Cebu Declaration: Break the Debt Cycle!
Posted on May 18 1999 |
In the advent of the third millennium, Jubilee resounds its redemptive call of debt cancellation. This is most fitting in the present situation when the great majority of nations are entrapped in a vicious cycle of indebtedness and underdevelopment. The debt problem has matured into institutionalized global usury. Perpetrated by international and multi-lateral finance institutions and banks dominated by G7 nations and private monopolies of the North, modern usury is a major factor in the widening distance between the North and the South.
The distance that sets apart the rich and poor nations has widened in great disproportion. As of 1996, 80% of the 5.7 billion world's population live in countries where per capita gross national production is less than $ 1,000 a year. Of this overwhelming majority, 1.5 billion people live in absolute poverty. More than 4 billion people eke out their daily grind on just $1 - $2 earning a day. Of the total world GNP, 20% of the poorest in the world subsist on 1.4%, while 20% of the richest feast on 84.7%. On top of the ladder of richness are 358 billionaires who own among themselves assets worth $762 billion! This great amount of wealth concentrated in the hands of few individuals is equivalent to the combined income of 2.35 billion poor people!
This global economic and social injustice is a gargantuan challenge to the fulfillment of the vision of Jubilee. The spiralling problem that is the debt cycle is largely contributing to this global infamy!
By their monopoly control of global capital, the North has entrapped nations in the South into debt dependence. The international lending operations dominated by the global centres of capital and their monopoly finance institutions are pushing many nations deeper into the debt mire. The combined foreign debts of 22 developing countries that include the "Newly Industrialized Countries (NICs)" and "emerging markets" in Asia was $2.137 trillion, as of 1997. At the same time, the combined foreign debt of the 40 Highly Indebted Poor Countries (HIPCs), which are mainly in Africa and Latin-America was $214 billion. This situation manifests the mounting problem of debt and debt-payment.
As foreign debts of countries increase so do the amount of profits the creditors draw back in terms of payments on principal and interest. In this simplest form of extraction of wealth, the international usurers are amassing super-profits. For example, in 1993 the combined debts of underdeveloped countries stood at $1.7 trillion, despite them having repaid $14 trillion in debt service. As the case of the Philippines shows, our standing foreign debt was $49.1 billion by the end of 1998 although we Filipinos have paid more than $63 billion in principal and interests from 1970-1996.
Moreover, there is more than interest on loans and the fulfillment of loan obligations that put debtor countries tightly entangled in the debt cycle and in perpetual underdevelopment and mal-development. The most vulgar manifestation of the debt cycle is -paying outstanding debts with new debts.
The debtor-countries are dragged into this by their underdeveloped economies and by other impositions the creditors attach to loans. Other than interests charged on loans and the terms of payment, the debtor countries' performance in debt payment and compliance with structural adjustment policies are requisites imposed on them by creditors. The International Monetary Fund (IMF) and the World Bank (WB) are the chief pushers of the whole schema of structural adjustments that are designed to further open up third world economies for penetration and plunder by private monopoly corporations.
Structural adjustment programs (SAPs) are mainly the policies of liberalization, deregulation and privatization of national economies. These have more specific concerns on labour, trade, finance and banking and capital flows. This triad of policies, tied to loans, facilitates the unhindered flow of both capital and goods from North to South. These policies ensure for the North maximum return on investments and the repayment of their loans even in events of crisis of the same or greater proportion than the one presently raging. In other words, these debt impositions facilitate the control of global monopoly capital of the North over whole economies of the South, translated in trillions of dollars of super-profits.
Deregulation and privatization restrict client governments from active intervention in their domestic economies and remove all constraints to foreign investments and repatriation of profits and of course the opening up of client countries' foreign exchange reserves even for speculative use of private foreign investors. Liberalization of trade and finance preserves the import-dependent and export-oriented character of Third World economies, relegating them in perennial deficits in balance of payment and current account and drained of wealth and resources; therefore, in state of perpetual underdevelopment and shackled in the vicious cycle of debt bondage.
The immorality of the debt burden is seen in its social costs. For the Philippines, many Asian countries and the rest of the Third World, annual debt payments grab the largest share in national revenue allocations leaving pittance for health, education, food production, and job creation. The Philippines, for example, has been allocating 30 to over 40 percent of its national budget for foreign debt servicing at the great loss to basic social services. Such immoral sense of priority was even legalized by the Marcos-crafted Presidential Decree 1177, providing automatic annual appropriation for debt service. For 1999, $5.9 billion (or P235billion) has been allotted for foreign debt service. This is more than 40% of the national budget!
In a country where; 75% of the people live within and below the poverty threshold; 30% do not have access to health services and sanitation; 30% of children under age 5 are malnourished; and, 30% of children never reach grade 5 in elementary education, allocating almost half of the budget for debt service at the expense of social services is unjust and unforgivable.
There are more to debts that make them unjust and abominable. One is the imposition that debts incurred by private foreign corporations and those of the local elite, including the cronies and bureaucrats who milked the public coffers, are assumed by governments. Public assumption of private debts is ensured, in the first place, by government guarantees on loans used in the expansion private interests. The other is the fact that public or government debts, most often than not, were used for purposes that benefited private and not the public interests. Government debts are used to cover import payments and debt-service; shore-up the dwindling foreign exchange reserves; and, spent in infrastructure and showcase projects that are usually cornered by foreign contractors. Furthermore, these public works are the common sources of bureaucratic corruption.
