Why is debt cancellation central to the
fight against poverty?
Debt cancellation for the world’s poorest countries is central to
the fight against poverty and key to ensure the achievement of the
Millennium Development Goals (MDGs). Many poor countries spend more each
year to repay decades-old debt to the world’s wealthiest countries and
international institutions like the World Bank and International
Monetary Fund (IMF) than they do on the fight against poverty, including
stopping the pandemic of HIV/AIDS, putting children in school and
ensuring access to clean water.
Debt is draining the budgets of
poor countries. Most poor countries spend as much of their
annual budget on debt repayment as they do on social services
like health and education. Moreover, many highly-indebted poor
countries also spend more on debt repayment than they receive in
foreign aid. For example, Sub-Saharan Africa, the poorest region
in the world, receives about $13 billion annually in
international aid but spends nearly $15 billion every year
repaying old debts.
How did poor countries accumulate so much debt?
Many poor countries began accumulating debt in the 1960s
when international currency prices and interest rates collapsed,
which launched banks into an international financial crisis. To
avert the crisis, banks sought to lend money – and lots of it –
Thus, significant amounts of money were lent to poor countries
with little thought as to how they would pay the money back.
Moreover, many of the loans were either lent to former corrupt
regimes that did not use the money in ways that benefited their
people (known as ‘odious debt’), or in the self-interest of rich
countries or financial institutions (known as ‘illegitimate
Today, many poor countries are
trapped in a deadly cycle of indebtedness – forced to borrow
more money to make payments on the interest accrued from the
principal loan that has long since been paid in full. For
example, according to CEPAC, the Economic Commission for Latin
America, external debt practically doubled from $439 billion to
$762 billion between 1990 and 2004.
Has anything been done about the debt crisis?
Yes, in large part because of political engagement and advocacy
by people of faith throughout the world, several major
initiatives to relieve the debt burdens of the world’s poorest
countries have emerged, including:
Jubilee 2000: In the
mid-1990s, advocates for the world’s poor began working
together to put the crisis of debt on the agenda of the
world’s political leaders. In 1999, billions of dollars of
poor countries’ debt were cancelled through the reform and
expansion of the World Bank and IMF’s Highly Indebted Poor
Countries (HIPC) program, which began in 1996. The HIPC
program provided debt relief to countries with good
governments committed to fighting corruption and poverty and
investing in the health and well-being of their people.
June 2005 G8 deal: Because the
HIPC program does not completely cancel poor countries'
debt, advocates worked to secure a new debt deal from the
world’s richest countries in 2005. They succeeded when the
Finance Ministers of the wealthiest eight countries in the
world (G8) agreed to cancel 100 percent of 18 HIPC
countries' debt – totaling $40 billion dollars.
Still, it is estimated that more
than 67 of the world’s poorest countries will not achieve the
MDGs without further debt cancellation.
How has debt cancellation
helped fight poverty?
Debt cancellation has saved lives and reduced poverty because it
frees up critical financial resources that governments commit to
investing in the well-being of their people. For example,
Mozambique has increased rates of childhood vaccination by more
than 80 percent; Uganda has provided clean water for 2.2 million
citizens; and Tanzania has eliminated school fees for primary
school, putting an estimated 1.6 million kids back in school.
While debt cancellation alone will not end extreme poverty, the
MDGs will not be achieved without it as part of a comprehensive
approach to poverty reduction adopted by industrialized nations
that includes fair trade and increased foreign aid (MDG 8).
How does my faith inform my advocacy for debt cancellation?
The biblical idea of Jubilee that is highlighted in the Old
expressed throughout the ministry of Jesus is one of the most
powerful concepts that inspire Christians working for debt
In the Books of Leviticus and Deuteronomy, God speaks to Moses
and commands that every seventh year, Israel keep a sabbatical
or sabbath year in which all are to rest from working the
fields and vineyards. God then commands that after seven sets of
sabbath years (seven times seven) the fiftieth year is to be a
year of jubilee. In the jubilee year, God calls his children to
allow the land to lie untouched, to set slaves free, to return
land to its original owners, and to cancel debts.
2007, falling seven years after the great Jubilee of 2000, has
been declared a “Sabbath Year” by advocates for debt
cancellation throughout the world.
What can I do as a ONE Lutheran?
As a ONE Lutheran, you can help ensure world leaders keep
promises made in 2005 while extending 100 percent debt
cancellation to all poor countries whose debt burdens prevent
them from meeting the MDGs. Together, with 2.4 million other
Americans committed to ONE: The Campaign to Make Poverty
History, your voice can help make the 2007 Sabbath Year a
success. Join the ELCA e-advocacy network at
to stay informed about how you can take action in support of
further debt cancellation.