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Groundhog Day on Debt Deal

Groundhog Day on Debt Deal

The G8 debt cancellation deal may suffer major setbacks at the World Bank and IMF annual meetings this weekend, warns international agency Oxfam. Rich country shareholders may choose to delay or dilute the landmark agreement and this will have serious consequences for the world’s poorest people.

In July, G8 leaders agreed to cancel the debts owed by some poor countries. This agreement was endorsed at last week’s UN Summit. But on Monday World Bank president Paul Wolfowitz hinted that the deal may not get done this weekend.

“It’s Groundhog Day on debt,” said Jonathan Hepburn, Oxfam’s Policy Advisor in Washington. “G8 leaders told the world the deal was done in July, but it now appears in danger of unraveling.”

The debt deal is threatened by Bank shareholders who want to impose unnecessary extra conditions on poor countries and by other shareholder countries that refuse to guarantee that they will pay their share of the costs.

“Delays in debt cancellation come at a terrible cost for the world’s poorest people,” said Hepburn. “Every dollar spent on debt repayment is a dollar not spent on food, education and life-saving medicines.”

The G8 also agreed to stop imposing harmful economic policies as conditions of their overseas aid. Yet all discussion of this issue has been quietly dropped from this weekend’s meeting.

Oxfam is calling for the World Bank and IMF to end all harmful economic policy conditions on aid such as wholesale privatization or trade liberalization. These conditions undermine poor countries and delay the delivery of aid. Shareholders must agree to annually review World Bank and IMF conditions beginning in 2006.

“Poor countries should not have to sign away their autonomy in exchange for aid and debt cancellation,” said Hepburn.

For the first time in the debate on debt, the G8 deal directly links calculations of debt cancellation to the resources a country needs to fight poverty.

Today Oxfam will release a report, Beyond HIPC: the Future of Debt Cancellation (pdf, 215kb). The paper outlines the clear steps that must be taken to finalize the G8 deal and rapidly move beyond it to grant debt cancellation to all the countries that need it to fight poverty.

“The World Bank and IMF must use the G8 deal as a launch pad for a new approach to debt cancellation that puts the lives of poor people first,” Hepburn said.

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