Debt Relief

A selection of papers published by the New Economics Foundation.

Despite endless debates and numerous international campaigns, the objective of resolving the debt crisis in developing countries has not been achieved yet. The reimbursement burden remains unsustainable for many States; some of them have to spend half of their yearly budget to honour their debt. The situation is particularly difficult for countries that do not qualify for the IMF “Debt Relief Program”, since access to that program has been restricted to the poorest countries. (More information about this program is available at IMF’s site).

This dossier presents articles and reports written by New Economics Foundation (Nef) experts, who criticize the dominant approach to the debt issue. As it is, balance of trade is the only thing that matters for the IMF and international banks in the evaluation of a country’s capacity to reimburse: as long as a country has any exports revenues, it has to respect its commitments. It is easy to show that this approach threatens development for the countries concerned: funds that could have been spent in social investment (education, health, etc.) or in production framework immediately leave the country.

Nef has developed several lines of argument in favour of a different debt policy. The report Debt relief as if justice mattered introduces the concept of “odious lending”, i.e. debts that have to be considered as illegitimate and thus suppressed. These debts are, for instance, those of corrupted regimes, where lent funds have not profited to people but only to the government in place (corruption, personal enrichment of leaders and so on). In this case, the Nef argues, it is difficult, not to say impossible, to pretend that lenders were not aware of their money’s destination.

Another argument put forward in the debate, anchored in the philosophy of the Human Rights, is developed in the report Debt relief as if people mattered: debt is here considered as illegitimate when it deprives the State of a means to give its citizens the most elementary rights.