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From: The Socialist issue 376, 15 January 2005: Cancel the debt

Search site for keywords: Tsunami - Debt - Aid - Indonesia

Business as usual for the politicians

IN SPITE of tens of thousands of people losing their lives in one of the biggest disasters the modern world has ever seen, it's business as usual for the politicians.

Alison Hill

The provision of aid to the millions injured and made homeless by the tsunami has become central to the fight for power and prestige between the tops of the world's major powers.

In Britain, aid to the tsunami-stricken areas and the relief of poverty in general has even become an issue in the rivalry between Tony Blair and Chancellor Gordon Brown.

Foreign aid is an important issue for New Labour but not for the reasons ordinary people donate money. As a columnist in The Economist bluntly put it: "It plays well at home. With Labour confused and angry about Iraq and no longer allowed to mention socialism at home, generosity to the world's poorest people is crucial to sustaining the party's sense of its own moral worth."

US agenda

The widespread reaction against the occupation of Iraq means there is a similar agenda behind the aid the USA is giving to the areas hit by the tsunami.

Colin Powell recently blurted it out: "I think it does give the Muslim world... an opportunity to see American generosity, American values in action... And I hope that, as a result of our efforts, as a result of our helicopter pilots being seen by the citizens of Indonesia helping them, that value system of ours will be reinforced."

Gordon Brown, in spite of being upstaged by Blair's press conference, used his speech in Edinburgh to launch what he described as a "Marshall Plan" for Africa - alluding to the reconstruction of postwar Europe.

He is calling for rich countries to double the amount of aid they give and "relieve" the burden of debt on the poorest countries.

The G8, the world's richest countries, have agreed to a one-year debt moratorium for Indonesia and the other countries hit by the tsunami. This is likely to be backed by the 'Paris Club' creditor countries later this week.


But this type of action didn't provide any lasting assistance after previous disasters. Hurricane Mitch killed 10,000 people in Central America in 1998. Honduras was given a moratorium on its debt, to help with its share of the clear-up costs.

But now Honduras spends more on debt now than it did before the hurricane. And Honduras and Nicaragua are still waiting for two-thirds of the $8.7 billion promised to them in aid.

Previous attempts to do something about debt have failed. The Heavily Indebted Poor Countries Initiative (HIPC) was started in 1996 and was expanded in 1999, with the aim of eliminating $100 billion in debt from poor nations. But it hasn't.

Some estimates say those countries are still carrying about $90 billion in debt. This is still 'unsustainable' in many cases, according to HIPC, being more than 150% of annual exports.


Sub-Saharan Africa pays $1.30 to service debts for every dollar they get in aid. This is four times what those countries can spend on health care.

Pressure from below has forced governments of the rich countries to propose measures to 'relieve' debt. But one of the biggest motivations for something to be done comes from George Bush. And the country whose debt he'd most like to see reduced is of course Iraq.

This is bad news for France, Germany and Russia, who stand to lose the most from the reduction of Iraq's, actually Saddam Hussein's, debt.

Indebted countries have to pay more than just the repayments. For example, the IMF's 'aid' to Indonesia after the Asian financial crisis included strictures like the forced removal of fuel subsidies, which hit the poorest people and provoked riots.

The forced lowering of tariffs on sugar imports and the closure of sugar factories in east Java, caused the forced migration of workers from Java to Sumatra.

It doesn't end there either, about 90 of the world's poorest countries are effectively governed from Washington.

A Zambian delegate to a debt conference last year complained that her country couldn't even appoint a new finance minister without Washington's approval!

The debt burden

Indonesia is the world's most indebted poor country. It 'owes' $132 billion. Most of this was run up by the Suharto dictatorship, which used western arms and finance to run an oppressive regime.

The Indonesian government still only spends 0.6% of its GDP on health, whilst spending 3% on defence. Staggeringly Indonesia, Sri Lanka, India, Thailand and the Maldives together pay $23.1 billion a year to the World Bank, IMF and other banks.

Total debt Payments per year
Indonesia $132 billion $13.7 billion
Sri Lanka $9.6 billion  $653 million
Thailand $59 billion $17.9 billion
India $132 billion $13 billion
Maldives $270 million $20.8 million

Gordon Brown's proposals -

Will they make poverty history?

BROWN AND Blair have obviously been stung by workers' disgust that nothing effective ever seems to be done about the tens of thousands of people dying every week from poverty. They had planned to use Britain's presidency of the G8 this year to launch a campaign to 'make poverty history'.

Brown has come up with a plan to find other sources of money for aid, through an international finance facility (IFF).

This works by issuing special bonds, secured on future government aid budgets. Many have already pointed out the fatal snag in the IFF scheme - although funds could be raised quickly, the bonds still have to be repaid.

The World Bank is unenthusiastic about the idea and Brown is having difficulty selling it to other countries. But it is possible he may get France and Italy on board, possibly Canada and Germany, which may allow a pilot scheme to be launched.

But borrowing more money to pay old debts has never been a successful strategy, as anyone with a credit card will tell you.

The cost of fighting HIV / Aids

NELSON MANDELA has announced that his son died of Aids. This is important for South Africa, where 600 people a day are thought to die of Aids-related illnesses but the real cause is often denied.

President Thabo Mbeki once said he didn't know anyone who had died of Aids!

The rapid spread of HIV-Aids in many countries has meant action is urgent. Richard Feachem, from the Global Fund to Fight Aids, Tuberculosis and Malaria recently said: "Countries like Swaziland will simply cease to exist if Aids is not stopped."

Bush has committed $15 billion to fight HIV/Aids but the UN estimates that $20 billion is needed by 2007 just to stop the epidemic getting worse.

But scandalously Bush is making sure his big business friends are OK by pushing programmes which use expensive drugs, rather than their generic counterparts.

Already 90% of the people never get the retroviral drugs they need and Bush's policies will make this situation worse.

Bush is also pushing his own agenda from the Christian Right, by backing schemes which promote sexual abstinence rather than condom use.

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