How much debt must be cancelled?

Abstract

Developing country debt now exceeds $2.4 trillion and has become a major international political and economic issue for debtor governments, creditor governments, the IMF and World Bank, and campaigning organizations such as Jubilee 2000. For the poorest countries, debt has become unpayable and debt service an obstacle to development. This paper argues that debt crises and substantial debt cancellation are part of the normal economic cycle, and that an unusual aspect of this cycle has been the unwillingness to cancel debt. Recent historic precedent suggest that at least $1 trillion in debt would need to be cancelled. The paper then uses a ‘rights-based approach to development’ to estimate that more than $600 billion in debt must be cancelled to release sufficient funds to meet internationally agreed development targets and thus satisfy human rights. Finally, the paper argues that lenders must take responsibility for illegitimate, corrupt and odious loans. Debt cancellation is the norm, not the exception, and the only question is how much. Copyright © 2000 John Wiley & Sons, Ltd.

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