On April 21, the federal treasurer Peter Costello announced the cancellation of the bilateral debt owed by Nicaragua and Ethiopia to Australia as part of an International Monetary Fund (IMF) program to reduce the debt of heavily indebted poor countries (HIPC). In reality, this program does little to improve the economic condition of the people in those countries.
According to the anti-debt coalition Jubilee 2000, Ethiopia and Nicaragua owe $17.9 million of the total bilateral debt of $62.2 million owed to Australia. Australia will not cancel the debt of its biggest debtor Vietnam ($47.3 million) as it does not fit the criteria of an HIPC.
To qualify as an HIPC, a country must meet tight economic criteria. Only 41 countries qualify. Since the program was established in 1996, only four countries have qualified for debt relief. Countries are required to carry out two successive periods of "structural adjustment" before qualifying. This takes at least six years.
Debt servicing is a major drain on the capacity of developing countries to meet the needs of their people. Nicaragua's debt repayments in 1997 were two-thirds of its national budget, and two and a half times what it spent on health and education combined.
All Third World debt should be cancelled. Resistance demands that the Australian government immediately cancel all bilateral debt owed to it. The government should also take immediate and concrete action to cancel the massive amounts of multilateral debt owed to institutions such as the World Bank and the regional development banks.
Australia lends to both the World Bank and Asian Development Bank, where it controls 1.8% and 5.1% of the voting power respectively. We demand that the government use this power to argue for the cancellation of all debt, and to write off its own share of this debt.