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Economic Justice

Consumer Financial Protection Bureau Fines Predatory Student Lending Practices; Religious Groups Pray for Student Debt Relief

 

Synagogues and churches held prayer services for students as the Consumer Financial Protection Bureau fined Discover Bank $18.5 million for illegal student lending practices. The bank must repay students $16 million, pay a $2.5 million civil penalty and reform its lending practices. The Bureau accused Discover of overstating the minimum amount due in billing statements, misrepresenting students' total interest payments and engaging in illegal debt collection practices. The penalty is the first of its kind by the Bureau against a student loan company

"This fine sends a strong message to companies that take advantage of students," said Eric LeCompte, executive director of the religious anti-poverty coalition Jubilee USA Network, which advocates for responsible student lending policies. "Predatory lending traps students in debt."

This past weekend, 64 faith communities from 26 states prayed and acted for fair student lending policies as part of Jubilee USA's national interfaith "Jubilee for Students" prayer event. In 2012 and 2013, the event pushed congressional legislation to stop federal student loan interest rate increases. 

"Unfair lending practices put our young people at risk," said Rabbi Barnett Brickner of Temple Israel in Alameda, Calif. "It's important we protect our students and ensure they can graduate college without mountains of debt."

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World Bank and IMF Announce $1.1 Billion in Debt Relief for Chad

The International Monetary Fund (IMF) and the World Bank announced $1.1 billion in debt relief for Chad. The money comes through the IMF and World Bank's two major debt relief programs: the Heavily Indebted Poor Country Initiative (HIPC) and the Multilateral Debt Relief Initiative (MDRI). Chad is the 36th country to receive HIPC relief and the first since 2012. Chad is the fourth-least developed country in the world. More than half its population lives in poverty.


"Debt relief for Chad means an investment in education and healthcare," said Eric LeCompte, executive director of the religious debt relief organization Jubilee USA Network, which advocated for the IMF and World Bank debt relief programs. "This is an important way to give Chad's people help."

As of 2013, Chad owed $2.2 billion to foreign lenders and spent over $100 million annually paying off debt. Prior to receiving debt relief, Chad owed around $800 million to the World Bank and $400 million to the African Development Bank. Chad also owes approximately $500 million to other governments. Under the relief plan, Chad receives $18 million in debt relief from the IMF, nearly $600 million from the World Bank and $236 million from the African Development Bank. Thirty-nine countries are eligible for HIPC debt relief. Qualifying countries must meet certain criteria and implement poverty reduction plans. Chad was granted relief even though it didn't meet all criteria. Critics of these plans argue that to qualify for debt relief, countries should not reduce any budget areas that protect vulnerable populations. The three other qualifying countries yet to receive relief are Sudan, Somalia and Eritrea.

Chad is one of the poorest countries in the world. Barely one-third of Chad's people are literate and life expectancy is just 50 years. It has the third highest mortality rate for children under five years old. Chad's people endured a civil war from 2005 to 2010 that required a United Nations peacekeeping intervention. Chad also faces significant regional challenges. Chad's military recently intervened in Nigeria's battle against Boko Haram militants and more than 260,000 Sudanese refugees from the Darfur conflict live in camps inside Chad.

"Debt doesn't exist in a vacuum," noted LeCompte. "Chad has immense challenges and its debt burden worsens all of them. Less debt means more hope."


Jubilee USA Network is an alliance of more than 75 US organizations and 400 faith communities working with 50 Jubilee global partners. Jubilee's mission is to build an economy that serves, protects and promotes the participation of the most vulnerable. Jubilee USA has won critical global financial reforms and more than $130 billion in debt relief to benefit the world's poorest people.www.jubileeusa.org

 

Aftershocks Pummel Highly Indebted Nepal: Poor Country Spends 217 Million Annually on Debt Payments

Severe aftershocks continue to terrorize Nepal which was struck by a 7.8 magnitude earthquake on Saturday. The rising death toll climbed beyond 3,000 people. Nepal is one of the least developed countries in the world, ranking 145th out of 187 countries in the United Nations Human Development Index. According to the World Bank, Nepal owes $3.8 billion in debt to foreign lenders and spent $217 million repaying debt in 2013. Nepal owes approximately $1.5 billion each to the World Bank and the Asian Development Bank and $54 million to the International Monetary Fund (IMF). It owes $133 million to Japan and $101 million to China.

