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Rich countries meeting in Paris on Wednesday must not only suspend all debt repayments from tsunami affected countries, but go further and cancel a substantial proportion of the debts permanently, international agency Oxfam said today. Any cancellation or moratorium should only have one condition; that it is spent transparently on poverty reduction and reconstruction.
The Paris Club of rich country creditors are gathering to decide what, if anything, to do about the huge debts owed to them by the countries devastated by the tsunami. Oxfam is calling on rich countries in the Paris Club to not only suspend debt repayments, which would only land poor countries with hefty repayments later, but to cancel enough debt and make repayment feasible in the future.
"The tsunami has accentuated the destructive impact of debt on poor countries," said Krista Riddley, Oxfam America's Deputy Director of Policy. "Countries struggling to recover after the tsunami could invest more in reconstruction and poverty reduction if significant amounts of their debts are not just postponed, but effectively cancelled. Otherwise, devastated countries will simply rebuild the poverty of the past."
With just one day's debt repayments, Indonesia could instead afford 100 desperately needed aid flights, while India could help provide 18 million people with emergency clean drinking water.
Oxfam warned however, that debt relief for tsunami-affected countries must not come at the cost of providing debt relief for other poor countries. Cancellation of unpayable debts for all the poorest countries is essential as a vital step to achieving poverty reduction and the Millennium Development Goals. The poorest countries pay $100 million dollars a day back to rich countries in debt repayments, vital resources that can be used for development and poverty reduction.
"Meaningful action on debt reduction at the Paris Club is urgently needed," continued Riddley. "But any decision to relieve the debt burden of those affected by the tsunami should be linked to a broader deal on further debt relief for the poorest countries to be agreed at the G7 finance ministers meeting in early February."
Oxfam also called for an independent and transparent assessment of what is a sustainable debt burden for the tsunami-affected countries and for the debt above this level to be cancelled. Meanwhile, Oxfam continued to scale up its programs in the tsunami-affected countries.