The Jubilee Blog

Victory at the SEC! For Greater Transparency

Last week, a huge victory for transparency and anti-corruption was won when the Securities and Exchange Commission (SEC) voted on the final rules necessary to implement the Cardin-Lugar Extractives Transparency Amendment to the Dodd-Frank Act.[i] This vital move will allow citizens, especially of developing nations, access to information to hold their governments accountable and fight corruption.

Thirty Years after the Mexican Debt Default: Déjà Vu?

By: Mary Donahue

This month marks the 30^th anniversary of the official start of the modern debt crisis. In August 1982, Mexico suspended repayment on all loans, essentially defaulting on its debt following decades of undiscriminating lending from Western banks. While interest rates attached to these loans were initially low, they were variable and following the tumultuousness of the 1970s the United States dramatically raised interest rates, significantly impacting developing nations’ debt servicing. The Volcker Shock, as the sudden hike came to be called after then-Chairman of the Fed, Paul Volcker, was intended to mitigate a financial crisis in the United States, but it also succeeded in throwing the developing world into a debt crisis that has sustained over these past thirty years.[i]

Egypt: Solutions for a Sustainable Future

IMF Managing Director Christine Lagarde, Egyptian President Mohammad Morsi and Egyptian Prime Minister Hisham Qandil met in Cairo to discuss Egypt's formal request for a USD$4.8billion loan from the Fund. Egypt already has a massive debt from loans that were taken out under Hosni Mubarak and saddling the Egyptian people with further debt may do more harm than good.

With bated breath, the world has been waiting to see what the future of Egypt will be.  Saddled with an estimated $35 billion of external debt, Egypt has been using much needed tax revenue to pay back international creditors.  Egypt recently put in a request for $4.8 billion to the IMF but with massive debt taken out under Hosni Mubarak, further debt on the Egyptian people may do more harm than good.

Today, we released the following statement on Egypt’s new loan talks with the IMF:

Mozambique's Debt Burden: Sympathy Is Not Enough

By: Andrew Hanauer

There are lots of reasons for going into debt, some more likely to inspire sympathy than others.  Take, for example, former baseball player Jose Canseco, whose financial troubles arose from multiple divorces that allegedly cost him $15 million, one of which may have been brought on by a 1990 incident in which Canseco crashed his Porsche into his then-wife’s BMW.  Mr. Canseco tried desperately to pay off his debts, but neither his stint as a celebrity boxer (he had his twin brother fight for him and hoped nobody would notice….somebody did) nor his recent sojourn at the age of 47 into the Mexican baseball league (where he was banished for testing positive for steroids) seems to have done the trick.  In this economy, it’s tough to feel too sympathetic for Jose.  On the other side of the coin are the parents asked to pay off the student loans of their dead child and the millions of Americans who have lost their homes and/or their jobs in the financial meltdown through no fault of their own and who have never once asked their twin brother to fight for them in a celebrity boxing competition.

If the same sympathy scale can be applied to countries, then the southern African nation of Mozambique is distinctly un-Canseco-like.  From colonialism to a brutal war initiated and sustained by external nations to a series of natural disasters, the list of explanations for Mozambique’s debt burden is long and the level of sympathy it evokes is substantial.  Sympathy, however, is not going to help one of the world’s poorest countries feed its people and set itself on a path to economic prosperity.  Mozambique, like many developing nations, needs debt forgiveness now.

Debt and the President's Strategy for Sub-Saharan Africa

By: Madelynne Wager and Mary Donahue

Last month, the White House hosted a discussion on U.S. Policy Toward Sub-Saharan Africa to showcase and answer questions about the recently released U.S. Strategy Toward Sub-Saharan Africa. Eric LeCompte, Executive Director of Jubilee USA, was among the over 125 activists, students and business leaders whom attended the event, which featured a distinguished group of panelists.

