September 2005: International Loan Sharks

G-8 relief of poor nations’ debt comes with strings attached
September 1, 2005

When the G-8 finance ministers met in London in June, and agreed to write off $40 billion of the debt owed by the world’s poorest nations to the World Bank, the International Monetary Fund, and the African Development Bank, the press was lavish in its praise. The BBC announced that “the world’s eight richest countries have reached a landmark debt relief deal to alleviate global poverty.” U.K. Finance Minister Gordon Brown, one of the architects of the plan, claimed it was “the most comprehensive statement that finance ministers have ever made on the issue of debt, development, health and poverty.”

The initiative was long overdue, considering that in many cases the debts were incurred by corrupt governments, the money was channeled to projects provided by Western firms, social services were curtailed to enable the countries to make their payments, and interest charges had resulted in the original debts being repaid many times over.

It wasn’t long, however, before questions were being raised about the details of the proposal. To begin with, the plan only applies to the debts owed to the three multilateral agencies mentioned above. There are many other multilateral and private creditors whose debts will not be covered by the initiative. The $40 billion proposed write-off is over a period of 40 years, the net present value of which is $17 billion. In addition, there will be a corresponding reduction in new funding for those countries that receive debt cancellation. (For a good explanation of the deal, see the Eurodad NGO Briefing at

Buried in the text of the announcement was the statement that, to be eligible for debt relief, it was necessary for developing countries to eliminate “impediments to private investment, both domestic and foreign.” In other words, they will have to allow multinational corporations access to their natural resources, utilities, health systems, and any other public services that could be privatized.

It apparently was not an issue to the ministers in London that the imposition of market “reforms” as a pre-condition for receiving loans may have had something to do with the impoverishment of the countries in the first place. It should, however, have come as no surprise to anyone watching the news. On June 7, three days before the London meeting, George Bush and Tony Blair held a joint news conference to announce their commitment to debt relief for poor countries, in which they reaffirmed IMF and World Bank policy that recipients would have to further open their markets and economies to transnational corporations.

Bush and Blair also made a point of announcing that only “democratic” regimes would be eligible. Bush stressed that good governance was important, saying, "Nobody wants to give money to a country that's corrupt, where leaders take money and put it in their own pockets." Blair agreed that Africa's leaders had to show a commitment to democracy and fighting corruption. "It's not a something-for-nothing deal," he said.

The question remains, of course, why loans were made to regimes such as Rwanda and Uganda despite their widespread corruption.

After Iraq and Israel, the three top recipients of U.S. aid are Egypt, Colombia, and Jordan. Egypt, which has been ruled by one party for the past 50 years, has received over $50 billion in aid since 1975. Since 1979 it has also received $1.3 billion annually in military aid and an average of $815 million a year in economic assistance.

Colombia, another recipient of billions of dollars of U.S. aid, has the distinction of having the worst human rights record in the Western Hemisphere. In the past, the U.S. has used the war on drugs as an excuse to supply $550 million a year worth of arms to Colombia out of a total aid package of $730 million. The Colombian military has then used this aid to target political opposition and labour leaders. Lately, U.S. concern has turned to stabilizing the country in order to secure Colombia’s oil reserves. The Colombian military is known to be closely aligned with paramilitary groups responsible for most of the 20,000 murders committed in that country each year. Recently, the secret police have been targeting indigenous groups in northern Cauca, a region in the southwest part of Colombia, for their successful defeat of a referendum on a proposed free trade agreement.

In Jordan, the prime minister is not elected. He is appointed by the king. Dissidents are routinely harassed and any disagreement with the government’s support of the U.S. occupation of Iraq is dealt with harshly. Legislation to prohibit political activity by professional associations has been introduced into the Jordanian parliament. According to Sara Lee Whitson of Human Rights Watch, this law threatens association members with the loss of their livelihood should they dare to criticize the government or hold a meeting without government permission. Jordan receives over $200 million a year in U.S. aid.

In light of this generous U.S. assistance to Egypt, Colombia and Jordan, George Bush’s comments could be rephrased: “If your population is starving, if disease is rampant and social services are non-existent, we may be willing to help relieve your debts, but only if your government is U.S.-supportive, and, more importantly, if your economy is open to our banks and other corporations. After all, you need us more than we need you, and we don’t want another Venezuela that restricts our access to its oil, or another Bolivia, where the indigenous people are demanding ownership and control of their resources. On the other hand, if you have resources that we need, or you happen to occupy an important geopolitical spot on the globe, step right up to the wicket. Would you like a side of cluster bombs with that helicopter?”

(Richard Tarnoff lives in Hedley, B.C. He can be reached at [email protected])