• Debt and HIPC

Debt and HIPC

In many of the poorest countries, the provision of decent, accessible public services is threatened by huge debt burdens and damaging policies demanded by creditors. This policy brief highlights the impact of debt and debt relief on developing countries. The paper argues that debt relief allows the world’s poorest countries to invest in public services for the poor.

The policy brief highlights the following:

• in 2005, developing countries paid out $1.4 billion every day in servicing external debts
• debt undermines public services not simply by causing under-investment but it has also driven privatisation of services, which has often been disasterous
• the lack of funding for public services and the policies demanded as conditions of loans and debt relief have hit the pay and conditions of public sector workers particularly badly, further undermining public service provision
• once debts have been cancelled, the impact on public services has been resolutely positive
• repeated studies have shown a marked increase in investment in public services after debt cancellation including drastic increases in education and health care spending.

The paper calls for the following:

• full cancellation of all illegitimate and unpayable debts, without externally-imposed conditions
  and without attributing this to aid budgets
• open and accountable use of the proceeds of debt cancellation, which respects the demands of unions, debt campaigners and other citizen organisations for increased investment in public services
• a fair, open and comprehensive framework for resolving the debt crisis, which takes account of the origin of debts as well as their impact.
  

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