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Debate
Debt relief: “Responsibility goes both ways”
Aggressors, not peacekeepers in Iraq
01/2007 |
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[ Erik Solheim, Norwegian Minister of International Development ]
“Responsibility goes both ways”
Internationally, non-governmental organisations (NGOs) applauded Norway for unilaterally cancelling $ 80 million of debt in October. The government in Oslo based its decision on the assessment that its predecessor in the 1980s had, in some instances, not acted as a responsible creditor, as Minister Eric Solheim explains.
What is Norway’s position on debt relief?
We strongly support HIPC, the Heavily Indebted Poor Countries Initiative, and multilateral debt relief in general. We have gone beyond the terms of HIPC, by fully cancelling the bilateral debt HIPC countries owed us. Usually, only 90 % is cancelled. Moreover, we do not include debt cancellation in our aid budget, so our other assistance is not affected. In addition to all that, we have done some unilateral debt relief, related to decisions made in the early 1980s. At the time, our government promoted Norwegian shipbuilders by giving guarantees to a number of poor countries that purchased ships. In effect, doing so was very negative, and we regret that step.
NGOs call that kind of debt “illegitimate”. Do you agree?
Well, I do not use that word. The topic is sensitive, and I don’t think we should move too aggressively, because that might make important actors shy from lending to poor countries in general. But I do think that we have to act as responsible creditors. Those who give loans should be held just as responsible as those who take loans. It goes both ways. And in the context I mentioned, we do not believe that Norway acted responsibly. Therefore, we have eliminated debts of five countries that bought ships: Jamaica, Egypt, Ecuador, Peru and Sierra Leone. We are prepared to do the same for Myanmar and Sudan, as soon as they qualify for multilateral debt relief. No doubt, debt relief has to depend on good governance.
So far, yours is the only government that has cancelled debt that way. What do you think other donors should do?
We are not in the business of running around the world and giving advice to all other donors on their portfolio. We have our own portfolio, and we found it right to take the steps mentioned, because some of our decisions in the past did not contribute to healthy development. If other countries see similarities in their own portfolios, it’s up to them to decide what to do. But I do think there is a need for an international debate on the concept of creditor responsibility. Everybody uses that term when dealing with loans to individual persons or when talking about banking problems and financial crises in the private sector. The same should apply to countries lending money.
To what extent can bilateral action substitute for multilateral debt relief?
It is not a substitute, but it can fuel multilateral action.
Who are Norway’s natural allies in this matter?
I think that all nations that take a global view of the world and want to promote development are our natural allies, be they donors or recipient countries. And internationally, the NGO s that campaign for debt relief, including churches and trade unions, are also our natural allies. I think it is fair to say that without their efforts we would not be where we are, with the G-8 having taken the lead on multilateral debt relief. We need that kind of civil-society campaign.
Should the G-8 do more in terms of debt relief?
Yes, definitely. They have taken the lead, and there is no reason not to implement what was promised at the highest possible speed. Some cases, I believe, are very obvious. Take Liberia, for instance, a country run by crooks for a long time. Various governments and international institutions gave Liberia loans nonetheless, as they did to other governments run by crooks, too. Today, Liberia has an internationally recognised government, led by Ellen Johnson-Sirleaf, the continent’s first female president. The time has come to make sure that the people of Liberia do not have to pay the bills that crooks piled up in the past.
Norway has asked UNCTAD and the World Bank to do some research on the matter. Do you have any results yet?
No, but we expect them in the next couple of months. We have financed two studies, one by UNCTAD and one by the World Bank, on the legal status of such debt. We hope they will come up with new information and help to intensify debate internationally.
Those who oppose debt relief always stress the danger of moral hazard. In that view, governments will start lending recklessly once they start expecting debts to be relieved at some point in time anyway. What is your view?
I think that is a fair argument. And that is why we stress both aspects, creditor responsibility and debtor responsibility. Not to accept the notion of debtor responsibility would amount to a form of neo-colonialism, denying that governments of sovereign nations are responsible for the destiny of those very nations. Of course, they must be held responsible for loans. But there also has to be creditor responsibility. Creditors must decide, first, whether the objective of a loan is credit-worthy or not and, second, whether a government is perhaps too corrupt, irresponsible or dictatorial to deserve loans at all.
Questions by Hans Dembowski.
Erik Solheim
is Norway’s Minister of International Development.
http://www.dep.no/ud/english/bn.html
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