As planned, on 19 June, the Jubilee 2000 Coalition formed a human chain surrounding the centre of Cologne where the G8 were holding the Cologne Summit. The demonstration appealed for:

a) the cancellation of the backlog of unpayable debts of the world’s poorest nations
b) under an independent and transparent procedure, and for
c) effective steps to be taken to prevent such high levels of debt building up again.

This appeal was supported by a petition with over 17 million signatures which was presented to the G8 by a group of 8 participants in the demonstration, one of whom was the Cardinal of Tokyo, Cardinal Shirayanagi. It was further supported by demonstrations appealing for debt cancellation in various parts of the world. In Cologne, about 35000 demonstrators gathered. The number of demonstrators around the world has been estimated at 1 million. The demonstrations were not boisterous or unruly and had a strong sense of calm, but they were nevertheless a very forceful presence.

In attending this demonstration and the subsequent meeting of NGO coalitions, as well as representing the SEDOS World Debt Working Group, which has had a significant role in promoting the Jubilee 2000 campaign, I was also representing the Commission for Justice, Peace, and the Integrity of Creation of the Unions of Superiors General and my own religious congregation, the Society of the Divine Word (SVD).

These three groups all involved themselves in collecting signatures for this campaign and in promoting awareness generally. The Commission for Justice, Peace, and the Integrity of Creation of the Unions of Superiors General had printed up a flier calling for debt relief which was distributed at Cologne through the kind help of the SVD and SSPS (Holy Spirit Sisters) justice and peace coordinators of the European zone, and the Africa-Europe Faith and Justice Network.

I have no way of estimating how significant a part these three groups played in this campaign. With regard to the collection of signatures, those that were sent here to the SVD generalate totaled 15,548 signatures. This includes a number that were collected by Holy Spirit Sisters and other congregations and delivered here, but at least 14,000 were from SVD confreres. This comprises only a small proportion of all those collected by SVDs, since many members sent in their petition forms to their national Jubilee 2000 Coalitions. In fact, apart from the signatures collected here at the Collegio, the only other places from which I received petitions were Asia, Latin America, and Poland. I know that many of our coordinators and other members in Europe and North America were very active in this campaign, but these sent in the completed petitions to their national Jubilee 2000 offices. The number of signatures collected here, then, is only a small portion of the total SVD contribution to this campaign. Many of our confreres have also been very active in consciousness raising on the issue.

I also took with me over 40,000 signatures collected by the Servites. Again this is only a very small portion of all those collected by the various SEDOS congregations, most of whom, likewise, sent their signatures either directly to Jubilee 2000 headquarters in England or to their national Jubilee Coalition office.

Both Unions of Superiors General (for male and female congregations) had also officially requested their congregations to take active part in this campaign, and again, there is simply no way of estimating the effectiveness of this endeavour.

Ann Pettifor, of the British Jubilee 2000 Coalition has told me that the signatures accumulated there come from such diverse parts of the world that it can only be presumed that the collection of many of these is most likely the result of the work of missionaries. I think that we can be sure therefore that, without ever being able to measure our actual effectiveness, we have had a significant impact on the campaign. That is important for considering where we go from here. If we have had a significant impact, then we have demonstrated, most of all to ourselves, that we can have a significant impact, and if we can have an impact, then, in the future too, we have an obligation to have an impact, and to see that this impact is ever more enlightened and ever more effective.

If our involvement in the campaign for debt cancellation has shown us anything, it is that we Catholic religious have a unique position in the world. We have many years of on-site experience in almost every imaginable situation in the world. We have a high level of international experience and international contacts. We have many pre-established fora and venues for reflecting on and raising consciousness about social and humanitarian issues. Among our membership, we have many resource people with a great deal of expertise in areas relevant to social and humanitarian concerns. On average, we have a comparatively high level of education. In recent years, at various levels, networking has taken place more and more between different congregations, with diocesan organizations, and with other NGOs, and we have come a long way in building up networks and developing the willingness and ability to collaborate with various kinds of groups.

Above all, we are called to a faith commitment that guides us to a commitment to respect for human dignity and care for all human persons, even if, at times, our preoccupation with institutional and individual self-protection hinders us from living out this commitment.

Given the degree of our involvement and our relative success in collecting signatures, I feel it incumbent on me to report on the outcome of the campaign. Therefore I have drawn up this report for all three groups that I represented at Cologne. The reflections on future directions are relevant to all three groups, although aimed more directly at the SEDOS World Debt Working Group.

In drawing up this report I have made use of analyses by Joseph Hanlon of the Jubilee 2000 Coalition UK and by EURODAD. I have also conferred by email with Henry Northover of CAFOD, Joseph Hanlon of Jubilee 2000 UK, and with EURODAD. The contents of this report, however, are entirely my own responsibility.

Michael T. Seigel, SVD

August 4, 1999

This report will be divided into three sections. The first section will discuss the response of the G7 to the debt crisis and to the campaign for debt cancellation. The second will consider the implications of this for the campaign for debt cancellation. The third will be directed primarily at the SEDOS World Debt Working Group and at religious congregations, and will consider future directions.

In the first section, on the response of the G7, I will aim at interpreting the response in terms of the whole goal of the Jubilee 2000 Campaign, and not just in terms of debt cancellation. From the beginning, there have been three explicit dimensions to the goal of the Jubilee 2000 Campaign:

1) that the backlog of unpayable debt be canceled.
2) that this cancellation take place under an independent and transparent procedure. (The demand,  then, is not that debt cancellation be unconditional, but that the conditions and procedures of debt  cancellation be set not solely by the creditors but through a process that involves equitable representation, neutral arbitration, and transparency).
3) that steps be taken to see that such high levels of debt do not arise again.

The SEDOS World Debt Working Group, together with the Jubilee 2000 Coalition and many others, has argued from the beginning that the debt is only one dimension of a much larger problem, that it is the outcome of much deeper inequities in the global economy, and that in fact it is a means of control by the developed world over the economies of the developing world. This control is effected through the conditions imposed on further lending and on debt relief. It is to address these more fundamental issues that the Jubilee 2000 Coalition has demanded both a transparent and independent process and steps to avoid a similar debt from arising again.

Therefore, I will try to evaluate the recommendations of the Cologne Debt Initiative in relation to these more fundamental problems. Do they move in the direction of a more equitable world economy? Or do they, in effect, reassert the control of the rich over the poor?