Nepal is one of 38 countries eligible for assistance from the IMF's new Catastrophe Containment and Relief Trust (CCR). The IMF created the CCR in February to provide debt relief to poor countries impacted by natural disasters or health crises. The new fund canceled nearly $100 million in debt for Ebola-impacted countries. In order to qualify for relief from the new fund after a natural disaster, a country must meet certain criteria. The disaster must destroy more than 25% of the country's "productive capacity," impact one third of its people or cause damage greater than the size of the country's economy. It is not yet known if Nepal will qualify. Of the $54 million Nepal owes the IMF, $10 million is due in 2015 and nearly $13 million is due in 2016.

"This new IMF fund can provide urgent relief as Nepal struggles to recover," noted LeCompte, who serves on expert groups to the United Nations that focus on debt. "Given the amount Nepal owes to the World Bank, we really need the Bank to take leadership and cancel debt. It's time for the World Bank to release its own plans for a crisis rapid response facility."

The World Bank is working on a new facility to respond quickly to disasters but has yet to publicly release any details. The IMF asked governments to fund its new trust for future crises. The United Kingdom and Germany recently pledged $72 million in contributions. During the Spring IMF meetings, Austria, Portugal and Mexico also announced they would contribute $16 million more.

"Debt relief can help Nepal," said LeCompte. "The earthquake shows how debts keep poor countries ill prepared for crisis."

In 2010, Jubilee USA moved the IMF to cancel Haiti's debt after its earthquake and to create a new debt relief fund for countries struck by disasters. Last Fall, Jubilee USA worked with the White House to urge the IMF to use that fund to cancel debt for Ebola-impacted Sierra Leone, Guinea and Liberia. In February, the IMF revised the previous debt relief fund and expanded it to include countries impacted by health crises. It then announced $100 million in debt relief for the three West African countries and called on governments to cancel $70 million more in Ebola-affected country debt. 

Jubilee USA Network is an alliance of more than 75 US organizations and 400 faith communities working with 50 Jubilee global partners. Jubilee's mission is to build an economy that serves, protects and promotes the participation of the most vulnerable. Jubilee USA has won critical global financial reforms and more than $130 billion in debt relief to benefit the world's poorest people. www.jubileeusa.org

 

World Bank Announces Package of Aid and Loans to Ebola-Affected Countries

As the Spring International Monetary Fund (IMF) and World Bank meetings open, the World Bank announced $650 million of new grants and concessional loans to the countries of Sierra Leone, Guinea and Liberia. About $220 million will be aid in the form of grants and the remainder will be in the form of highly concessional loans. Currently the three countries owe a combined $518 million to the World Bank. Liberia owes $105 million, Guinea $186 million and Sierra Leone $227 million.

“We urge the World Bank Group to consider bolstering their commitments with a new debt relief package for the impacted countries,” said Eric LeCompte, executive director of the religious development coalition, Jubilee USA Network. “We applaud the new aid for the affected countries and hope that the World Bank can come up with some rapid response plan to address this kind of crisis much faster in the future.”

The new financing is through the World Bank's International Development Association (IDA). The IDA determines its lending terms based on the borrowing country's risk of "debt distress."  The new IDA financing will be distributed as approximately 50% grants to Sierra Leone and Guinea and 100% as loans to Liberia. The loans will be repaid over 25 to 38 years. In February, the IMF announced $100 million in debt relief for the three West African countries and called on governments to contribute $70 million more. The IMF also set up a new debt relief fund for poor countries struck by natural disasters or health crises. 

"As a development institution, we need the World Bank to respond faster," said LeCompte, who serves on United Nations expert groups on debt. "It's ironic that the innovation for dealing with this crisis and future crises is coming from the IMF, whose mission is not development. World Bank innovation would look like a permanent facility to solely administer grants when the poorest countries face crisis."

