'Bury the debt, not the dead' procession in central London. Pledges of aid after disasters like the recent tsunami are dwarfed by countries' annual debt to donors.
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Debt relief
Debt relief
The tsunami was the most devastating of several natural disasters in recent decades. In each of these, the human scale of the disaster and the difficulties in rebuilding people's lives has depended on countries' economic circumstances and the strength of their infrastructure. Each disaster brings pledges of aid from richer governments. But these pledges are dwarfed by the amounts each country pays back annually to richer states in debt service (debt repayment, including interest).
Each tsunami country owes multilateral and bilateral debts to richer countries and still more to private financial institutions. Multilateral debt is owed to the World Bank, the International Monetary Fund and regional development banks, to which several countries contribute. Bilateral debt is money owed by one government to another.
Indonesia, for example pays $2.8bn annually to service its multilateral debt and $1.3bn to service its bilateral debt. It pays a further $9.6bn annually in private debt service. Its total 'debt stock' (outstanding amounts that require repayment) is $132bn. Thailand – relatively more prosperous – owes $17.9bn in combined debt service annually and has a debt stock of $59bn.
Seeing the tsunami devastation, Gordon Brown announced that Britain would immediately suspend debt repayments from affected nations for a year. Other governments – the Paris Club of 19 creditor nations – made similar pledges. However, Thailand and India have refused debt relief to protect their credit standing. They don't want potential investors to have a negative impression of the strength of their economies. Indeed, India has sought to lead the regional relief effort to Indonesia, Sri Lanka and the Maldives.
Each tsunami country owes multilateral and bilateral debts to richer countries and still more to private financial institutions. Multilateral debt is owed to the World Bank, the International Monetary Fund and regional development banks, to which several countries contribute. Bilateral debt is money owed by one government to another.
Indonesia, for example pays $2.8bn annually to service its multilateral debt and $1.3bn to service its bilateral debt. It pays a further $9.6bn annually in private debt service. Its total 'debt stock' (outstanding amounts that require repayment) is $132bn. Thailand – relatively more prosperous – owes $17.9bn in combined debt service annually and has a debt stock of $59bn.
Seeing the tsunami devastation, Gordon Brown announced that Britain would immediately suspend debt repayments from affected nations for a year. Other governments – the Paris Club of 19 creditor nations – made similar pledges. However, Thailand and India have refused debt relief to protect their credit standing. They don't want potential investors to have a negative impression of the strength of their economies. Indeed, India has sought to lead the regional relief effort to Indonesia, Sri Lanka and the Maldives.