While these subsequent questions are more fundamental, I will take up the debt relief actually decided on by the G7 first. This will be necessary to set the stage for considering the other questions. It will also be necessary to evaluate the success or failure of the campaign, and therefore to shed light on the path ahead.

The G7 Statement is based on a document issued one week earlier by the G7 Finance Ministers. These ministers met in Cologne and produced a document, dated June 13, called "Report of the G7 Finance Ministers on the Köln Debt Initiative." The statement of the G7 fully endorses this report, repeats much of what it says, and makes no additions. The report of the Finance Ministers is the fullest statement of the decision of the G7 on debt relief.

The G7 describes its own initiative as amounting to $70 billion, and much media coverage has presented it as a major step towards resolving the debt crisis. This needs to be qualified in a number of ways.

Firstly, the G7 as such does not have a decisive policy-making role in relation to the debt. Even if the governments involved in the G7 each have very influential roles in the Paris Club and in the International Financial Institutions, which are the main groups of creditors, as G7 they do not directly grant debt relief. Effectively, what the Cologne Summit did was to make certain recommendations to the International Financial Institutions (the World Bank and the IMF), to the Paris Club, and to ODA (Official Development Assistance—see box, following page) creditors. Considering that the G7 governments hold most of the voting power in the International Financial Institutions, that they are the main members of the Paris Club, that they include most of the main ODA creditors, and that the decisions of the G7 meeting are made on a consensual basis so that no member is an unwilling partner to a decision, there seems to be no reason to doubt that the decisions will be largely implemented. The decision-making process in some G7 countries may prove a limitation. Many of the real decisions on debt relief in the United States, for example, rest with the Congress, and this may hamper things. And if one major creditor holds back from implementing the recommendations, it is almost inevitable that the others will. Nevertheless, it is reasonable to assume that the recommendations made by the G7 will be largely carried out. Michael Camdessus, director of the IMF, has already responded affirmatively.

Secondly, there is a question of whether the amount of $70 billion is all new or includes debt relief that is already on offer, and of how much, just in terms of quantity, it is actual likely to ease the debt burden of the poor countries.

Thirdly, the $70 billion is not all direct cancellation. It is made up of two parts. The first is $50 billion that the G7, following the finance ministers, estimates will result (primarily) from certain recommended modifications in the HIPC Initiative (see p. 9 for a description of the HIPC Initiative). The G7 therefore strongly reaffirms the HIPC Initiative, with all the conditionality that is associated with it—and therefore to understand what has been offered at Cologne, this conditionality will need to be considered. The second part of the $70 billion of debt relief granted by the Cologne Summit is $20 billion, which is to derive from the cancellation of debts arising from Official Development Assistance (ODA).

(i) How Much of What Is Offered Is New?

Those with whom I have conferred all complain about a substantial degree of obscurity in the G7 Statement and in the Report of the Finance Ministers. In paragraph 2 of the Finance Ministers report and paragraph 12 of the G7 Statement, the amount of debt relief that is expected to result from the Cologne Debt Initiative is spelled out. The exact phrasing of the G7 Statement is:

So the question is, how much are the poor countries actually able to pay, or conversely, how far would debt cancellation have to go before it started to make an actual difference in their well being (in other words, until it started to actually reduce what they are, in fact, paying). The chart below, taken from the same IMF source as the chart on the previous page, gives as a composite sum for all HIPCs for 1994 (the most recent year for which it provides figures), the ratio of debt service due to GNP as 15.8% and of debt service actually paid to GNP as 5.3%. This implies that in practice, poor countries are paying only one third of the debt service they owe, and therefore, that to make a difference, debt relief must go beyond two-thirds. Of the $204 billion owed in 1994, this would suggest that poor countries were defaulting on as much as $136 billion of their debt, and therefore, that debt relief that does not exceed that amount will make no real difference.

Jubilee 2000 economist, Joseph Hanlon, calculates the amount of unserviced debt at $100 billion of the $207 billion HIPC debt. He also points out that the combination of new debt relief called for by the Cologne Summit ($45 billion), the debt relief already on offer under the pre-Cologne HIPC Initiative ($25 billion), and debt relief already on offer by the Paris Club ($30 billion) adds up to $100 billion, so that the total debt relief granted amounts to no more than what was not being paid anyway. These debts were debts that, in fact, were never going to be repaid. Cancelling them costs nothing because they were already irrecoverable. And it gives nothing because it does not reduce actual payments.

Of course, the debt relief will be distributed proportionately to the willingness and ability of countries to implement structural adjustment. Those countries most successful in implementing this will get more debt relief, those less successful will get less or, more likely, nothing (except, perhaps, for the cancellation of ODA debt). Therefore, it can be expected that there will be a degree of easing of the debt burden for a very small number of countries, and nothing for the rest.

The HIPC Initiative was drawn up by the World Bank and the IMF, and put in place in September 1996. The stated goal of this initiative is to reduce "the debt burdens of all eligible HIPCs to sustainable levels," and the condition applied to this debt relief is that the indebted country must "adopt and pursue strong programmes of adjustment and reform." Countries seeking debt relief through this initiative must first establish a track record of adjustment for three years. After undergoing three years of structural adjustment, the country arrives at what is termed the "decision point." At this point, the specific debt relief needed by that country is evaluated and a commitment is made by the international financial community "to provide sufficient debt relief to reduce the debt burden of eligible countries to sustainable levels." However, this debt relief is to be granted only when the country has completed another three years of "strong policy performance." The end of this second three year period of adjustment is called the completion point. Thus, the HIPC process, in its pre-Cologne form, consists of three years of adjustment according to World Bank/IMF norms, a decision on debt relief, an additional three years of adjustment, and finally, after six years of implementation of IMF reforms, the granting of the debt relief necessary to achieve debt sustainability. (See the next section for a basic critique of the HIPC Initiative, page 14ff).

(i) Earlier Relief in the Cologne Debt Initiative

One change called for by the Cologne Debt Initiative is that the second three year term should be shortened to as little as one year "if a country meets ambitious policy targets early on" (Finance Ministers’ Report, 7). This is referred to as a "floating completion point." It would mean that a country that implemented reform with sufficient thoroughness could gain debt relief after four years of adjustment instead of six. In fact, this has already been the practice. So far only two countries have reached their completion point (Uganda and Bolivia) and in both cases the time from the decision point to the completion point was only one year.

(ii) Modifications in the Calculation of Debt Sustainability and Eligibility for Debt Relief

A number of changes are recommended in the criteria for measuring debt sustainability. The IMF defines debt sustainability in the following terms: "A country can be considered to achieve external debt sustainability if it is expected to be able to meet its current and future external debt-service obligations in full, without recourse to debt relief, rescheduling of debts, or the accumulation of arrears, and without unduly compromising growth." In the HIPC Initiative certain criteria relating debt and debt service to income from exports or, for some countries, to GDP are used to determine a country’s debt sustainability, and the Cologne Debt Initiative has brought some modifications in these criteria.

In the pre-Cologne HIPC Initiative definition of debt sustainability, the ratio of Net Present Value (NPV) of debt to exports was to be within a range of 200% to 250%.
The Cologne Debt Initiative recommends that the this ratio be brought down to 150%
Likewise in the pre-Cologne Initiative, the debt service to exports ratio was to be between 20% to 25%.
The Cologne Debt Initiative does not recommend any change in this.
In the pre-Cologne HIPC Initiative, an alternative measure for debt sustainability was possible for countries with very open economies (defined as an export-to-GDP ratio of at least 40 percent) and making strong efforts to generate revenue (with a minimum threshold of fiscal revenue in relation to GDP of 20 percent). For these countries, an NPV debt-to-export target below 200 percent at the completion point could be considered.
The Cologne Debt Initiative reduces the export-to-GDP ratio from 40% to 30% and the fiscal revenue to GDP ratio to 15%.
For the countries in this second category, the pre-Cologne HIPC Initiative determined that the NPV debt-to-export target will be set at a level that achieves a 280 percent ratio of the NPV of debt to revenue at the completion point.
The Cologne Debt Initiative recommends that this debt to revenue target be brought down to 250%.

(iii) Increased Relief from the Paris Club

In the pre-Cologne HIPC Initiative, creditors belonging to the Paris Club grant 80% debt forgiveness to countries qualifying for the HIPC Initiative. The Cologne Debt Initiative recommends that this be increased to 90% and more in individual cases if needed.

Note that in the case of both the pre-Cologne HIPC Initiative and of the Cologne Debt Initiative, this refers to pre-cutoff date debt, with the cutoff date being the day that the debtor country first approached the Paris Club for debt relief—in the mid eighties for most HIPCs. It also applies only to publicly guaranteed commercial debt, which consists principally of export credits.

(iv) Debt service relief in addition to debt stock relief

An additional change is the idea of interim relief. The G7 Finance Ministers Report (12) calls for interim relief focused on "significantly reducing the cash-flow of debt service payments ... even before the completion point." This relates to debt servicing. There are no specifics on the degree or nature of this "interim relief" except to refer to the fact that such relief is already granted by the Paris Club, and therefore one might expect that it would be of a similar nature to that granted by the Paris Club. The G7 Statement itself does not use the phrase "interim relief." However, in endorsing the Finance Ministers’ Report, it does affirm that the proposals contained in this report will lead to "a stronger focus on early cash flow relief by the International Financial Institutions" (G7 Statement, 11). This is a clear endorsement of the Finance ministers proposal of interim relief.

The Cologne Debt Initiative makes two provisions for debt relief other than through the HIPC Initiative: a call for forgiveness of ODA debt, and a suggestion for Paris Club debt relief for countries not qualifying for the HIPC Initiative.

(i) Forgiveness of ODA Debt

As noted above, the Cologne Debt Initiative calls for complete forgiveness of ODA debt, of which $20 billion is owed to G7 creditors. The Finance Ministers’ Report makes it clear that this should be fully canceled, even when such cancellation would actually go beyond what is required to achieve debt sustainability.

It is important, however, to note that this call for forgiveness is qualified, in the Finance Ministers’ Report (13), by the phrase "through a menu of options," and in the G7 Statement, by the phrase "through a variety of options." This phrase has apparently been included to approve of the Japanese strategy for forgiving ODA debt. Japan has adopted an approach which is to lead to total debt relief of the debt through the following procedure. First, the indebted country must repay the loans. An equal amount of money is then refunded to the debtor country as a development grant (not a loan, so it will not need to be repaid). There are two catches: first, this grant will come from the aid budget, so debt relief in this strategy will result in an equal reduction in other forms of development aid; second, this grant will come with the condition attached that it must be used to buy Japanese products. Clearly, it is anything but straight cancellation, and is more oriented towards helping the Japanese economy than that of the debtor country.

(ii) Paris Club Debt Relief for countries not qualifying under the HIPC Initiative

The G7 Statement (11) says: "For poor countries not qualifying under the HIPC Initiative, the Paris Club could consider a unified 67 per cent reduction under Naples terms and, for other debtor countries, an increase in existing debt swap limits."

Naples terms, of course, apply to pre-cutoff date commercial debt, conditional on a track-record of at least three years of structural adjustment.

The above is the essential content of the Cologne Debt Initiative. It is clearly designed to respond to the campaign for debt cancellation led by the Jubilee 2000 Coalition in collaboration with a very large number of NGOs. NGOs have customarily argued that the HIPC Initiative needs to be faster, broader and deeper. The G7 Statement describes the changes for which it has called in precisely those terms.

1) Faster: Both the floating completion point and the idea of interim relief, it is claimed, will make debt relief come faster, or perhaps more correctly, earlier. Note, however, that there is a problem with how additional conditionality might affect this. As I will discuss below, additional conditionality (specifically with relation to poverty alleviation) may make it more difficult for poor countries to qualify for debt relief, effectively slowing it down.
2) Broader: The same redefinition makes more countries eligible for debt relief under the HIPC Initiative. For example, countries able to arrive at a NPV-to-exports ratio between 150% and 200% through traditional debt relief would not have been eligible for debt relief under the pre-Cologne HIPC Initiative, but will become so if these changes are implemented. Countries with an export - GDP ratio between 30% and 40%, a fiscal revenue - GDP ratio between 15% and 20% will become eligible in accord with the alternative criteria for very open economies. Reportedly, these changes will increase the number of countries eligible for debt relief under the HIPC Initiative from 29 to 36. Countries like Benin and Senegal, for example, which reached their decision points in the HIPC Initiative in July 1997 and April 1998 respectively, but were deemed to have sustainable debt burdens and therefore were not eligible for debt relief under the HIPC Initiative, may now be eligible.
3)Deeper: The changes make the Initiative deeper through the redefinition of debt sustainability, in that these changes bring a greater degree of debt relief to debtor countries.

