During the debt crisis in the 1980s, the negative impact of debt on development in many of the less development countries was causing considerable concern as the full effects of the debt on poverty became more apparent. A number of campaigns were started by pressure groups to put governments and International financial institutions under pressure to relieve the problems of the highly indebted poor countries.
The Heavily Indebted Poor Countries (HIPC) initiative was set up in 1996 by the World Bank and the IMF, to reduce the debt of the lowest income countries. The HIPC initiative is monitored and implemented by the World Bank and IMF. Most other creditors - foreign governments, regional development banks and some private creditors are encouraged to take part. Most, but not all, do. Commercial creditors often fail to deliver they share of debt cancellation they have agreed under HIPC.
The Jubilee 2000 campaign was one such attempt to put pressure on the governments of the world's richest countries to cancel the debts that were crippling the HIPC and their economic progress. As a result of this pressure a package of debt relief was agreed. While not cancelling debt completely, the level of debt was significantly reduced. As a consequence the countries concerned were able to direct funds into poverty reduction programmes. This, created a fiscal space, allowing developing governments to invest more in health and educational programmes and policies that directly addressed the cycle of poverty.
In 2005, the Make Poverty History campaign called for the reduction and cancellation of remaining debts. Again the governments of the richer nations appeared to respond and at the meeting of the G8 riches countries in London, cancelled debt worth $40 billion owed to the World Bank, IMF and African Development Fund by 18 of the HIPC nations. The effect was to save over US$ 1 billion per year. In addition, the ministers stated that twenty more countries, with an additional US$15 billion in debt, would be eligible for debt relief. However, this was conditional upon these countries meeting targets on fighting corruption and fulfilling the requirements of structural adjustment programmes, liberalising their economies, eliminating subsidies, and reducing budgetary expenditures. The agreement came into force in July 2006, and was referred to as the "Multilateral Debt Reduction Initiative", MDRI.
Debt relief campaigners are still trying to pressurize governments to enable the remaining debts of the poorest countries to be cancelled.
Goal 8 of the Millennium Development Goals, makes a commitment to deal comprehensively with developing countries' debt.
Refer to the OECD website to see whether these commitments are being met.
The Jubilee Debt Campaign website provides some excellent background information about Third World Debt and Debt Relief:
The Global Issues website provides a range of materials and insights relating to debt and debt relief: