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Campaign criticises G20’s lending plan

13 September 2013

AP

Posing: leaders of the G20 outside Konstantin Palace, St Petersburg

Posing: leaders of the G20 outside Konstantin Palace, St Petersburg

THE leaders of the G20 have "sowed the seeds of the next debt crisis" by entrusting responsibility for developing lending standards to the International Monetary Fund (IMF) and the World Bank, the Jubilee Debt Campaign warned last week.

The G20 summit, which took place in St Petersburg on Thursday and Friday last week, produced a leaders' declaration that highlights "high public debt and its sustainability in some countries" as one of the main challenges to the global economy.

The leaders state their support for the IMF-World Bank Debt Sustainability Framework for Low-income Countries, and say that they will take it into consideration "in order to better inform our practices".

The framework was introduced in 2005, and is designed to guide the borrowing decisions of low-income countries. The World Bank uses the assessment of the risk of "debt distress" from the framework to determine the share of grants and loans in its assistance to each low-income country.

On Friday, the policy director at Jubilee Debt Campaign, Tim Jones, said: "To prevent debt crises happening again, lenders need to be more responsible, and finance needs to be controlled. Yet the G20 want to put sustainable lending standards in the hands of the IMF and World Bank, who themselves are responsible for half the lending to low-income countries, where debt burdens are increasing rapidly. This is a conflict of interest, which is sowing the seeds of the next crisis."

The Jubilee Debt Campaign acknowledges that there has been "substantial cancellation" in recent years, "thanks to campaigner pressure", but argues that "there is still very far to go". The IMF-World Bank's Heavily Indebted Poor Countries Initiative, a debt-relief programme launched in 1996 and completed by 35 countries to date, is "open to too few countries, doesn't properly assess the need or justification for debt cancellation, and offers too little, too slowly, with harmful conditions attached".

The charity is calling for "just- trade rules, a just tax system, and sufficient, high-quality aid - with a bias towards grants, not loans - so that countries are not forced back into indebtedness". Future loans should be "given responsibly, on fair terms, and in a transparent way which is open to scrutiny by parliaments, media, and citizens".

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