How accurate are the estimates likely to be of the debt relief that should result from the above-mentioned modifications in the HIPC Initiative. It would be impossible to give an accurate estimate as to how much a particular country will actually receive in debt relief through the HIPC Initiative until that country has reached the decision point. Apart from the two countries that have reached their completion points, seven have reached their decisions points. Assuming that the number of countries "possibly qualifying under the HIPC Initiative" is in fact increased to 36 by the Cologne Debt Initiative, that would meant that 27 of these have not yet reached their decision point, and consequently any estimates as to how much the total debt cancellation is likely to reach must inevitably be tentative approximations.

In both the G7 Statement (12) and the Finance Ministers’ Report (2) the qualifying phrase, "If implemented ...," is used. It is of course conditional on the International Financial Institutions and the members of the Paris Club actually adopting it. But it is also conditional on the indebted countries fulfilling the conditionality. Given the difficulties involved in this, the full amount of debt relief called for by the G7 is, in fact, a best case scenario. To the extent that conditionalities are not met, then the debt relief will not be achieved.

The HIPC Initiative has received extensive criticism, and not only because of the demand that it be deeper, wider and faster.

(i) Problems with the goal of the initiative

The goal of the HIPC Initiative is debt sustainability, and this goal in itself is subject to criticism. Debt sustainability means the ability of a country to keep up its debt servicing payments. The definition of debt sustainability that the IMF gives is:

A country can be considered to achieve external debt sustainability if it is expected to be able to meet its current and future external debt-service obligations in full, without recourse to debt relief, rescheduling of debts, or the accumulation of arrears, and without unduly compromising growth.

Therefore the principle focus is on meeting debt obligations, and the phrase "without unduly compromising growth" still relegates growth to secondary level of importance. Growth, or development, or in more concrete terms, the increased well-being of people, ought not to be subjugated in this way. In debt cancellation, as in all economic activities, the primary goal must always be the well being of all and most particularly of the poor.

As many NGOs point out, in Germany’s history of debt cancellation after World War II, it is clear that Germany’s own economic recovery was the first goal, and debt servicing was subordinated to that. The Jubilee 2000 Coalition notes that, "During the post-war negotiations, the allies initially asked Germany to pay 10% of its exports in debt service, but Germany said this was impossible. Finally, in 1953 the allies agreed that Germany need pay no more than 3.5% of its export earnings as debt service." This was a debt cancellation that made possible the subsequent growth of Germany. Clearly, the goal of this strategy was not just debt sustainability, but growth and well-being.

Compare this 3.5% with the 25% percent debt service to exports ratio which the HIPC demands of the indebted poor countries today, and which remains unchanged in the Cologne Debt Initiative, and it is clear that the latter aims primarily at maximizing repayment to the creditors and not at the development of the country. Jürgen Kaiser, coordinator of Erlessjahr 2000 (the German Jubilee 2000 coalition), made the comment that, "The reduction of the ratio of total debt to export earnings to 150 % of present net value means that the poor countries of the world will still have to pay, in relation to their capacity, to their international creditors, three times as much in debt service compared to Germany after the debt reduction of 1953."

(ii) Problems with Conditionality

Further, both in the pre-Cologne HIPC Initiative and in the Cologne Debt Initiative, debt relief is totally conditional on structural reforms according to the dictates of the IMF. In fact, the real outcome of the Cologne meeting is so strongly weighted towards the implementation of reform that any evaluation of the results of the Cologne meeting hinges more on the evaluation of this conditionality than on the amount of debt relief as such. Do the IMF reforms constitute "steps ... to prevent such high levels of debt from arising again," and do they promise to bring the indebted countries to a greater degree of self-reliance, or do they simply further the control of the rich over the poor? To fully interpret the implications of the Cologne Debt Initiative, these questions must be answered.

Under numerous synonyms ("sound economic policies," "adjustment," "structural adjustment programmes"), these reforms are mentioned frequently throughout the Finance Ministers’ Report, and are conditions sine qua non for debt relief.

—Poverty alleviation as a new condition for debt relief

What is interesting is that this conditionality is consistently linked with poverty alleviation. In fact, there is not a single place in the Finance Ministers’ Report nor in the G7 Statement in which reform or adjustment are mentioned without being explicitly connected with poverty alleviation, poverty reduction, or social spending. In the Finance Ministers’ Report, fully four of the fifteen paragraphs constitute a section on "A Framework for Poverty Reduction," which is the first section after the two introductory paragraphs, giving it a certain prominence and priority. Of the whole fifteen paragraphs in the document, nine explicitly mention poverty reduction or poverty alleviation. There is a clear attempt, then, to address the humanitarian issues that so many members of civil society have raised about structural adjustment, but without in any way compromising on structural reform itself.

The question is: How do these two sets of conditions (structural adjustment and poverty alleviation) hang together? While it is easy to list the two together in a document, how compatible are they in reality? Traditionally, structural adjustment programmes have involved restrictions on social sector spending. Even this document, in one place, says that "renewed unproductive expenditure must be avoided" ((Finance Ministers’ Report, 3). But when will social sector spending be considered as "unproductive expenditure." It is rarely directly productive in the sense of being income generating. Do the fiscal and other policies promoted by structural adjustment programmes enable governments to carry out appropriate social sector spending? Can governments of poor countries cope with carrying out privatization (frequently resulting in increased unemployment) and still provide the social benefits necessary to care for the unemployed? Can they cope with the increased cost of imported goods that results from currency devaluation and still hope to import what they need to improve health care?

Many of the members of civil society who attended the conference of Jubilee 2000 meeting after the Cologne rally had grave doubts and even denied outright the compatibility of these conditions. Given the demands of structural adjustment, they argued, the increased investments required for poverty alleviation and social spending are impossible. And by adding on a basically non-feasible conditionality, many asserted, the Cologne Debt Initiative weakens the potentiality of countries from ever meeting up to those criteria. Far from making debt relief come earlier, this apparent concession to civil society may simply move real debt relief further away.

