Economic Justice

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 

 

 

 

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.

President Obama Says Greece Needs "Growth Strategy," Criticizes Austerity

 

President Obama criticized Greek austerity programs in an interview that aired on CNN on Sunday. The United States President said: “You cannot keep on squeezing countries that are in the midst of depression.” Obama called on all sides to compromise and argued, "when you have an economy that is in a free fall there has to be a growth strategy and not simply the effort to squeeze more and more out of a population that is hurting." His comments follow French Finance Minister Michel Sapin's call for a "new contract" between Greece and Europe. The anti-austerity Syriza party won Greece's elections and is seeking to renegotiate Greek debt. Greece is the third-most indebted country in the world.

"Austerity simply doesn't work," said Eric LeCompte, Executive Director of the religious financial reform organization Jubilee USA. "I think President Obama and French leaders understand there needs to be an alternative."

Mr. Sapin met Sunday with Greece's Finance Minister Yanis Varoufakis and said Europe should review austerity policies within the Eurozone. The French minister said Europe should also discuss Greece's debt situation and he and President Obama both called on Greece to make internal reforms. Greece began a series of austerity measures in 2010 as part of its emergency loan from the European Central Bank, International Monetary Fund and European Union. Since 2010, Greek unemployment doubled and the country lost 400,000 jobs in 2012. The Greek economy contracted every fiscal quarter for five years.

"Because of debt and austerity policies, Greece's economy and people are hurting," noted LeCompte. "There is growing consensus for rethinking these issues."

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 

 

 

United Nations Commission: Cancel Debt for Ebola Countries Report: West Africa Needs Debt Relief to Address Economic Challenges

 

 

The United Nations Economic Commission for Africa (UNECA) released a report calling for debt cancellation for Ebola-impacted countries. The new report, "A Case for External Debt Cancellation for Ebola-Affected Countries," calls on multilateral institutions and governments to cancel Liberia, Sierra Leone and Guinea's debts. The report argues debt relief would provide necessary "breathing space" to address the region's economic challenges. All three countries are ranked in the bottom 15 in the United Nations' Human Development Index.

 "West Africa needs debt relief," said Eric LeCompte, Executive Director of the debt relief organization Jubilee USA. "Debt relief will not only fight Ebola, it will also provide a long-term investment in healthcare for the countries."

UNECA first called for debt relief in December. In November, the United States government called for $100 million in debt relief and took its plan to the G20. At the request of the G20, the International Monetary Fund (IMF) is currently considering a $300 million financing package that could include debt relief. In January, Guinea President Alpha Conde called for IMF debt relief. Guinea, where the outbreak began, spent more money on debt than on public health in the year before the epidemic began. All three countries have poverty rates above 50%.

"There is growing consensus for action," noted LeCompte, who serves on UN expert groups on debt. "Debt relief can provide additional financing the countries need."

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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