Campaigners Criticise “Premature” Burma Debt Cancellation

By Jubilee Debt Campaign UK • January 28, 2013

$5.9 billion to be written-off and new loans to military dictatorship to begin.

Western countries, in a body called the Paris Club, have agreed to cancel 50 per cent of the debt owed to them by Burma. The World Bank and Asian Development Bank have also agreed to start lending to the Burmese government again. The move comes after the Burmese government signed-up to a set of IMF economic conditions earlier this month.

Burma’s external debt is $15.3 billion, much of it from lending in the 1980s and 1990s. The government began defaulting on the debt in 1997, since when few payments to western countries have been made.

Tim Jones, policy officer at Jubilee Debt Campaign, said:
“These agreements allow large amounts of new lending, before any investigation has been made into how past loans did and did not benefit the people of Burma. None of these deals save Burma any money now, but they commit future governments to making payments on debt they inherit. This support for a military dictatorship could bind the hands of a hoped-for future democratic government.”

Anna Roberts, Executive Director at Burma Campaign UK, said:
“It is incredible that Burma gets billions of dollars of debt relief when its biggest spending is on the military, an army that is committing crimes against humanity in its war against ethnic minorities. Burma’s leaders should be on trial in The Hague not getting special deals on debt relief.”

The debt cancellation by the Paris Club will be counted as aid, and be able to contribute to meeting government’s aid targets. The $5.9 billion of debt cancellation amounts to 4 per cent of current aid budgets of western countries.

Under the debt cancellation deal, 50 per cent of the debt owed to western countries will be cancelled in two stages. The remaining 50 per cent will be paid between 2020 and 2028. In addition, Norway has agreed to cancel 100 per cent of the debt owed to it, whilst Japan has agreed cancellation of over 60 per cent. In total $5.9 billion of debt will be cancelled, $3.7 billion of which is owed to Japan.

The UK is owed £85 million, so will cancel over £40 million. The debt comes from loans for Burmese companies to buy British exports in the 1970s and 1980s, primarily gas turbine generators and textile equipment.

In addition to the cancellation, the World Bank and Asian Development Bank have agreed a process called arrears clearance, which makes the Burmese government eligible to borrow from them again. This process does not involve debt cancellation, but restructures the debt owed to the institutions to be paid over coming decades.