—Structural adjustment as a condition

The reform that is set as conditionality for debt relief in the HIPC Initiative is structural adjustment. This consists of a set of policies, guided by neo-liberal economic ideas including many that people in developed countries have become familiar with in recent years, such as trade liberalization, deregulation, privatization, etc. In many HIPC countries and other developing countries, these programmes tend to emphasize improving the external balance of payments (in other words being able to service debts and pay for imports) by increased earnings of foreign exchange which, in turn, leads to policies that both promote exports (mainly of raw materials and agricultural products) and encourage foreign investment.

Through the SEDOS World Debt Working Group, we have had a good deal of contact with members of SEDOS congregations working in countries undergoing these structural adjustment programmes, and the assessment by these people, often with many years of experience among the poor, is usually negative. The on-site experience is that only a small group of people benefit, that the gap between rich and poor widens, that the economy is diverted away from production for the local market at the same time as the expansion of exports causes a decline in commodity prices and weakens the local currency thereby making imports more expensive. Further, by diverting the economy ever more towards exports, these programmes weaken the self-reliance of the countries involved, making them ever more vulnerable to the vagaries of the commodity market. In sum, the evidence from the ground is that these programmes increase disparities within the country, give exaggerated powers to business interests while weakening governments, increase divisions within the country, and weaken the resilience of the country to external shocks. Even worse, the focus of these programmes, by diverting resources away from such areas as education and health-care, undermines the very future of the countries concerned. (It is criticism over this last issue that the G7 seeks to address by its focus on poverty alleviation).

It is not just the allegorical evidence of missionaries that raises questions about structural adjustment programmes and the policy imposition that accompanies them. Numerous case studies have highlighted such consequences as increasing disparities between rich and poor, declines in public services such as health care and education (resulting in consequences such as increased infant and maternal mortality, increases in the school drop-out rate, etc.), a worsening situation for small and medium producers, declining wages and increased unemployment, increases in food prices even when there is a decline in overall inflation.

These evaluations of structural adjustment are not limited to NGOs or to promoters of alternative economics. Many economists, such as Michel Chossudowski, professor of economics at Ottawa University, and Jeffrey Sachs, professor of international trade at Harvard and director of the Harvard Institute for International Development, have long been either opposed to these programmes or at least to the economic policies that underpin them. Much to the chagrin of the Word Bank, its own vice-president and chief economist, Joseph E. Stiglitz, has strongly criticized the "Washington Consensus" (the policy framework developed by the World Bank, the IMF and the US government) and the policies that guide structural adjustment programmes.

Needless to say, the International Financial Institutions and others have their studies that show improvements (including poverty alleviation) resulting from structural adjustment. Most frequently they cite the cases of Uganda and Ghana, the two countries that have reached the completion point in the HIPC Initiative. The on-site experience of missionaries from these countries, however, still points to increasing disparities and deprivation of the social sector (apparently more so in Ghana than in Uganda), even if there has been some improvement in GDP and balance of payments.

Additionally, there is a problem in measuring the effects of structural adjustment. Usually, prior to the implementation of structural adjustment, there has been a period in which funding has been either withheld or significantly restricted (without this, countries would not have been persuaded to accept structural adjustment). Once structural adjustment is accepted, access to funds becomes possible. Loans and investments inevitably come into the country. The money that flows into the country has to go somewhere, and there must be some measurable difference arising from it. This does not imply that the policies imposed are bringing about an improvement, or that the growth will be sustainable, or that it will not be tilted in favor of the already well-to-do.

Further, even if the improvements in Uganda and Ghana are fully sustainable, equitable, and attributable to structural adjustment, considering the large number of countries that have undergone these programmes in the last two decades, this is too little too late. The main responses of the IMF to the debt crisis has been to make structural adjustment loans to indebted countries at concessional interest rates. The main result of this lending has been to transfer substantial portions of the debt from private creditors to the IMF, which is the reason that the IMF has been able to move so much to centre stage. It is surely time to conclude that structural adjustment programmes have served only to prolong the debt crisis. (Left in the hands of private creditors, it is almost certain that most of the debt would have been written off as bad loans long ago).

There is not space here to do a detailed analysis of all aspects of structural adjustment. But it should be clear that the neither the track-record of structural adjustment nor the rationale behind it are so convincing that its universal imposition is justified. As a condition imposed on debt relief it is at best dubious, and at worst clearly harmful.

Why do the G7 and the International Financial Institutions impose such policies. Some attribute this to intellectual bias. The economists involved have such a blind faith in neo-classical economics, that failures go unquestioned. But many, particularly but not exclusively from the indebted countries, see these programmes as a means of controlling the economies of the indebted countries, and of maintaining access to their resources. Motivations are always complex, and it would be overly simplistic to see the debt crisis and structural adjustment as a planned conspiracy to keep the Third World in poverty and maintain control of its resources. But however complex the motivations, the outcome of the debt crisis and the transfer of the greater part of the debt from private to bilateral and multilateral creditors has been to create a new form of colonialism, where the developed world determines the economics, politics, and more and more even the society and culture of the developing world. In the Cologne Debt Initiative, the IMF and the World Bank are given stronger roles than ever not only in dealing with the economic policies but even the social policies of countries. No matter what language it is dressed up in, and no matter how many good intentions may have been involved, the Cologne Debt Initiative is an advancement of this quasi-colonial control.

While the Cologne summit increased the amount of debt relief available to those countries that accept its policies and meet its demands, there are numerous dimensions of the debt issue that have not been addressed at all.

(i) Failure to address the question of the justice of the debt

Most importantly, the summit made no attempt to address the question of the very justice of the debt. Along with the Jubilee 2000 Coalition and many others, the SEDOS World Debt Working Group has argued that debts resulting from fluctuating interest rates that have already been repaid at the original interest rates should be treated as paid, and that any debts that have accrued as a result of fluctuating interest rates are unjust. Debts derived from loans for failed projects, to the extent that these projects were initiated by and directed by experts from the developed world (we have cited such instances as the Bataan nuclear plant) and sometimes by the creditors themselves (we have cited the World Bank imposition of closure of cashew processing factories in Mozambique), are also unjust, or at least accountability is misplaced. We have further argued that it is unjust to require subsequent governments and the people of a country to repay debts resulting from loans to governments that were clearly corrupt, and clearly using the money to suppress and exploit the people.

