Relief for Nepal? Debt cancellation!

(My friend Sunil is circulating this article in response to Nepal’s crisis, and the second major earthquake to hit. I think it’s worth sharing around.)

External debt is a cancer to Nepal: Cancel it now!

I would like express my heartfelt thanks to all the kindhearted people across the world for their generosity and solidarity in response to the horror of Nepal’s earthquake. And as Nepali people, Nepalese security forces, Nepali government and civil society along with international rescue teams  tirelessly helping the survivors  with shelter, water, food, medicine; I like call World Bank, ADB and other bi/multilaterals to stop blood-sucking the money Nepal so badly needs now in the name of ‘debt servicing’.

Nepal was already one of the world’s poorest countries and now it has become far poorer after the recent deadly earthquakes that already killed more than 8000 lives in Nepal. So it’s unacceptable that the World Bank and Asian Development Bank (ADB) still intend to collect tens of millions of US$ from Nepal this year, as much or more than the total amount pledged so far to Nepal in aid.

Nepal government external debt is $3.8 billion.  A debt payment due in 2015 is $210 million.
Who debt is owed to:
$1,200 million: Non-World Bank multilateral (a lot of this will be to the Asian Development Bank)
$1,100 million: World Bank
$250 million: Other governments (likely to include India and China)
$64 million: IMF
$1 million private

Nepalese debt may appear small by global standards but trying to repay it is a crushing burden. Debt incurred by Nepal during the feudal government during the ‘Panchayat era’ hardly benefited the grassroots and poor people in Nepal, despite that debt pouring into Nepal. After 1990 democracy, corruption was on the rise, despite that, debt continued pouring into Nepal. During 12 years of the Maoist insurgency, development not only could not reach the neediest rural population, but already built infrastructure, including schools, hospitals, bridges, power stations, etc., were destroyed; despite that, debt continued pouring into Nepal. Then, in the ‘new-constitution-writing-era’, development was forgotten by the government over the past 7 years; despite that debt continued pouring into Nepal.

Now, this deadly earthquake strikes Nepal, destroying massive public and private properties and basic infrastructures in the hills and mountainous regions of Nepal which were already poor. All those years Nepal government has been borrowing in the name of development, but the results are not only insignificant but also raise the question of whether the debts to Nepal were used or abused. For a small and poor country like Nepal the debt is not just a ‘crisis’ but has become a chronic condition, like a cancer that never allows Nepal to grow. Some even say debt to “third-world countries” is a conspiracy meant mostly for the benefit of bankers.

There seem no valid economic reasons whatever for the rich world to have made Nepal drag its debt burden so far, for so long.

Debt servicing
Total external debt receipt until the second quarter of Fiscal Year 2071/72 is Rs. 12,821,919,260.33.
Payments to IMF only for 2015 is $14 million, next payments 15 May; for 2016: $18 million and for 2017: $12 million
Payments to World Bank for 2015 are $48 million (what is left of it), next payments 1 May ($5.2 million); by 15 May 2016: $67 million and for 2017: $68 million.
According to Jubilee Debt campaign’s ( statistics for Nepal 2012, Nepal paid on foreign debt is 5.9% of total revenue (US$ 210 million), Nepal’s Government foreign debt was 18 % of GDP (US$3.8 billion). That’s a lot of money! And Nepal is losing resources by having to service that debt year after year.

Reimbursement of Nepal’s debt has been a huge burden and now will lead to unimaginable human suffering. Nepali economy has been wrenched by ‘structural and/or policy adjustment’ measures dictated by the bilateral and multilateral creditors.

Nepal is among the poorest and least developed countries in the world, with about one-quarter of its population living below the poverty line. Nepal is heavily dependent on remittances, which amount to as much as 22-25% of GDP. Nepal has considerable scope for exploiting its potential in hydropower, with an estimated 42,000 MW of commercially feasible capacity, but these external debts are rarely used to invest in hydropower generation projects in Nepal. And while a few creditors have invested into hydropower, the unjust contracts result in the creditors taking all the benefits and Nepal is left with load-shedding and less access to energy produced.

Nepal can’t afford to pay the debt back as per the creditor’s terms (it will be interesting to know how much Nepal actually has paid of the debt: how much interest and if any of the principal has been paid). While these sums are relatively paltry–Japan, China, India, South Korea and the West don’t need the money—the burden on Nepal is enormous. So why the continuous blood-sucking?

One reason the ‘debt as cancer’ is metastasizing is that the in last few decades, Nepalese governments have never had the guts to sit face to face with creditors at a debt-negotiating table, even though these supposedly democratic governments are supposed to take up the matter of unjust debt taken by previous governments and at the same time not to add further debt with similar impossible conditions, conditions that are demonstrably against the interests and needs of the Nepali people. Political parties supposedly stand united on this front, but party interest, personal interest makes the government ministers and parties fail to raise this serious matter at all. This inability has made it even easier for creditors to isolate and browbeat the Nepalese government after government.

The World Bank, ADB and other institutions that can cancel this debt are under the influence of rich countries like USA, Japan, UK, EU, South Korea, Australia, China, and India. Hence I like to call our friends from develop countries as well as other countries to push pressures to their governments and these institutions.

The Ministry of Finance (The Debt Management Unit – DMU – in the Foreign Aid and Coordination Division) should calculate up-to-date debt figures for Nepal from different countries, World Bank, ADB and other institutions. The government should propose paying for earthquake relief, rebuilding and rehabilitation, poverty reduction by the fund that will be available after cancellation of ‘the debts’. The debt cancellation to Nepal will lift a huge burden from Nepal’s ability to recover and rebuild.

I believe this is something that the World Bank, ADB and other bi/multilateral donors also want to see happen to Nepal now. Saving population from this recent earthquake-caused hunger, poverty, diseases and destruction of livelihood by cancelling Nepal’s unjust debt from the past is ‘Just and Human Rights’ now more than ever.

Sunil B Pant
Former Member of Parliament (2008-12) of Nepal.
Founder of Blue Diamond Society

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