IMF crisis windfall should be used to cancel debt

Jubilee Debt Campaign has joined an international campaign for the IMF to use windfall profits from the sale of gold to cancel debts.

The International Monetary Fund (IMF) will meet this week to discuss how it will use $2.8 billion of excess money gained from sales of its gold.[1] This is on top of a projected profit this year of $500 million [2], due to the money the IMF makes from lending to countries in crisis, such as Ireland.

UK-based anti-poverty charity Jubilee Debt Campaign is calling for the IMF’s spare money to be used to cancel the debts of countries which are the result of crises outside the country’s control.

Jubilee Debt Campaign policy officer Tim Jones said:

“The IMF is doing very well out of the economic crisis it helped to create, with a windfall from gold sales and profit from lending. Yet, many poor countries have been forced into debt through no fault of their own, whether due to disasters or the financial crisis caused by western banks. The IMF should use its excess money to cancel such debts.”

Fifty-eight civil society organisations and networks from across the world have written to the governments which control the IMF, calling on them to use the windfall to cancel poor countries’ debts.[3] Signatories include Oxfam International, the International Trade Union Confederation, Action Aid International, Cafod, Save the Children and the World Development Movement.

Collins Magalasi, Executive Director of the African Forum and Network on Debt and Development, said:

“This is a long awaited opportunity for the IMF to cancel poor countries’ debts. The IMF has always said it lacks the money to be able to write off the debts of these poor countries. Now that there is an excess, it is only logical to use this money to cancel debts that are further crippling poor economies. For most African countries total foreign debt is a third of earnings from exports.” 

Owen Tudor, Head of EU and International Relations of the Trades Union Congress said:

“The people of the developing world have suffered from a crisis they didn’t cause, a crisis caused by inequality within and between nations. The IMF’s windfall could help redress the global imbalances it acknowledges cause so much harm. The governments who run the IMF keep saying that debt must be reduced – now they have the chance to practice what they preach.”

Countries across the world have seen their debts increase due to the financial crisis. Sierra Leone’s debt to the rest of the world has doubled in recent years. In 2011, more of the government’s revenue will be spent on debt repayments than is spent on healthcare.[4]

ENDS

Notes
Contact: Tim Jones, Policy Officer, Jubilee Debt Campaign:
+44 (0)20 7324 4725 or +44 (0)7817 628196

For more information read Jubilee Debt Campaign’s briefing:
‘Financial crisis creates bumper bank balances at the IMF’ 

[1] The IMF Board will met on Wednesday 6 April to discuss how to spend the $2.8 billion excess proceeds from gold sales.

[2] IMF. (2010). The Fund’s Income Position for FY 2011 – Midyear Review. International Monetary Fund. Washington DC. 03/12/10.

[3] The statement by 58 civil society organisations is here

[4] IMF. (2010). Sierra Leone: Staff Report for the 2010 Article IV Consultation, First Review Under the Three-Year Arrangement Under the Extended Credit Facility, Request for Modification of Performance Criterion, and Financing Assurances Review. International Monetary Fund. Washington DC. 18/11/10. http://www.imf.org/external/pubs/ft/scr/2010/cr10370.pdf

A recent report by the IMF’s Independent Evaluation Office of the IMF’s approach between 2004 and 2007 criticised the “groupthink” of the IMF in the lead up to the financial crisis. It found that the IMF had been “in awe” of the US financial system, praised the light-touch approach of the US and UK and had recommended this approach be followed across the world.[5]

[5] IMF IEO. (2011). IMF Performance in the Run-Up to the Financial and Economic Crisis: IMF Surveillance in 2004-07. http://www.ieo-imf.org/eval/complete/eval_01102011.html 

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