Debts that propped-up dictatorial and other repressive regimes are immoral and most detestable. The Philippines, Indonesia, Burma, Thailand, South Korea, to mention a few in Asia and many more in Latin-America and Africa, at one time or another, were under repressive regimes. In our own case, the 2 decades of Marcos rule brought our foreign debts from $599 million in 1965 to $26.5 billion by the time he was ousted in February 1986. This amount is more than 50% of the outstanding foreign debt of the Philippines as of 1998! Despite calls for their repudiation, the succeeding Aquino government chose to honour all these debts to the great frustration of the Filipino people. Form then on, Marcos cronies who amassed wealth have come back to power, and exonerated of their crimes. His wealth, stashed away in Swiss and other foreign banks, is worth billions of dollars. The irony of this wealth is that, the series of governments after Marcos disregarded the urgent demands of the Filipino people to seize this wealth for domestic use. At worst, this stolen wealth could have most likely been loaned back by the banks to the Philippines or some other governments or private entities.
How the Northern creditors are addressing the Asian crisis illustrates how they take advantage of it in order to concentrate more wealth in their hands and expand their hegemony in the region. They sowed the seeds of the crisis, in the first place, now, they are rubbing salt to injury by infusing new loans in crisis-stricken countries in the guise of rescue packages from the IMF and the Japanese government.
The IMF's $117 billion rescue package and the Japanese government's $33 billion Miyazawa Fund are indeed increasing, by several billions more, the foreign debts of recipient Asian countries. But the loans, far from rescuing millions of workers thrown out of jobs and losing small local businesses, are intended to bail out private multinational banks and industries from their bad loans and precarious investments. The Japanese government, for instance, was quick to assume 83% or $520 billion of the $800 billion bad loans that giant Japanese banks "lent" to their own multinational corporations and their business partners operating in Asia. Some of these were loans guaranteed by client governments and used by foreign and big local private corporations. In the end, the people will shoulder payments of these.
More significantly, the rescue loan packages facilitate global super-monopolies' buying spree, at bargain prices, of bankrupt local corporations and banks including state enterprises and public assets. For instance, the IMF and Miyazawa loans availed by the Philippine government will fund the local banking reform program which simply means, allowing giant multinational banks up to 100% equity in local banking. In South Korea and Thailand, for example, American and German super monopolies are having a heyday buying losing local companies and banks at auction prices.
The sufferings the people bear with increasing debt burden can alone justify debt cancellation. However, the World Bank, IMF and G7 nations are capitalizing on the debt dependence of HIPCs (Highly Indebted Poor Countries) to concoct a debt relief scheme that will ensure for them further control of HIPCs. On several counts, the HIPC debt relief scheme is circumventing the Jubilee call for debt cancellation, which the "HIPC Initiative" is riding on. First, it requires "eligible countries" to further restructure their economies. Second, the "eligible countries" must have the "ability to pay their outstanding debts". Third, the whole scheme is "too late, too little amount and too few countries".
To complete the irony of its own debt-relief plan and to cover-up its unwillingness to cancel debts, the IMF-World Bank tandem goes further by introducing concepts such as "sustainable debt servicing" or "sustainable debt management" and "payable or un-payable debts". All these recently coined fiscal jargons only reveal further the latent usury done by IMF-WB which prescribes that all debts are payable and "sustainable debt servicing" means paying debts with new debts.
International usury is bereft of all moral pretensions - it is, in fact, a major means by which giant private interests expand and continue to amass wealth at the great expense of the world's population and the whole creation.
In the face of all these and compelled by our faith, WE take upon ourselves the challenge of Jubilee to move beyond the call of debt cancellation and strike at the very core of debt dependence and perpetual underdevelopment. Thus, we put forward our central position -
Break the Debt Cycle!
WE demand the unconditional, immediate and total cancellation of Third World debts, beginning with odious and illegitimate debts; and oppose the HIPC initiative as a grand scam, a self-serving scheme to push HIPCs into further debt dependence.
WE call for the abrogation of all loan agreements that provide for structural adjustments, public assumption of private debts and the further exposure of Third World economies to plunder by private multinational giants. Towards this, we shall pursue the promotion of self-reliant and sustainable economies, giving priority to domestic needs as opposed to export-oriented and import-dependent economies.
WE reject the IMF, Miyazawa and other rescue loans for Asia that subvert national economic development and facilitate the gobbling up of bankrupt domestic companies by multinational super monopolies through banking and finance liberalization and the sale of state assets and enterprises to private monopolies.
WE demand the realignment of budget allocations to give priority to social services and domestic economic needs as opposed to debt service payments. We urge the Philippine government to realign the national budget along this framework and repeal P.D. 1177 that provides for automatic appropriation for debt service.
WE press for the immediate repudiation of all loans incurred by the Marcos dictatorship and all other dictatorial regimes in Asia. Specifically, we demand the recall of the Philippine Ombudsman's decisions exonerating Marcos and cronies on behest loans and economic crimes.
WE support and join all initiatives, local and international, religious and secular, that are geared towards achieving immediate and substantial gains for the world's poor people and oppressed nations in the pursuit of global economic justice.
(Adopted unanimously by the PAJCAD Visayas-Mindanao Jubilee Conference held at St. Theresa's College, Cebu City, Philippines on May 18, 1999)
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