A Portrait of Unity

The Royal Air Force Aerobatic team flying over Buckingham Palace during Diamond Jubilee celebrations

By: Mary Muyia

Watching the closing ceremony of the Olympics, I could not help but feel a sense of harmony between the nations. For the Olympics are a competition, true, but they are also a global unifier – did people from all over the world not root for Usain Bolt, the astoundingly fast gold medal winner from the Bahamas? Or cheer on the two women Olympians from Saudi Arabia, the first female athletes that Saudi Arabia has ever allowed to compete on the international stage? So while national pride is at the forefront of the Olympics, the sportsmanship and unity of all the nations is a strong underlying current.

The closing ceremony also reminded me of the unity echoed a few months earlier when the United Kingdom marked Queen Elizabeth’s Diamond Jubilee. The Diamond Jubilee and the Olympics were a time of great jubilation that came from the UK and affected the world, bringing together people from around the globe to celebrate, watch in awe and unite behind these occasions.  While the Diamond Jubilee hit headlines worldwide, here at Jubilee USA, we have been striving towards a very different type of Jubilee. 

A Wolf in Sheep’s Clothing: the Poverty Reduction Strategy Paper

 

PRSPs allow international financial institutions to make claims of promoting domestic ownership while they continue to heavily dictate development policies within debtor nations.

By: Madelynne Wager

The World Bank and the IMF set out to cancel debt in low-income countries for poverty reduction through a program called the High Indebted Poor Countries (HIPC) debt relief initiative.  This program is aimed to help the world’s poorest – nations that are struggling in abject poverty and are crippled with debt.  But what many do not know is that this initiative comes with mandatory conditionalities attached to international loans.  Initially called Structural Adjustment Programs (SAPs), these Fund and World Bank imposed conditionalites were lambasted as harmful to developing countries, mandating austerity and privatization with a one-size fits all policy. SAPs have fallen out of favor, but rather than truly transform the lending system, HIPC has cloaked these harmful adjustment programs in sheep’s clothing, called the Poverty Reduction Strategy Paper.

HIPC promised the world’s poorest nations additional funds for social investment by resolving unmanageable debt levels. However, access to HIPC was limited, and countries that did gain access were required to establish favorable track-records of ‘reform and sound policies’ by adhering to IMF and World Bank supported programs before reaching the HIPC completion point. Consequently, countries became subject to harsh austerity measures and reserve requirements before ever receiving debt relief.

Women, Structural Adjustment Programs and Debt Relief

Two women farm with their children on their backs in Niger. Women are often pressured to find work while still taking care of children and household duties. This is called the double burden and it can often worsen with national debt problems.

By: Maddie Baker

Criticism of the International Monetary Fund and the World Bank has been rampant in the past few decades due in part to the negative effects of Structural Adjustment Programs (SAPs) in many countries. These programs are infamous for cutting down the public sector and slashing social spending in countries that are in most need of social programs.  Although it is well known that SAPs and neoliberal reform policies weigh heavily on the poor, the fact that women bear a disproportionately large part of this burden is often forgotten.  

Battle of the Bulging Debt: Why Crash Dieting Doesn’t Work for an Economy

By: Wenyu Heng

When battling the bulge, crash diets never work.

For someone struggling with obesity, it’s unhealthy to severely restrict caloric intake. Eating significantly less may seem the obvious solution to obesity, but crash dieting, especially for long term results, rarely works and may even put one’s life at risk. The ultimate cure is a good, balanced diet, regular exercise and a healthy life style rather than drastic and immediate weight reduction.

The same rule also applies for battling debt crises. When faced with excessive external debt and a growing budget deficit, slashing budgets and implementing austerity that involves severe reduction in the public sector’s expenditures may be a fast solution to decreasing debt. However, budget cuts are not the panacea they’ve come to be billed as. Rather, austerity can hinder economic growth and may even put a country’s long-term competitiveness at risk, distracting from a true cure to debt crises: develop a sustainable economic model to improve competitiveness and rebuild investors’ confidence, which public sector spending can play an important role in doing.

And yet, when faced with international debt crises, the prevalent recovery plan remains a crash diet of austerity.