nef research says official debt relief target for world's poorest is massive underestimate: up to $590 billion needed

And basic health and education needs could be met in just five years if the richest nations honoured existing aid commitments says the research published, as creditors meet to celebrate 50th anniversary of the Paris Club.

New research from nef (the new economics foundation), published on the day that the Paris club - the informal group of the world's creditor countries - meet to celebrate 50 years of rescheduling the debts of the world's poorest, shows that if the world's richest countries honoured their aid commitments for just five years, all unsustainable the debt of the poorest could be written off to such a degree that the basic health and education needs of the world's poorest people could be met.

In a new nef research paper, 'Debt relief as if people mattered', the Jubilee research programme (an official successor to the Jubilee 2000 campaign and project of nef), proposes a radical new approach to debt cancellation - based on the amount of revenue that a government can be expected to raise without increasing poverty or compromising the meeting of basic human needs.  This means a change from the traditional approach to debt cancellation based on crude financial measures - towards protecting government spending needed to meet basic human development needs as well as not taxing those people who already live below the poverty line.   nef's new analysis adopts an ethical poverty line of $3 per person a day - a level more compatible with the basic human rights of well-being and health than the $1 and $2 a day poverty lines used by the World Bank and others. Based on this, and using data for 136 countries, nef has calculated which countries will need 100 per cent cancellation of their debts and which will need some debt relief to reduce their debt to a sustainable level.  The results show that:

• Of the 136 countries surveyed, between 51 and 54 needed complete cancellation of their debts and between 32 and 53 needed partial cancellation on human rights grounds.  Bangladesh and the Democratic Republic of Congo, for example, need 100% debt relief, amounting to $11.8 billion and $10.5 billion, respectively.
• Based on the ethical poverty line of $3 a day, the net present value of debt that should be cancelled is between $424 and $589 billion depending upon the proportion of government revenue that can be allocated to debt service without causing severe hardship to the population.
• This is between 31 and 43 per cent of all outstanding developing country debt.  This sounds a lot until it is compared with the shortfall in the aid target of 0.7% of rich countries' GDP - $120 billion in 2005 alone. If rich countries had met the target each year since 2000 it could have wiped out all this debt.

For example in Cambodia - not currently benefiting from debt relief, but eligible for 100 per cent cancellation under the new proposals - almost 10 per cent of infants die before they reach their first birthday. In Kenya - also not currently benefiting from debt relief - almost 7 per cent of children die before their first birthday -compared to less than half of one per cent in the UK.

• nef calculations show that even at the lower level of $2 a day, substantial further debt cancellation is needed for a wide range of countries if their debt is to be brought down to sustainable levels. 

"Debt cancellation for the world's poorest nations is no longer simply a matter of justice, it is a moral imperative. We must move towards a system based on debt relief as if people mattered if we are to have even a chance of meeting the Millennium Development Goals -the international targets on halving global poverty - by 2015," said David Woodward, head of nef's Global Economy Programme.

nef's research shows that substantial debt relief is urgently needed beyond that provided under the Heavily Indebted Poor Countries (HIPC) initiative and the 2005 G8 deal.  Even the amounts currently committed to relieve the debts of low and middle-income countries fall far short of the levels needed.   In adopting the UN Millennium Development Goals (MDGs), all the world's countries have made a commitment to reduce global poverty by 2015. The Millennium Goals also reinforce earlier commitments to universal rights, including in health and education. But, as nef's research emphasises the MDG targets will be impossible to meet as long as developing countries have to use vast shares of their resources to meet crippling debt service payments. 

Traditionally, debt sustainability has been judged along crude financial lines. A country's ability to pay is assessed by looking at its income, primarily from export earnings, with no account taken of the demands on government funds. In many of the world's poorest nations, debt service payments have taken precedence over providing people with a basic standard of living. The approach set out in this research paper provides a much needed alternative. 

"This is the second of a three pillar approach to debt relief. It promotes a concept of debt sustainability which puts the rights and basic well-being of people first and those of the creditors second. We believe it is a fundamental human right to have basic needs met - for food, clean water, shelter, education and health", says Stephen Mandel, nef researcher and author of the report.

National governments have an obligation towards their citizens to provide for the meeting of their basic needs. Human rights are violated if, in order to meet debt service payments, a government is forced to ignore basic health and education requirements and to tax poorer citizens so that they cannot pay for adequate food or shelter.

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	Publications Debt relief as if people mattered: A rights-based approach to debt sustainability

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	Steve Mandel