Jubilee USA Network is an alliance of more than 75 US organizations and 400 faith communities working with 50 Jubilee global partners. Jubilee's mission is to build an economy that serves, protects and promotes the participation of the most vulnerable. Jubilee USA has won critical global financial reforms and more than $130 billion in debt relief to benefit the world's poorest people. www.jubileeusa.org

IMF Reports Debt and Human Crises Drive Uneven Growth; Global Stability and Economic Outlook Reports Released

 The International Monetary Fund (IMF) released its Global Financial Stability Report, noting "increased financial stability risks" in the global economy. The report notes that large-scale economic shocks are particularly concerning to global stability. It argues that such risks are greatest for countries with high debt levels and that emerging market countries must be prepared for external shocks. Particular concern is raised on the consequences of currency volatility, the shadow financial system and high corporate debt.

Grenada Reaches Debt Deal as Caribbean Mired in Debt Problems

Grenada Could Influence Global Debt Negotiations

Grenada agreed to a debt plan with its Caribbean island investors that will result in a 50% reduction in the value of existing Grenada investment bonds. The deal offers investors a portion of future revenues from a government program designed to attract foreign investment. Although the deal addresses about $262 million in debt, the International Monetary Fund (IMF) reports that Grenada's total debt tops $907 million. According to the Central Intelligence Agency, nearly 40% of Grenada's population lives below the poverty line.

"Grenada's debt deal is a significant step in the right direction," said Reverend Sean Doggett, a spokesperson for the local Catholic Diocese and a founding member of Grenada's Jubilee Committee. Because of the correlation of debt levels to high poverty rates, Grenada's Jubilee Committee was organized by the Conference of Churches in Grenada to influence debt negotiations between investors, the IMF and the government of Grenada. "The Conference of Churches in Grenada continues to engage in this process and work with its partners in the region."

Other Caribbean islands are also dealing with unsustainable debts or attempting to renegotiate their debt levels. These islands include Antigua and Barbuda, St. Vincent and the Grenadines, St. Lucia, Dominica and Jamaica. Jubilee USA supported Grenada's Jubilee Committee and last year religious leaders across the small islands formed the Caribbean Debt Network (CDN) to join debt negotiations on all islands facing crisis.

Due to the involvement of Grenada's Jubilee Committee and the Conference of Churches, Grenada's debt negotiations over the last two years with the IMF and with bond investors included provisions to protect the poor and stem austerity policies. Legislation to ensure budget transparency and responsible borrowing are moving forward on the island. A homegrown plan to curb corporate and professional tax avoidance was designed to protect public sector jobs. Additionally, those close to the negotiations say new investment bonds will include a "hurricane" clause as much of the island's economic woes are traced to a 2004 hurricane.

"Grenada is still dealing with high debt burdens," noted Eric LeCompte, the Executive Director of the anti-poverty group Jubilee USA. "This debt deal is a step forward as we work for more comprehensive solutions in the region."

Through various United Nations processes, including the Financing for Development process, Jubilee USA and Caribbean Ambassadors have argued for the establishment of a comprehensive and transparent global bankruptcy process to resolve the regional crisis.

 

Vanuatu Owes Millions in Debt, Struggles to Recover from Monster Cyclone; Religious Coalition Calls for Debt Relief

The religious anti-poverty organization Jubilee USA Network is calling on international lenders to grant debt relief to Vanuatu. In mid-March, Cyclone Pam struck the string of small Pacific islands with winds up to 165 miles per hour. The category 5 storm destroyed or damaged nearly every building in the capital city and wiped out crops across the country. The United Nations warns that entire islands are facing imminent starvation and its President says the "monster" storm undid the nation's recent economic development. Vanuatu owes approximately $84 million to international lenders, including nearly $10 million to the World Bank.

"The World Bank and other international lenders can reduce Vanuatu's debt," said Eric LeCompte, Jubilee USA Network's Executive Director. "Vanuatu's people will need every single dollar they can get to rebuild."

Jubilee USA recently led a successful campaign to win debt relief for Ebola-impacted countries. In February, the International Monetary Fund (IMF) announced $100 million in debt relief for Guinea, Liberia and Sierra Leone. The IMF offered debt relief by creating the Catastrophe Containment and Relief Trust (CCR) to offer grant-like financing and debt relief to countries impacted by health crises and natural disasters. Although Vanuatu does not owe money to the IMF, the country cannot access grant financing from the trust because the country narrowly misses the income criteria for CCR relief. Thirty-eight of the world's poorest countries are eligible, but only two small-island nations currently fit the criteria of the special fund. Many small island states are heavily indebted and particularly vulnerable to strong storms.

