Jubilee Scotland Analysis on G8 Debt Deal

18 countries are to receive a total of $40 billion in debt cancellation, the G7 Finance Ministers announced on Saturday. This marks a significant step forward by the G8 who in February were only agreeing to a deal ‘on principle’. Campaigners are heralding the breakthrough as a step in the right direction but remain cautious until a deal is secured in Gleneagles in July.

A deal seems to have been reached between the US and UK who both made compromises to reach agreement before the G7 Finance Ministers meeting held in London at the weekend.

What does the deal involve?
18 countries are to receive 100% debt cancellation of their multilateral debts owed to the World Bank, IMF and African Development Banks. In total this would come to $40 billion that would immediately be wiped out.

Why only 18 countries?
The 18 countries specified are Heavily Indebted Poor Countries (HIPC) who are already receiving full bilateral debt relief through completing the World Bank HIPC process, a process by which poor countries must prove that they have:
1. unsustainable debts
2. a system of good governance
3. a working poverty reduction strategy
4. Sound economic policies

The other 24 countries classed as heavily indebted will only receive 100% debt cancellation when they pass completion point of the HIPC process. Some of which are unlikely ever to do so.

What about conditionality?
One of the concessions made by the UK to the US was that conditions would become stricter for countries applying for debt cancellation. This was promoted as ensuring money is used effectively to fight poverty but many campaigners see it as merely the G8 dragging their feet in delivering justice.

New Money?
One fear over the past months was that the G8 were not going to provide new money to fund debt cancellation. However the statement from the G7 meeting announced that new resources would be used from the previous sell of IMF gold as well as additional spending.

What Now?
This deal represents a major breakthrough for campaigners worldwide. The demands for justice are making their way through to the G8. But there is still much to be done to ensure the G8 ACT and DELIVER on their promises. Debt campiagners are all too familiar with the G8 breaking promises on debt relief in the past, so now is the time to push ahead and ensure the G8 and media do not satisfy themselves on mere words. The following issues need addressing if the G8 debt deal is to succeed in satisfying campaigners:

1. Only 18 out of 42 HIPC's will benefit if this deal goes through. Highlight the danger of this creating a two-tier system where only countries currently receiving debt relief will receive full debt cancellation. There must be a Jubilee for all.

2. Conditionality remains a huge obstacle in fighting poverty. Demand that harmful conditions attached to any deal are not imposed on by the G8 but that the only condition for debt relief should be that money be spent on poverty reduction.

3. HIPC is still failing. This deal remains within a flawed HIPC system of debt relief whereby it is provided too slowly and is creditor biased.

4. New Money not other's aid. Ensure that money provided by rich governments is not diverted from existing aid budgets. Doubling aid as well as 100% debt cancellation is essential for real poverty reduction.

5. Campaign for G8 and World Bank transparency especially when they demand of it of recipient countries.

6. Above all come to Edinburgh on 2nd July to keep the pressure on the G8 to make good promises to WIPE OUT DEBT and MAKEPOVERTYHISTORY

* A DEAL SECURED IN GLENEAGLES WILL BE A CREDIT TO CAMPAIGNERS WHO HAVE FOUGHT FOR DEBT JUSTICE FOR MANY YEARS WITHOUT MUCH HOPE. JUBILEE SCOTLAND IS INDEBTED TO INDIVIDUALS AND ORGANISTATIONS FOR ALL THEIR WORK AND FAITH.