(ii) Failure to establish an independent and transparent procedure

The failure of the Köln Summit to address the very fundamental issue of the justice of the debt demonstrates that a fair solution to the debt crisis is not likely to be achieved by the creditors alone. The Jubilee 2000 Coalition has been right in seeking an independent and transparent procedure. The HIPC Initiative is clearly a resolution to the debt crisis determined exclusively by the creditors and completely controlled by them. By placing the HIPC Initiative so much at the centre of their debt initiative, the G7 leaders have rejected totally the demand of the Jubilee 2000 Campaign for debt cancellation be carried out under an independent and transparent procedure. This failure to go beyond the standpoint of the creditors has meant that debt sustainability, the ability of the debtors to keep up their payments, has remained the focus. What the Jubilee 2000 campaign called for was a fresh start with a focus on human well-being. This has certainly not been achieved, and if we have learned anything from Cologne, it is that it will not be achieved unless an independent, and transparent arbitration process, equitably representative of all concerned, is established.

(iii) Consultation with civil society

The Finance Ministers’ Report calls for consultation with "broader segments of civil society" in the design and implementation of structural adjustment programmes, and the G7 Statement (10) calls on the International Financial Institutions to carry out similar consultation with civil society in the development of "an enhanced framework for poverty reduction." Unfortunately, they give no definition of civil society, and it is hoped that they accept the definition of civil society adopted by the Copenhagen Social Summit which understood civil society in contradistinction both to government and to the private sector. It would not therefore include businesses nor coalitions formed by businessmen to promote their interests—for the accusation has been made that, at times, consultation with groups such as the Chamber of Commerce has been classified under "consultation with civil society."

Considering that this role for civil society is limited to (a) consultation in the design and implementation of structural adjustment programmes, and (b) the development of an enhanced framework for poverty reduction, it comes nowhere near the kind of role for civil society that is called for. It does not go beyond the creditors and the International Financial Institutions setting the agenda and civil society cooperating with that agenda. This is still the kind of colonial structure we have already noted. IFI documents on structural adjustment frequently refer to the idea of "ownership," meaning that the countries undergoing structural adjustment accept these programmes as if they were their own. "Ownership," in this sense, becomes an issue precisely because the programmes are not their own, but are imposed from without. Any attempt to create an atmosphere of "ownership" without changing the very basic nature of imposition from without will be no more than window-dressing and will be essentially deceptive. As long as consultation with civil society is limited to the level of implementation, it will not get beyond this deceptive attempt to make something imposed from without look home-grown.

Consultation with civil society needs to take place (i) in the process of determining true accountability for the debt, (ii) in determining the processes and conditions for cancellation, and three (iii) in determining the ongoing agenda for development in the country. To the extent that civil society is excluded from the discussion at these levels, basic democratic principles are ignored. To the extent that the Cologne Debt Initiative seeks to impose policy without consultation with civil society in the development of that policy, it is colonialistic rather than democratic.

The movement for debt cancellation has not achieved its goal. But it is far from having been a failure. The very fact that the G7 addressed the issue and that both the Finance Ministers and the G7 devoted a substantial portion of their statements to it indicates a substantial success for the movement. At the very least, it has been heard. Of this there can be no doubt. In such a campaign, one does not expect to achieve all goals at once. My basic conclusion with relation to the campaign is that we should feel encouraged but not satisfied.

The fact that the G7 has defined its decision precisely in the terms used by the campaign for debt relief indicates clearly that this campaign has succeeded in making its voice heard. And the emphasis on poverty reduction is clearly a result of the actions of civil society in seeking a more humane world order. It is further evidence that the civil society movement has been able to make itself heard. But is it a response that is genuine? Many NGO participants found it deceptive.

A difference did emerge within the Jubilee 2000 movement over the response to the G7 statement. Two press statements were released, one expressing primarily the viewpoint of the Jubilee 2000 coalitions from the south, the other, the viewpoint of the coalitions from the north. The former was substantially more negative about what happened in Cologne than the latter.

The groups from the south titled their response, "Jubilee South Rejects Köln Debt Initiative as a Cruel Hoax"²¹ and included in it statements such as:

These groups reject the HIPC Initiative because of its link with structural adjustment. They reject the Cologne Debt Initiative because it is built on and enhances this link, because it will only aid a small number of countries, and because it does not address the "the moral dimensions of the debt crisis and the historical responsibility of the rich countries for the current state of affairs."

The conclusion is that "Jubilee South sees nothing to welcome in this initiative."

The Jubilee 2000 groups from the north can seem comparatively positive. Their statement describes the Cologne Debt Initiative as "a big advance beyond the $25 billion the G7 offered in Birmingham last year."²² Ann Pettifor of Jubilee 2000 UK is quoted as saying, "The G7 have made great strides since their meeting in Birmingham last year. If they continue at this pace, then we will achieve our goals in the year 2000."²³

It would be a mistake to pay too much attention to this divergence without looking closely at the points of convergence:

(1994) There is essential agreement in the analysis of the debt crisis. Both groups from the north and groups from the south see the debt as having emerged as a result of multiple factors, including inequities in the world economy, faulty development models, use of aid loans as a political tool to prop up certain governments without consideration for the way that money is used, irresponsible lending on the part of banks, etc. There is also essential agreement that the real issue is the control over the economies of the south by the economies of the north.

Consistent with the first point, there is universal opposition to the linkage of debt relief with structural adjustment.

There is also universal agreement that the decisions about debt relief and debt cancellation should be taken out of the hands of the creditors, and determined in an independent venue through an independent, representative and transparent process duly accompanied by consultation with all the actors including civil society.

There is also essential agreement on the goals of the movement, namely, that it is not just about debt cancellation but about achieving a truly fair and equitable world economy.

Where, then, lies the difference? I think that two points can be made. One point is simply that one group looks more at what has been achieved and the other at what remains to be achieved. The groups from the South witness daily the suffering that comes from the debt and from the imposition of conditionality. They are less likely to be satisfied as long as there are not clear steps to alleviate that suffering. The groups in the north look more at the process: Is this campaign working? Are we getting somewhere? Do we keep up the same kind of activities or must we start from scratch along some completely different path? And the conclusion has been: Yes the campaign is working! Yes, we are getting somewhere! And therefore we should try to strengthen what we are doing (while being open to new ideas and new strategies)! The fact that the G7 and their finance ministers devoted so much attention to the issue, and the fact that they made concessions to the movement by adopting its language and by increasing their own programs of debt relief, demonstrate the effectiveness of what has been done—even if the real goal remains to be achieved.

