50 Years Is Enough Network Statement on the Highly Indebted Poor Countries (HIPC) Debt Initiative

As part of its 1994 Platform of profound transformation of the Bretton Woods Institutions (BWIs), the members of the 50 Years Is Enough Network called upon the World Bank and the International Monetary Fund (IMF) to use their own resources (their liquid and gold reserves, respectively) to cancel significant proportions of multilateral debt. The Network also called for write-offs of loans that have had severe adverse impacts on local populations and the environment, and the establishment of international agreements that would, to the extent possible, ensure that future borrowing by governments from the IMF and World Bank would be based on the informed consent of citizens to accept and repay the debt. Underlying the recommendations made in the Platform are several principles that the 50 Years Is Enough Network believes should provide the framework for any multilateral debt reduction plan.

• The current debt burden of the poorest heavily indebted countries is unsustainable because of: the large proportion of natural, financial and human resources used to service the debt; the debt overhang; and the harsh conditionality that accompanies the never-ending string of new loans disbursed to ensure repayment of old loans. De-linking debt relief from structural adjustment conditionality and annulling significant portions of the debt of the highly indebted poor countries (HIPC) is the most efficient and effective way to break countries out of the debt, conditionality and rescheduling trap that constrains (and in some cases precludes) their progress toward sustainable development.

• The World Bank and the IMF carry a large responsibility for exacerbating the debt crisis through their bad loans, bad advice, and bad faith, and must be held financially, socially, and politically accountable to higher, citizen-influenced standards of performance and effectiveness. Using their own resources to cancel debt is one important means of operationalizing such accountability.

• It is citizens, the majority of whom are poor, that in the end repay the debt of their nations, yet they are excluded from the decision to borrow money, the determination of acceptable conditionality, and too often from such benefits as derive from projects and policies funded by multilateral development bank (MDBs) loans. Incorporating the practice of informed consent of citizens to accept and repay the debt would help ensure that citizens understand and benefit from the loans taken out by their governments, and that they are able to hold their government accountable to higher, citizen-determined standards of performance and effectiveness.

The debt crisis is so acute that in 1996 the World Bank took the initiative to address the problem, and dragged a reluctant IMF into negotiations that have culminated in the joint IMF and World Bank Highly Indebted Poor Countries (HIPC) Debt Initiative.

Unfortunately, rather than providing a good framework for addressing the problem of debt, the HIPC Initiative is structured such that it will provide almost no debt relief, tie countries more tightly to structural adjustment conditionality, limit eligibility to fewer than one-quarter of the countries that are severely indebted, not take effect in most countries until after the year 2004, and enable any of the parties to the Initiative (the World Bank, the IMF and the Paris Club) to back out of the imitative if the other parties do not or cannot fulfill its commitments. In addition, the US$500 million and US$250 pledged by the World Bank and the IMF respectively is nowhere near sufficient for meaningful debt relief.

Worse still, the IMF, by conditioning its participation on first receiving full funding of its Enhanced Structural Adjustment Facility (ESAF), is clearly using the debt initiative to increase its institutional power. Given the habit of legislative bodies to ask questions about accountability, poverty alleviation, participation, and progress towards sustainable development, the IMF is loath to go to Parliaments and Congressional bodies to ask for additional funding for the ESAF program. Its plan is to get ESAF permanently funded under the Debt Initiative and remove this most onerous and hotly contested aspect of its publically-funded program from any vestiges of public accountability.

The 50 Years Is Enough Network will continue to work with our colleagues in the South and North, the U.S. Congress, the Administration, and the MDB staff to address the debt crisis through programs based on the principles of debt cancellation de-linked from structural adjustment conditionality, increased MDBs accountability for their role in creating -- and therefore responsibility for addressing -- the debt crisis, and informed citizen involvement at all stages of the MDB loan process, as well as the debt cancellation process. The 50 Years Is Enough Network was a founding member of the Jubilee 2000/USA Campaign that calls for:

• definitive cancellation of the crushing international debt in situations where countries are burdened with high levels of human need and environmental distress and are unable to meet the basic needs of their people or achieve a level of sustainable development that ensures a decent quality of life;

• definitive debt cancellation that benefits ordinary people and facilitates their participation in the process of determining the scope, timing and conditions of debt relief as well as the future direction and priorities of their national and local economies;

• definitive debt cancellation that is not conditioned on policy reforms that perpetuate or deepen poverty or environmental degradation;

• acknowledgment of responsibility by both lenders and borrowers, and action to recover resources that were diverted to corrupt regimes, institutions, and individuals; and

• establishment of a transparent and participatory process to develop mechanisms to monitor international monetary flows and prevent recurring destructive cycles of indebtedness.

Because of the destructive and anti-democratic nature of ESAF programs and conditionality, the IMF's continued efforts to remove itself from public scrutiny, and the lack of a public mandate for the IMF to be involved in the determination and implementation of development policy (not to mention the lack of skills and capacity), the 50 Years Is Enough Network will continue to work to limit the IMF's role and influence in this regard.

February, 1999