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".