HPSAAN ForeignDebt

Foreign DebtandAIDS: 

Foreign Debt and AIDS

The Origin of Debt : 

The Origin of Debt 1973 OPEC raised the price of oil Western Banks lent money without thought 1982 Mexico said couldn’t pay and the International Bank for Reconstruction and Development (World Bank) and International Monetary Fund (IMF) decided to “help out” Mexico and other countries

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The Effect of Debt Little of the money actually went into programs designed to help the poor Increased spending on war, oppressive regimes Corruption

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The Effect of Debt, cont. Today, sub-saharan Africa spends $14.5 billion a year repaying debts to the world’s richest countries and international agencies like the World Bank and IMF. Africa still owes rich countries almost $300 billion Soaring interest rates have multiplied old debts several times over – for example, Nigeria originally borrowed $5 billion, but due to subsequent rises in interest rates, it will still have to repay $32 billion despite already having paid $16 billion. The enormous amounts spent by these countries means that many countries in Africa spend more each year on debt repayment than on health care or education, diverting much-needed funds away from providing quality healthcare or education.

Thanks for the help!: 

Thanks for the help! In 1982 when the World Bank and IMF took over, debt of the developing world totaled about $800 Billion. By 1990 that number reached$1300 Billion Countries were paying more in debt service than on healthcare and education combined!

Types of Debt: 

Types of Debt Private- owed to private companies and commercial banks Bilateral- owed by one government to another Multilateral- owed to international financial bodies like the IMF and World Bank

What Has Been Done: 

What Has Been Done Structural Adjustment Programs (SAPs) Many debtor countries defaulted on their payments in the early 1980s, threatening stability of credit-debt system. To help debtor countries repay debts, IMF and World Bank created system to reevaluate and reschedule debt repayment programs for many countries. Created strict economic programs imposed on debtor nations that sought to reschedule debt repayment or borrow more money;Structural Adjustment Programs (SAPs)

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SAPs: Structural Adjustment Programs Goal: increase debtor nation’s hard currency by increasing exports and reducing imports, with the goal of using the hard currency to repay debt. SAPs intend to stabilize poor country economies by creating economic growth which will in time `trickle down’ to the poor. Some Requirements of SAPs: Governments should spend less on healthcare, education, and social services Devalue national currency, lower export earnings and increase import costs cut back on food subsidies cut jobs and wages for workers in government industries and services encourage privatization of public industries take over small subsistence farms for large-scale export crop farming instead of staple foods.

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Impact of SAPs Increased costs of education and health care Decreased government spending on health care Laying of workers Devaluation of currency

Relief Efforts Begin: 

Relief Efforts Begin In 1995 Jubilee 2000 Campaign is started 1996 World Bank and IMF introduce their Heavily Indebted Poor Countries (HIPC) Initiative 1999 U.S. becomes first country to cancel debt owed by some of the world’s poorest nations, leading to other developed countries to do the same

HIPC Initiative: 

HIPC Initiative Began in 1996 with the intent of relieving debt burden on those countries that can’t handle it In 1999 modifications, known as the enhanced HIPC, were made in order to strengthen the links between debt relief, poverty reduction, and social policies

HIPC Initiative: 

HIPC Initiative Criteria: unable to handle debt burden, institute reform and sound policies, develop Poverty Reduction Strategy Paper (PRSP) Interim Relief 27 Countries have been approved under HIPC Initiative IMF predicts debt service paid by these countries in 2004 is half that paid in 1998

What Has the US Done?: 

What Has the US Done? 1999- H.R. 1095 Debt Relief for Poverty Reduction Act, reduce monies owed to the U.S. by HIPCs from loans made prior to Jan. 1, 1996 2003- H.R. 643 Debt Cancellation for the New Millennium Act, a call for the U.S. to pressure the IMF and World Bank to reform the HIPC Initiative and bring more debt relief to more countries

HIPC Initiative Has Helped: 

HIPC Initiative Has Helped Health Spending in Percent of GDP

How Does Debt Affect Healthcare?: 

How Does Debt Affect Healthcare? HIPC payments (average)

The HIV/AIDS Crisis: 

The HIV/AIDS Crisis Approximately 39.4 million people in the world today are living with HIV/AIDS, and 95% of those live in developing countries. Sub-Saharan Africa alone is home to about 25 million - that's about 63% of the world's cases. AIDS is also impacting other regions: Asia, for instance, has 7.4 million infected persons, and growing. In October 2002 UNAIDS and the World Health Organization said $10.5 billion in annual spending would be needed by 2005 “for a ‘barebones’ package of prevention, treatment, care and support” and $15 billion in annual spending by 2007 to fight AIDS

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Debt and HIV/AIDS WDM and Medact believe that economic reforms under SAPs may have aggravated the spread of HIV/AIDS: Firstly, by reducing public access to health services; Secondly, by social and economic changes which increase poverty and vulnerability and so make people more susceptible to infection Between $7.5 and $15 billion is needed annually to fight HIV/AIDS in Africa each year. However, Africa pays out $13.5 billion to repay debt every year. Africa spends four times as much on debt repayment as on healthcare. For every dollar sent to the poorest countries in aid, $1.30 is sent back to lenders in debt repayment.

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What Can Be Done Cancel the Debt The Heavily Indebted Poor Countries Initiative, begun in 1996, seeks to cancel $100 billion in debt from dozens of poor debtor nations, which would liberate the funds necessary to begin providing adequate healthcare and education However, under the current HIPC rules, a country seeking debt must first undergo six years under an SAP, a move that could further destabilize and impoverish already poor nations SAP Restructuring Structural adjustment programs should be subjected to a fundamental reform, making poverty reduction their central objective, with the understanding that any macro-economic policy must be judged in terms of its ultimate impact on the poor

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Ways to learn more… HPSAAN http://www.amsa.org/global/hpsaan.cfm Jubilee Drop the Debt http://www.jubileeusa.org/ DATA- Debt AIDS Trade Africa www.data.org

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Thank you to those who created this presentation: Kimberly Spillman Jessica Rhee Tanya Wansom