Business, Legal & Accounting Glossary
Debt relief for heavily indebted and underdeveloped developing countries was the subject in the 1990s of a campaign by a broad coalition of development NGOs, Christian organisations and others, under the banner of Jubilee 2000. This campaign, involving for example demonstrations at the 1998 G8 meeting in Birmingham, was successful in pushing debt relief up the agenda of Western governments and international organisations such as the International Monetary Fund and World Bank. Ultimately the Heavily Indebted Poor Countries (HIPC) initiative was launched to provide systematic debt relief for the poorest countries, whilst trying to ensure the money would be spent on poverty reduction.
To the disappointment of some activists, the HIPC programme has to some extent been subject to conditionalities similar to those often attached to IMF and World Bank loans, requiring structural adjustment reforms, such as privatization of public utilities.
Moral obligation to help poor countries struggling to service debts, or doing so only at the expense of social programs such as public health.
A moral obligation arising from the fact that in some cases much of the debt was incurred for military purposes by Western-supported dictators, which debt should not have been provided in the first place for such oppressive purposes (“odious debt”).
Economic justification – in the long run, helping poor countries to develop is good for the world economy.
There is much feeling that banks that lend money have an obligation to make sure the money is invested in useful projects, however, this was not the case in the past. Much money was spent on projects that had little or no use. A lot of the loaned money even left the poor countries immediately and went straight into Swiss bank accounts.
Relieving debt would not make much difference to the really poor, as they are not the ones who owe.
Some feel that the borrowing countries did not invest the money properly and thus it is their fault, as they always knew they would have to repay the loans.
If debt were to be suddenly cancelled, it could cause such disruption in the developed world the negative effects could also be felt around the world.
By cancelling debt, banks and other organisations would be much less likely to lend again in the future, which could be very damaging to countries that need capital to trigger development.
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This glossary post was last updated: 13th February, 2020