The second area of divergence that I sense is in the area of the very focus on debt. I believe that, for all practical purposes, every single person involved in the Jubilee 2000 movement is aware that the debt is only one part of a much more deep-rooted structure of inequality and control in the world economy, and that the ultimate goal must be to go beyond debt cancellation and aim at a genuinely equitable world economy. The Jubilee 2000 movement recognizes this with its demand for an independent transparent procedure and for steps to be taken to avoid such a debt developing again. But, in fact, a campaign has to have a focus. It has to be specific in its demands. And the campaign has focused on debt. The focus on debt, rather than on something so broad as, say, "an equitable world economy" has made awareness raising possible. It has made possible a broad-based movement. As such, it has not been a mistake.

In the South, too, I think that there is a general agreement that the debt issues provides something sufficiently concrete on which to focus and around which civil society can coalesce. Nevertheless, I have the sense that groups in the South feel less comfortable than groups in the North about making the debt the principle focus. In fact, I think they have the same hesitancy with anything that has the risk of deflecting attention from the more fundamental issue of economic and political control.

During the colonial era, the developed countries controlled the economies of the resource rich Third World through direct colonization. During the post-colonial years until the early 1980s, they maintained the same control by propping up dictatorships such as those of Marcos, Suharto, Mobutu, etc. During the 1980s the debt emerged as a new means of control, and the imposition of structural adjustment programs remains the means of that control. As the nineties draw to a close, agreements such as the Multilateral Agreement on Investments may be emerging as the next form of control.

Unless that kind of control is changed, then debt relief or debt cancellation on their own will make very little difference to these countries. It is noteworthy that in the statement of the Jubilee south, the word that is used to describe the debt problem is "debt domination."²⁴ In a document published some weeks previous to the meeting, Jubilee south had stated that, "Canceling the debts of HIPCs does not and can not in anyway alter the power balance and stakes of creditors in the global financial architecture."²⁵ It is this inequity and control that it the principle issue. When the campaign seems to focus too much on the debt as such, then I think that the groups from the South become concerned that these more important issues are being lost from sight.

While the focus on the debt as a specific and concrete issue has been both necessary and helpful, it may be that it has contributed to an atmosphere in which at least some have lost sight of the more fundamental issues. The G7 leaders and their finance ministers certainly appear to have thought that they could appease the movement by responding only to the question of debt and not dealing with the broader issues. And members of the German group of Jubilee 2000, Erlkassjahr 2000 informed us that after the G7 announced its plans for debt relief on the eighteenth of July (the day before the human chain was scheduled), they received phone calls from people who wanted to know if the demonstration for the nineteenth had been canceled because the demands had already been granted! Clearly, these people too thought that just debt cancellation was enough.

In sum, I think it is fair to say that the demands of the south are three: that debt cancellation not be linked to structural adjustment nor to any other imposed conditionality and that it be part of a process towards and equitable world economy,²⁶ that the immorality of the debt and the historical responsibility of the rich countries for the present state of affairs be recognized, and that it be recognized that the debt has already been paid.

The attention paid by the G7 to the issue of debt is a success for the Jubilee 2000 Coalition and clearly demonstrates that the approach to lobbying has been effective. This is true even if we are not satisfied with the outcome. Therefore, the same style of lobbying should be continued.

The SEDOS World Debt Working Group should make sure that it is known among the member congregations of SEDOS that the Jubilee 2000 Campaign continues and that signatures are still being collected for the petition. There may be some misconception that the collection of signatures ended with the Cologne summit. Over 17,000,000 signatures were submitted to the G7 at Cologne. The Jubilee 2000 Coalition intends to continue submitting signatures over the coming months. 5,000,000 more signatures will make it the biggest petition ever.²⁷

I think that the outcome of the Cologne summit has made us more aware that the different dimensions of the Jubilee 2000 demands (debt cancellation, an independent transparent procedure, steps to prevent similar debt crises from emerging in the future) are not three different and separable items. They are integrally related and together constitute one demand. If the first demand of debt cancellation is achieved but not the other two demands, should we see this as a partial achievement of our goal? I think not. De-linking debt relief from structural adjustment, carrying out debt relief trough an independent and transparent process, and addressing the injustices and inequities at the core of the debt crisis are so integral to the goal of the debt cancellation campaign that an achievement of debt cancellation without steps towards achieving these other dimensions of the goal should not even be seen as a partial achievement of our goal. The G7 granted some debt relief while actually strengthening the conditionality of structural adjustment. In terms of the whole goal of the campaign, that is a step backward, not a step forward.

The Jubilee 2000 Coalition has raised consciousness and has created a network. Likewise, through collaboration with the Jubilee 2000 Coalition, religious congregations have substantially contributed to the process. I think that it is fair to say that we have learned something of the potentiality of the network that has been evolving over recent years through SEDOS, the JPIC Commission of the Unions of Superiors general, and the network of justice and peace promoters. I think that we have also learned of the catalytic role that a small group like the SEDOS World Debt Working Group can play, working through this network.

Nevertheless, in some cases, understanding of the debt crisis frequently remains superficial. Some have understood the Cologne Debt Initiative as a major step toward debt cancellation (taking at face value the statement of $70 billion), and without noting the conditionality applied. I have even encountered some who think that when the G7 spoke of reform, it mean democratization and greater respect for human rights, rather than structural adjustment!

So awareness-raising remains an important task, and we should continue with it through the same networks we have used so far.

There seem to be four trends linked to the campaign for debt cancellation that are either emerging or strengthening and deserve our attention and support

More and more, people involved in the movement are arguing that the indebted countries should simply refuse to pay. Implicit in this is the recognition that the debt is both unjust and that, in fact, it has already been paid. It would, of course, be difficult for an individual government to refuse to pay off its debts, given the power of the International Financial Institutions and the main bilateral creditors to withhold future funding . However, I think it is important to recognize the validity of the assertion whenever there is a misallocation of accountability, whenever the debt is clearly unjust, and whenever the debt has already been paid off at the original interest rate.

