WTO Ministerial Section • Volume 2 • Number 18 • 18th May 1998

G-8 meet amid protests for faster debt relief


Ministers from the seven largest industrialized economies and Russia (G- 8) met this past weekend in Birmingham, England for their annual summit, where the focus was on fighting crime and doing more to relieve debt in the world’s poorest countries. Before getting to those issues, G-8 leaders’ focus was distracted by the nuclear testing in India, although G-8 leaders took no joint position on the issue–much to the chagrin of Pakistan.

Thousands of protestors converged on the convention center in Birmingham to demand that the world’s richest nations do more to facilitate debt relief in heavily indebted poor countries (HIPCs). The protestors argued that the current Debt Relief Initiative, sponsored by the G-8, World Bank and International Monetary Fund (IMF), needs to be more generous and quicker to dispense funds to HIPCs.

The Debt Relief Initiative provides for a nation’s debt to be forgiven in exchange for implementation of a six-year economic and social reform program overseen by the IMF. So far seven countries have been made eligible for debt forgiveness under the initiative: Uganda, Bolivia, Guyana, Burkina Faso, Ivory Coast and Mozambique.

Poverty-fighting organizations argue that the debt-relief program is being carried out too slowly and does not include enough countries. Further, many observers argue for a total write-off of HIPC debt, as many of these nations spend more on debt service than on health, education and other development efforts. They note as well that the current debt to exports ratio and debt service payments to export ratio used by the Debt Relief Initiative to determine a “sustainable” level of debt for a country is too high at 250 percent and 25 percent respectively. Poverty-fighting organizations hold that a debt to exports ratio of 100 percent and a debt service to exports ratio at less than 10 percent is a more appropriate indicator of sustainability.

Oxfam International found that poor African economies spend four times as much on debt relief than on health and education. In Ethiopia, Oxfam reports, 100,000 children die each year from preventable diseases while the Ethiopian government spends four times as much on debt relief than on heath care.

The G-8 made no commitments to reforming the Debt Relief Initiative. British Prime Minister Tony Blair did say the G-8 leaders are committed to “speedy and determined implementation” of the program, but made no specific promises regarding the expansion or hastening of debt relief. U.S. officials said the G-8 leaders did agree to support a broad effort to insure that all African children had the opportunity to get an education, as well as to reduce infant mortality rates.

“Rich leaders turn eye to crime and debt,” NEW YORK TIMES, May 18, 1998; “Debt relief,” FINANCIAL TIMES, May 14, 1998.