kills the equivalent of this tsunami every week.
 
“Action at the ‘Paris Club’ on debt reduction is imperative, to be speedily followed by debt cancellation for the world’s poorest countries,” said Phil Bloomer, Oxfam’s Head of Advocacy.
 
Debt relief for tsunami affected countries must not come at the cost of providing debt relief for other poor countries. Cancellation of unpayable debts for all the poorest countries is essential as a vital step to achieving poverty reduction and the Millennium Development Goals. The poorest countries pay US$100 million dollars a day back to rich countries in debt repayments, vital resources that can be used for development and poverty reduction.
 
Any decision to relieve the debt burden of those effected by the tsunami should be linked to a broader deal on further debt relief for the poorest countries to be agreed at the G7 finance ministers meeting in early February.
 
An independent and transparent assessment of what is a sustainable debt burden for the tsunami affected countries should be carried out as a matter of urgency and debt above this level cancelled.

 

Notes to Editors

In 2002 Indonesia, Thailand, Sri Lanka and India together paid US$50 billion in debt service. Of this US$7 billion went to rich country governments such as the Japan, UK and the US.

Indonesia owes Britain US$644 million dollars, 44 per cent of which was as a result of arms sales. By far the biggest creditor for Indonesia is Japan, owed US$29 billion.

Indonesia's debt payments for 2004 are 10 times more than spending on health and 33 times more than spending on housing.

A debt moratorium for two years was agreed following the devastating Hurricane Mitch in 1999 and after the floods in Mozambique in 2000, under pressure from campaigners globally. However, a moratorium will only postpone the problem, and does nothing to tackle the root cause.

Contact Information

For further information, please contact Matt Grainger on 44 1865 313705.

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