We should therefore collaborate with this movement in seeking ways to assert itself. This movement will take specific forms in some countries where government policy gives a high priority to debt servicing and "Don’t owe! Won’t pay!" movements seek for a change in those policies, and also in countries where there are clear cases of unjust debt. In South Africa, for example, it expresses itself in the campaign against apartheid debt²⁸ and in the Philippines in the campaign to repeal the Automatic Appropriations Law that automatically appropriates government revenue for debt servicing.²⁹

At the Jubilee 2000 conference after the human chain demonstration in Cologne, one speaker from Latin America, in a quite humorous way, calculated that if all the gold that was taken out of the Americas were to be repaid at 10% annual interest, the amount of gold that would now have to be repaid would outweigh planet earth! The point is clear. From the beginnings of colonialism, so much wealth has been taken from the developing countries by the developed countries, that only a twisted ethical perspective and a set of laws biased towards the benefit of the developed countries could consider the developing countries the indebted party.

In Africa, this movement is focused around the Abuja Proclamation and the ARM (Africa Reparations Movement).³⁰ I have heard of other movements, but I don’t have contact with them. Linking with these movements could contribute a lot to putting the debt in perspective.

There is a trend that is emerging to appeal to legal rather than political processes to resolve the debt crisis. In a number of countries, this has proved effective with indigenous land rights. The process as it is being planned in most cases is to form public tribunals where people with expertise pool their knowledge and conduct hearings to determine true accountability for the debt, how the money was used, etc., and to find legal protection for poor countries from being required to pay for debts for which they have no just accountability. With debts such as that for the Bataan Nuclear Plant, the closure of the cashew factories in Mozambique, loans made as "development loans" to the Marcos government at the height of the campaign against Cory Aquino, etc., it may be possible to find procedures under contract law that will in fact prevent this unjust transfer of accountability. ³¹

As far as I know, none of us in the SEDOS World Debt Working Group have sufficient knowledge of law (either international or country specific) to discuss this issue in depth. I think that we should make an attempt to learn. We should also try to keep in touch with this movement as it develops in different countries and try to raise awareness about it among the member congregations of SEDOS. It is quite possible that some members of the various SEDOS congregations do have expertise in these areas. It is also quite possible that some members were involved in development projects in the indebted countries at the time the debt was incurred, and have specific knowledge that may be useful in these tribunals and hearings.

The next year is likely to be one of change for the SEDOS World Debt Working Group, mainly because of personnel transfers. Many of the original members of the group have already moved on, and in the next year, more will. I myself expect to return to Japan in the latter half of next year.

At the same time, we have shown that through the various networks available to it, SEDOS is in quite a strategic position to promote campaigns such as this one. It would seem important to avoid letting upcoming personnel transfers weaken the possible role that the SEDOS World Debt Working Group can feasiblely play.

The SEDOS World Debt Working Group has long claimed that its main resource is contact with the members of the respective congregations who have spent long years deeply involved in the indebted countries themselves. In fact, this contact has been informal. Email and the internet seem to be opening up new possibilities. We could now set up a broader working group with members from various parts of the world, who would share their ideas through the internet. This could be achieved by the use of email, bulletin boards, discussion groups, listserves, homepages, etc. Costing would certainly not be a significant factor, but partly because of costing and partly because of workload, it would probably be limited to participants with internet access. However, this is no longer a small number of people.

Having a broader network inclusive of people actually involved in campaigning within the indebted countries would also enable us to relate more directly to the growing trends described above. Perhaps we could give some consideration to developing this network over the coming months.

We have adopted the theme "Towards and equitable world economy" as an ongoing focus and we have consistently argued that more than just debt cancellation is necessary. I think that we need to begin spelling out some of that "more." We need to look seriously at issues that are emerging and campaigns that are taking place and be able to develop positions and promote campaigns that do promote an equitable world economy. Perhaps the kind of broader network suggested above could help us develop a forum where these matters too could be discussed.

G8 Communiqué Köln 1999. http://www.G8Cologne.de/07/
G7 Statement. http://www.G8Cologne.de/03/00126/index.html
Report of the G7 Finance Ministers on the Köln Debt Initiative. http://www.G8Cologne.de/ 06/00114/index.html

FROM THE EURODAD HOMEPAGE

G7 Cologne Summit: leaders Adopt NGO Wording but Make Only Small Concessions. http:// www.oneworld.org/eurodad/koln_otcome.html
The EURODAD Guide to Debt and the G7. http://www.oneworld.org/eurodad/g7cologne.htm

IMF News Brief No. 99/33, June 22, 1999. http://www.imf.org/external/np/sec/nb/1999/ NB9933.htm
Anthony R. Boote and Kamau Thugge. Debt Relief for Low-Income Countries: the HIPC Initiative. IMF Pamphlet Series No. 51, 1998. http://www.imf.org/ external/pubs/ft/pam/ pam51/contents
Debt Initiative for the Heavily Indebted Poor Countries (HIPCs) http://www.imf.org/external/np/ HIPC/HIPC.htm

Joseph Hanlon. Details and Interpretation of the Köln (Cologne) Debt Initiative. http:// www.jubilee2000uk.org/news/cologne24jun.html
From the Ambassador: Germany's response to your letters. http://www.jubilee2000uk.org/ germany0910.html"Cologne Initiative" no solution for the debt crisis. http://www.jubilee2000uk.org/cologne.html
Jubilee South Rejects Köln Debt Initiative as a Cruel Hoax. http://www.jubilee2000uk.org/ cologne.html>
G8 announcement is progress but only the first step on the way to a debt-free start for a billion people (19 June 1999). http://www.jubilee2000uk.org/cologne.html
$70 billion in cancelled debt an important step, but only a first step for the world's poor (18 June 1999). http://www.jubilee2000uk.org/cologne.html>
Philippine government pressed to scrap debt servicing law http://www.jubilee2000uk.org/ news/philippines2507.html

Adams, Patricia. The Debts of Corruption. http://www.jubilee2000uk.org/features.html> and click "Using international law, Jubilee 2000 campaigns are involved in challenging the very 'legitimacy of international debt."
Gugler, Alfred. The Win-Win-Win-Scenario: Conversion of Debt. http://www.oneworld.org/ ecdpm/anniv/fingug.htm
Sprietsma, Henry. Structural adjustment and taxing aid: A way forward after Lomé IV. http:// www.oneworld.org/euforic/courier/157e_spr.htm
Stiglitz, Joseph E. More Instruments and Broader Goals: Moving Toward the Post-Washington Consensus. UNU World Institute for Development Economics Research (UNU/WIDER) 1998. http://www.wider.unu.edu/stiglitx.htm

Notes

²See the Jubilee 2000 Coalition home page:<http://carryon.oneworld.org/jubilee2000/main.html>