"Small islands sit at the intersection of climate change, poverty and debt," noted LeCompte. "The World Bank needs to offer debt relief."

Vanuatu struggled with poverty before the storm hit and is ranked 131st out of 187 countries in the United Nations Human Development Index. The storm decimated the island's infrastructure. Aid workers report that desperate residents are drinking sea water and food supplies are running low. The United Nations Children's Fund (UNICEF) says 82,000 children are in need of aid and the country's remote location is making international relief efforts more difficult. UNICEF says those children are located on 22 different islands.

"Vanuatu's recovery is crippled by high debt burdens," said LeCompte who serves on United Nations finance expert groups. "The world can't turn a blind eye to the stark reality on the ground. A sustained recovery must include debt relief."

Jubilee USA Network is an alliance of more than 75 US organizations and 400 faith communities working with 50 Jubilee global partners. Jubilee's mission is to build an economy that serves, protects and promotes the participation of the most vulnerable. Jubilee USA has won critical global financial reforms and more than $130 billion in debt relief to benefit the world's poorest people. www.jubileeusa.org

Greece Proposes Plans to Tackle Tax Evasion and Corruption

 

IMF Plan Offers $170 Million in Debt Relief for Ebola-Impacted West Africa:IMF Debt Facility Can Aid World's Poorest Countries


The International Monetary Fund (IMF) is providing $330 million of financing to aid Ebola-impacted countries. The plan includes $170 million of debt relief and grant-like aid for Liberia, Sierra Leone and Guinea. The new plan also expands a debt relief facility previously used to cancel debt after Haiti's 2010 earthquake. The new expanded facility, the Catastrophe Containment and Relief Trust (CCR), is now a permanent debt relief facility for the world's poorest countries when they experience shocks such as epidemics or natural disasters.

"This aid is so vital for the countries affected by Ebola," said Eric LeCompte, Executive Director of the religious anti-poverty organization Jubilee USA Network. "Now we have a permanent debt relief vehicle for when the poorest countries face certain crises. Essentially, a global social safety net is now in place to protect the least developed countries when they experience disasters."

$100 million of debt relief will come through the IMF's new Catastrophe Containment and Relief Trust. Another $70 million in debt relief will come from other governments who hold debt in the three countries. Concessional loans of $160 million add up to a grand total of $330 million in new financing. The package also includes a new financing mechanism designed to deliver funds to disaster-impacted countries quickly without worsening debt burdens.

"This new fund is an important, permanent tool in the fight against poverty," noted LeCompte, who serves on United Nations expert groups on debt and global finance. "It means resources for countries that need them most at the time they need them most."

Jubilee USA moved the IMF to create the Post Catastrophe Debt Relief Trust (PCDR) after Haiti's 2010 earthquake and to finance the fund through windfall gold sales. Jubilee USA urged the US government to call on the IMF to use the fund for Ebola-impacted countries. In November, the White House asked the IMF to grant $100 million in debt relief through the fund and took its proposal to the G20. At the G20 summit, the IMF agreed to the $300 million package, which its board now approved.

The Fund's plan includes a new innovation: rapidly distributing loans to countries in need and then using debt relief to provide grant-like aid. The $100 million in debt relief - which represents roughly 20% of the countries' quotas at the Fund - is designed to offset any increased debt burden from emergency loans. Prior to the announcement, Liberia, Sierra Leone and Guinea owed a combined $372 million to the IMF. The three countries have a combined total debt stock of over $3 billion; much of that debt comes from  dictatorships, civil wars and one-party rule. The three countries paid a total of $81 million in debt service in 2013. In 2012, Guinea, where the outbreak began, spent more money on debt than on public health.

"Tonight I'm toasting the IMF and the White House," said LeCompte. "Unfortunately the World Bank has remained silent in the face of this crisis. I pray they follow the IMF's lead."

Jubilee USA Network is an alliance of more than 75 US organizations and 400 faith communities working with 50 Jubilee global partners. Jubilee's mission is to build an economy that serves, protects and promotes the participation of the most vulnerable. Jubilee USA has won critical global financial reforms and more than #130 billion in debt relief to benefit the world's poorest people. www.jubileeusa.org 

 

 

 

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