Report: G8 Debt Deal One Year On: What Happened and What Next?

This report was originally published by EURODAD

G8 Debt Deal One Year On: What Happened and What Next?

Delivering on the multilateral debt cancellation deal announced by G8 Heads of State in Gleneagles exactly one year ago has been a bit like the journey between Mopti and Timbuktu: a long, arduous and bumpy ride; at times you think you’ll never arrive at your final destination but you get there in the end.On 1 July 2006, the World Bank and African Development Bank will start to deliver debt cancellation to 19 impoverished nations, 15 of which are in Sub-Saharan Africa. This is one full year following final announcement of the plan, during which time these countries have continued to make debt service repayments to these institutions. The IMF delivered its share (US$3.3 bn) of the debt cancellation six months earlier: on 6 January 2006. Two further countries also benefited from IMF debt cancellation: Cambodia and Tajikistan. The debt deal means that each year, over the next ten years, these 19 countries will save around US$1.1 bn in debt service repayments: money that can be used instead to invest in health, education and infrastructure.

What did the G8 promise?

So what exactly was promised by G8 Heads of State in Gleneagles last year? The deal (now relabelled the Multilateral Debt Relief Initiative or MDRI) promised to cancel the debts of Heavily Indebted Poor Countries (HIPCs) to the IMF, World Bank and African Development Bank once they completed the HIPC Initiative debt reduction programme. The deal is worth approximately US$40 billion over the next 40 years. A further 10 countries could be included in the plan over the next two years bringing the total cost to US$55 billion. At the time, UK Chancellor Gordon Brown described the plan as a “historic breakthrough” and “the most comprehensive statement that finance ministers have ever made on the issues of debt, development, health and poverty”. But did campaigners feel this deal really went far enough? Did the deal cover 100% of countries and 100% of debts?

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