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Forum for the Future of Aid

Southern Voices for Change in the International Aid System Project

The Forum on the Future of Aid is an online community dedicated to research and opinions about how the international aid system currently works and where it should go next

organised by ODI

Hiding Public Debt

Source: Economic Research Forum (ERF)

This paper examines the determinants of hidden public debt—that is, government financial commitments and contingent liabilities that do not receive official recognition and explicit budgetary allocations, but are later on assumed by the government as additional debt outside the normal budget. Hidden debts are large in many countries and can cause fiscal and macroeconomic instability. We propose a measure of hidden debt and develop a model that explains its regularities. We show that the forces that raise the demand for public expenditure, such as fractionalization and division in the government, also motivate politicians to resort to disguised expenditure and debt as a means of alleviating constraints on explicit borrowing. The tightness of such constraints also adds to the incentive to hide debt, as do factors that reduce the costs of arranging off-budget debts. We find that these costs decline with the extent of government intervention in the economy, especially when the economy is sufficiently developed to have resources that interventionist governments can direct toward hidden expenditures. The proposed measure of hidden debt is likely to have other important applications, especially in the studies of fiscal policy that in the past have relied on budgetary deficit as a complete measure of government deficit.

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Wangari Maathai lends voice to debt cause at World Social Forum


“Loans given to irresponsible projects or illegitimate regimes should not be the plight of the people to repay” Professor and Nobel Peace Prize Laureate Wangari Maathai said when she opened a seminar that AFRODAD, together with Norwegian Church Aid (NCA), All African Council of Churches (AACC), and Kenyan Debt Relief Network (KENDREN), convened during the World Social Forum in Nairobi on Monday. “If the illegitimate debt is to be cancelled, churches, civil society organisations and parliamentarians will need to put increased pressure on leaders in the North and the South to do so” Professor Maathai continued in front of more about 500 participants and a significant number of journalists.

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Motes and Beams: The case for debt relief as if morals mattered

Source: Jubilee Research

In his book “Odious lending: debt relief as if morals mattered”, Stephen Mandel examined 13 cases of odious lending to gauge its real impact. Based on the principle that a successor government should not be worse off than if an odious loan had not been granted, the author included debt servicing and any loans subsequently taken out to manage the odious loans. The results were striking. In ten cases, the impact of odious debt was to render all outstanding debt odious. In effect, these countries are ‘overpaying’ their debt service, often to an enormous extent. Indonesia has paid US $151 billion related to its odious debt, more than twice as much as its total outstanding debt. Nicaragua, has odious debt of over five times its national income. This article (an edited version of one which appeared in the The Banker, November 2006) brings out some key points from the book.

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Zambia after the HIPC ‘Surgery’ and the Completion Point

Source: Jesuit Centre for Theological Reflection (JCTR)

“We reached the heavily indebted poor countries (HIPC) Completion Point in April 2005 and so what?” asked a workshop participant in one of the Jubilee-Zambia Provincial Workshops. Indeed many other Zambians are asking similar questions given the high expectations that had been created by senior Government officials on the possible benefits to Zambia of reaching the Completion Point. The questions are many and need candid answers from all of us but particularly from Government. For instance, what does the HIPC Completion Point really mean for a Zambian man, woman and child? What are the current debt levels after the Completion Point? What are the specific timelines for the delivery of debt relief to Zambia by the International Monetary Fund (IMF), the World Bank and the other creditors? Is debt relief part of direct budget support? Is there conditionality attached to the HIPC and the G8 debt relief packages? How can Zambia avoid another debt trap in future?

This Policy Brief builds on the earlier one issued by the JCTR in 2004 which explored in great detail Zambia’s Experience with the HIPC Initiative. This current Policy Brief is an attempt to offer an explanation on Zambia’s new status after the Completion Point.

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Africans on Africa: Debt

For one week in July, the BBC did a series on looking at African problems through African eyes. In this piece, Andrew Mwenda, a Ugandan radio journalist and presenter of a controversial and high-profile nightly radio show, reflects on aid and debt relief, and he offers a critical assessment of what aid has accomplished in Uganda over the last 40 years.

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