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Debt & Debt Relief

Debt & Debt Relief. United States $ 13,750,000,000,000 United Kingdom $ 9,041,000,000,000 Germany $ 5,158,000,000,000 France $ 4,935,000,000,000 Netherlands $ 2,461,000,000,000 Ireland $ 2,356,000,000,000 Italy $ 2,328,000,000,000 Spain $ 2,317,000,000,000 Japan $ 2,231,000,000,000

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Debt & Debt Relief

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  1. Debt & Debt Relief

  2. United States$ 13,750,000,000,000 United Kingdom$ 9,041,000,000,000 Germany$ 5,158,000,000,000 France$ 4,935,000,000,000 Netherlands$ 2,461,000,000,000 Ireland$ 2,356,000,000,000 Italy$ 2,328,000,000,000 Spain$ 2,317,000,000,000 Japan$ 2,231,000,000,000 Luxembourg$ 2,020,000,000,000 Belgium$ 1,354,000,000,000 Switzerland$ 1,305,000,000,000 Austria$ 832,800,000,000 Australia$ 799,800,000,000 Canada$ 781,100,000,000 Hong Kong$ 659,900,000,000 Sweden$ 617,300,000,000 Denmark$ 588,800,000,000 Greece$ 504,600,000,000 Portugal$ 484,700,000,000 Which countries have the largest debts?

  3. What about Poorer Countries? • The poorest 49 countries have debts totalling US $375 billion, • The poorest 144 countries, it is over US $2.9 trillion. • For every $1 in aid the developing world pays $13 on debt repayment (2000)

  4. Which Countries are in Debt? Public Debt % of GDP

  5. Why are countries in debt? • Low industrial growth • High interest rates • Rise in old prices • Falling commodity prices

  6. Heavily Indebted Poor Countries (HIPC) Initiative • Launched 1996-7 by IMF & World Bank • Endorsed by 180 governments • To relieve certain low income countries of their unsustainable debt to donors • Promote reform and sound policies for growth, human development & poverty reduction

  7. How does debt relief work? • At the decision point the country gets debt service relief after adherence to an IMF program and progress in developing a national poverty strategy • At the completion point the country gets debt stock relief on approval by the world bank & the IMF of its poverty reduction strategy. The country is entitled to at least 90% debt relief from its creditors.

  8. What is ‘debt service’ & ‘stock relief’? • ‘debt service’ is the cash required over a given period for the repayment of interest and principal on a debt • ‘stock relief’ is the cancelling of specific debts this will achieve a reduction in debt service over the life of a loan

  9. HIPC Initiative

  10. Successful? • Boosting social spending. On average, such spending is about six times the amount of debt-service payments. • Reducing debt service. For the 35 countries receiving debt relief, debt service paid, on average, has declined by about 2½ percent of GDP between 1999 and 2007. • Improving public debt management. Debt relief has markedly improved the debt position of post-completion point countries, bringing their debt indicators down below those of other HIPCs or non-HIPCs

  11. WARNING • MEDCS must at the same time: • Increase Official Development Assistance • Remove tariffs & quotas • Finance debt reduction to ensure sustainability • Criticized by some for “half-hearted inadequate, piecemeal cancellation • Purpose to ensure repayment not cancellation

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