G7 Debt Relief Plans Promising, says Agency

Although last weekend’s decision by Group of Seven (G7) finance ministers is an important milestone on the road to one-hundred percent debt relief for poor countries, much must be done to ensure it becomes reality, a Norway-based ecumenical organization said Tuesday.

According to an agreement made in a meeting London over the weekend between finance ministers from the world’s seven richest countries, poor countries will now be granted full debt relief. The agreement will be formally drafted at the G7 summit in July 2005, however Norwegian Church Aid’s head of department for development policy, Gunstein Instefjord says many issues must be cleared up before this date.

“So far the G7 ministers have been focused on around twenty poor countries,” Instefjord said. “Norwegian Church Aid believes that debt relief must be granted to all low-income countries that require it.”

“Many poor countries today choose to repay foreign debt rather than fight poverty," he added."Therefore a thorough analysis of these debts is required—only then can we chart precisely the needs of individual countries in order to be able to achieve the Millennium Goal of halving poverty by 2015. And such an analysis will most probably reveal that debt relief must be given to fifty, and not twenty countries.”

According to NCA, previous debt relief initiatives have traditionally been marked by the fact that countries wishing to see their debt erased must fulfill a series of prior conditions. “Norwegian Church Aid is critical of many of these conditions,” the agency stated.

”G7 must ensure that the harmful macroeconomic criteria that have in the past been tied to debt relief do not feature in this new initiative, specifically those criteria demanding privatization of public services, adverse liberalization of trade regulations and cuts in public spending,” Instefjord continued. “The only condition that should be laid down is that freed-up resources must be ploughed into achieving the Millennium Development Goals.”

NCA’s final point regarding the agreement made over the weekend is that fresh money must be put on the table if rich countries really are to make a serious contribution to the achievement of the Millennium Development Goals.

“This new initiative must not be financed from existing development aid budgets, such as for example the USA has suggested,” Instefjord said. “If this were the case, the total resources available would remain unchanged. The suggested sale of the IMF’s gold reserves would alone free up 45 billion US dollars in multilateral debt relief. In addition to this, creditor nations would have to provide new fund both for debt relief and increased development aid.”

NCA believes that in order for the Millennium Development Goals to be met, poor countries will require an annual sum of around 50 billion dollars in addition to the aid already in place. The agency underlined that this money must given in increased development aid, and not in the form of new loans that will only lead the countries into further debt crises beyond 2015.

For some time now Norwegian Church Aid has been advocating for the cancellation of so-called illegitimate debt. Currently the organization, together with its youth movement, Changemaker, is running an international campaign for the worldwide cancellation of dictator debt. A new film, produced for Norwegian Church Aid and focusing on this issue, premiered at the World Social Forum in Brazil in January.