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1. September 2006

Conditions attached to debt relief have been disastrous for poor countries

The conditions attached to debt relief have been disastrous for poor countries. If they do not comply with these conditions, debt relief is witheld, and cancellation delayed. Typically, the conditions include trade liberalisation, privatisation of basic services, and cuts in vital social spending.

Conditions attached to debt relief have been disastrous for poor countries. For instance: Tanzania was forced to privatise water provision, leading to a worse service and higher prices. Ghana had to abolish a trade policy that would have let poor farmers compete with imports from rich countries. Zambia had to cut much-needed spending on education, leaving it unable to employ thousands of teachers in a country where 40% of women are illiterate.

These conditions hurt.
Countless studies have shown that economic policy conditions attached to debt relief and aid have harmed indebted countries. For instance, Senegal was forced to liberalise its groundnut sector, a disastrous policy that resulted in more than two thirds of the crop not being collected, farmers collectively losing millions of dollars, economic growth being cut in half and a near state of famine in rural areas. But the World Bank and International Monetary Fund continued to insist on further liberalisation a condition of debt relief for Senegal.

They undermine democracy.
Countries often resist implementing these policies, but are forced to adopt them even when their people protest and their parliaments oppose them. For instance, the IMF requirement that Zambia privatise its state bank in order to get debt relief prompted mass public protest, a parliamentary motion opposing the privatisation and the refusal of the President. But the IMF insisted that "if they don’t sell, they won’t get the money".

They are inconsistent with UK and G8 statements.
The UK’s has promised not to attach economic policy conditions to aid it gives directly to poor countries, saying it is "inappropriate and ineffective for donors to impose policies". The Commission for Africa questioned the role of conditions, for instance stating that "forced liberalisation will not work" as a way of reducing poverty. The recent G8 communiqué also stated clearly that "developing countries…need to decide, plan and sequence their economic policies." Despite this, debt relief and cancellation granted by the World Bank and IMF - which the UK helps to fund - still has huge numbers of damaging conditions attached. The UK is also using implementation of World Bank conditions as the criteria for deciding which countries will get the additional debt relief it is now offering.

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