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Debt is one of the main instruments of control that the developed world have over poor developing countries. It is also of crucial importance in the Eurozone with the present crisis over Greek debt. In short, those who own the debt can make demands that are virtually impossible to refuse. The alternative is to default on debt. Defaulting is a disastrous policy as it makes future governments unable to borrow. In short, defaulting gives a country pariah status, and cripples social improvement programs.
What is commonly not understood about debt servicing by the average man or woman on the street is that it is a very, very lucrative business for a few banks and larger corporations. These monied institutions are keen to hide the fact that debt relief has reversed the flow of money. Because of interest, poor countries pay several times more than they borrowed in the past. The IMF and the World Bank are no better than loan sharks. Thanks to them, if you add all the money donated to Africa to the sum of money lent to African countries it would be less than the amount of money Africa has collectively paid to the ‘West’ in debt servicing. While people think that charity is not working in Africa, the truth is that aid agencies and NGOs have not been able to make a difference because of the crippling amount of debt that African countries have.
Debt is one of the main reasons why there have been running battles between the police and protestors outside World Bank and IMF meetings.
Realizing just how unpopular the topic of third world debt had made the International Monetary Fund the institution has sought to improve its public relations with its Heavily Indebted Poor Country (HIPC) initiative that allowed them the discretion to cancel debt.
Liberia amassed a massive debt under the military dictatorship of Samuel Doe who came to power in a coup in 1980. The IMF was more than happy to lend money to the Doe regime. This money was spent on weapons and other means to consolidate power, not to help the people of Liberia. The IMF must have known full well how bloody the dictatorship of Samuel Doe was but they had no qualms lending it money. Nor did they expect the debt to ever be paid off.
After 14 years of bloody civil war the Doe regime eventually collapsed, and in 2005 Ellen Johnson-Sirleaf won a fair election to become the leader of Liberia. When she did the country inherited a crippling debt of US$842 million to the IMF. With such a debt the chances of reconstruction were severely limited.
Liberia applied for debt cancellation through the HIPC initiative but the IMF dragged its heels.
It was mostly thanks to the 48,000 emails that the IMF received from ONE members calling for the cancellation of Liberia’s debt that anything was done. A full 2 years after Liberia gained democracy the IMF agreed to cancel the debt. During that time they continued to collect on the debt and endanger the fragile new democracy in the country.
One has to wonder that if the IMF had not been pressured by public opinion whether Liberia’s debt would have ever been cancelled. Clearly it is a matter of bringing the facts to light and organizing protests and petitions that will make the IMF keep its promises to help the poorest countries of the world. Otherwise it is business as usual.
For more information on this story: http://www.one.org/c/us/pastcampaign/105/