As the world steps up momentum towards attaining the UN Millennium Development Goals (MDGs), a strong case has been made for more action on debt cancellation in 2005 to unlock the economic potential of heavily indebted poor countries.

This urgent call was loud and clear at the civil society’s World Social Forum in Porto Alegre, Brazil, as it was across the Atlantic Ocean when big business and world economic superpowers met at the World Economic Forum (WEF) in Davos, Switzerland late January.

A total of eight MDGs, agreed on by world leaders five years ago, have time-bound targets which should be achieved between 2005 and 2015. With the deadlines fast approaching, developing countries are not oblivious of their commitments and thus are calling for proactive strategies towards the achievement of the targets.

Debt cancellation will allow funds that would normally be set aside for debt repayments to be diverted towards financing development in critical areas.

Poor countries argue that any further delays will inflict undue pain to the already overburdened nations. Africa pays a staggering US$15 billion a year to wealthy creditors, and even more to the International Monetary Fund and the World Bank.

For decades, poor countries have been calling for their debts to be cancelled by developed countries yet real action towards this has not been forthcoming while affected nations plunge deeper into poverty.

Each year Tanzania spends close to US$400 million to service the country’s debt. “I can use this money for bed nets” needed to prevent hundreds of lives that are lost every year due to Malaria, said President Benjamin Mkapa of Tanzania at the WEF 2005.

Although Tanzania has benefited from the Heavily Indebted Poor Countries Initiative (HIPC) -- achieving commendable strides towards poverty reduction through the building of new schools -- the country’s debt of about US$7 billion continues to compromise its development potential.

African leaders strongly feel that debt cancellation is the only hope for economic development on the continent.

“In this new century, millions of people in the world’s poorest countries remain imprisoned, enslaved, and in chains. They are trapped in the prison of poverty. It is time to set them free,” said Nelson Mandela at the G-7 Finance Ministers meeting held in London on 4 February.

“Overcoming poverty is not a gesture of charity. It is an act of justice,” added Mandela.

The MDGs comprise a range of development benchmarks that, overall, seek to reduce poverty by half by 2015. The other goals include reversing the spread of HIV and AIDS and other diseases, improving access to education, and reducing the number of people without access to safe drinking water.

The UN estimates that about US$50 billion a year is required to accomplish these goals making the issue of debt cancellation urgent for most poor countries.

Speaking at the WEF, leaders from the developed world conceded that developing countries are lagging far behind with the achievement of the MDGs.

“If we do not act, we do not have the right to be forgiven by future generations,” said British Chancellor of the Exchequer, Gordon Brown.

Debt cancellation will be one of the major issues that will form the discussions at the Millennium Summit scheduled for September 2005. The Millennium Summit will review progress in achieving MDGs and discuss strategies towards the achievement of the targets.

The general consensus among developing countries is that strategies that have been put in place as a response to the debt challenges of poor countries have not been fruitful. The HIPC initiative for instance has not provided effective solutions for the huge debts that poor countries have to deal with.

Many impoverished nations have been excluded from the initiative after failing to meet the requirements of the complex HIPC programme. Those that qualified still spend up to three times more on debt repayments than on health care.

The tsunami disaster has added another dimension to the call for debt cancellation. Last year governments of tsunami affected countries repaid US$38 billion to creditors which is significantly higher than the US$6 billion dollars in international aid pledged to address the disaster.

If the theme of this year’s WEF -- “Taking responsibility for tough choices” – is to be taken seriously, then unconditional debt cancellation is undoubtedly one of the necessary tough choices that developed countries have to take to free millions from the chains of poverty. (SARDC)

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