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Despite high profile debt relief initiatives, the debt crisis continues unabated for most developing countries. With the international community at risk of failing to meet the 2015 MDG deadline, leaders in Doha should support a strong call for expanded debt cancellation to all countries that need relief to meet the MDGs. Moreover, they should address the fact that debt cancellation continues to be undermined by onerous forms of conditionality since countries must implement hundreds of conditions as part of the IMF/World Bank HIPC Initiative.

What has been the story on external debt since the Monterrey Conference? While high profile debt relief initiatives such as the Multilateral Development Relief Initiative (MDRI) have made a real impact in eligible countries, saving almost an additional $1 billion annually in debt service repayments, the reality is that the debt crisis continues unabated for most developing countries. Developing country debt today stands at US$2.85 trillion, up from US$2.24 trillion in 2000, and US$1.3 trillion in 1990. Indeed, even low income countries continue to pay out $100 million each day to creditors, diverting large sums of scare government revenue to external debt service and away from investments needed to reach the Millennium Development Goals (MDGs).

With the international community at risk of failing to meet the 2015 MDG deadline, leaders in Doha should support a strong call for expanded debt cancellation to all countries that need relief to meet the MDGs. Moreover, they should address the fact that debt cancellation continues to be undermined by onerous forms of conditionality since countries must implement hundreds of conditions as part of the IMF/World Bank HIPC Initiative. Tight fiscal and monetary policies required by the IMF as a condition of debt relief, have in some cases, eviscerated the gains of debt relief.

There have been some notable new dynamics in the profile of external debt and the global conversation surrounding it that should be considered in Doha. Increased lending by new lenders such as China and India and aggressive litigation by so-called "vulture funds" have triggered real concerns, even in countries that have benefited from debt cancellation under HIPC or the MDRI. The international community’s current response to this problem – the IMF/World Bank Debt Sustainability Framework – has failed to solve these problems. Only a strong, binding international system for responsible lending and sovereign debt restructuring which holds creditors and debtors responsible can ensure debt sustainability in the future. As we look forward to guidelines around new lending, it is important to consider both quantity and quality of financing. In the past several years, the international community has increasingly issued calls for more "responsible lending" at such opportunities as G-8 summits, in the G-20, and in the United Nations General Assembly. These discussions have tended to focus on voluntary codes of conduct for new lending. Eurodad’s proposed Charter on Responsible Financing, on the other hand, outlines the essential components of a responsible loan and illustrates the call of civil society for a stronger approach that gets at the root of the problem.

Finally, there has been growing legal and political interest in the concepts of odious and illegitimate debts since Monterrey. Though ultimately the decision to provide cancellation to Iraq was not made on the basis of odiousness, the debate on Iraq’s debt surely raised the profile of the odious debt issue. Last year, Norway became the first government to unilaterally cancel specific debt claims on the grounds that the credit in question was an example of "failed development policy", a key element of conceptions of illegitimacy of debt. Across the developing world, civil society has been implementing citizens’ debt audits to examine the nature of debts, and in 2007, Ecuador became the first government to convene an official debt audit commission, with a mission of assessing the legitimacy of historical lending to Ecuador. The debate on odious debts has further been developed with the publication of papers on the topic by UNCTAD and the World Bank. As new developments in external debt are considered, the growing global call for action on odious and illegitimate debt and the need for strong new standards for responsible lending should be supported in Doha.

* Neil Watkins is National Coordinator of Jubilee USA Network, an alliance of religious organizations, development agencies, and human rights groups working for debt cancellation and responsible lending for impoverished nations.

This article was first published by NGLS in the Bulletin "The Road to Doha"

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