Advocacy Group Says World Bank and IMF Can Afford to Cancel Debts of Developing Nations

The World Bank and the International Monetary Fund can afford to cancel the debts of the world's "poorest countries" without "impacting adversely on their ability to carry out their objectives," according to the advocacy group Drop the Debt. In a new report titled "Reality Check: The Need for Deeper Debt Cancellation and the Fight Against HIV/AIDS," Drop the Debt cited research from the British accounting firm Chantrey Vellacott DFK that showed that countries in sub-Saharan Africa spend $13.3 billion repaying debts each year, even though the cost of fighting HIV/AIDS could top $15 billion per year. "The AIDS crisis is devastating Africa and the continent's biggest creditors, the IMF and World Bank, are still taking the money. They should take a reality check and act now to cancel the debt," Drop the Debt Director Adrian Lovett said (Drop the Debt release, 4/10). The study also criticized the Heavily Indebted Poor Countries initiative, which offers debt relief to nations that "adhere to IMF-backed economic reforms and commit themselves to fighting poverty." However, the report states, the 22 countries enrolled in HIPC will "owe more to the [World Bank and the IMF] than they will to the next largest 17 creditors combined" after passing through the HIPC process (Harrison, Agence France-Presse, 4/11). In addition, UNAIDS estimates that the 17 African countries that have already "benefited" from HIPC will need $1.5 billion to "scale up their effort to combat HIV/AIDS to an adequate level," even though these same nations spend $1.4 billion in debt payments each year (Drop the Debt release, 4/10). Canceling the debts owed by HIPC nations will cost the World Bank $353 million per year and the IMF $368 million per year, the equivalent of one dollar per year from each citizen in the world's seven leading industrialized nations, the report says (Agence France-Presse, 4/11). In addition, the IMF and the World Bank can use a "number of options" to help poor nations cancel their debt, including the use of reserves and net income, Drop the Debt states (Drop the Debt release, 4/10). A spokesperson from the World Bank, however, said that the group's numbers "don't add up," and an IMF spokesperson added that total debt cancellation is not a "panacea" for developing nations. IMF spokesperson Lucie Mboto Fouda said that the HIPC initiative aims to raise developing nations' spending on health, education and HIV/AIDS programs by $1.7 billion next year, adding that because of HIPC, the countries will be spending 7% of their gross domestic product on such "social expenditures," as opposed to just 2% on debt relief (Agence France-Presse, 4/11). To read the report, go to http://www.dropthedebt.org/reports/realitycheck.shtml.