Post-tsunami challenge: Debt write-off for the weak and vulnerable

Marshall concluded that an historic offer of unprecedented sums of money was required. And that America could contribute an unparalleled 1 per cent of its national income to fight war torn hunger, poverty, desperation and chaos. His treasury also argued that prosperity, like peace, was indivisible, not to be achieved at the expense of others, but had to be spread throughout. Prosperity, to be sustained, had to be shared.

And Marshall’s plan - the unparalleled transfer of American resources - made possible the reconstruction of Europe, the renewal of world trade, and prosperity for both.

We now, tragically, but challengingly, have a unique opportunity to deliver a modern Marshall Plan for the developing world - one in which developing countries are partners. Not supplicants.

Our Government calls on all to recognise the three essential elements of developing a plan for a new deal:

• First, full debt-relief for burdened countries;
• second, world trade begins to “better benefit” poor countries, and ensure their capacity to benefit from this new trade; and
• third, declaring the level of aid to be approx 0.7 per cent of national income, we must also create an International Finance Facility (IFF) to offer immediate, long term aid for investment and development - such as commitments from individual governments, leveraging in funds from capital markets, and raising an extra US$50 billion for the next ten years. This would double aid and halve poverty.

Today, 27 countries benefit from US$70 billion worth of unpayable, and exponential debt being written off, while 37 others are considered eligible. US$100 billion of debt relief is now seriously possible.

It is partly because of debt relief that in developing countries, primary school enrolments have increased at twice the rate of the 1980s; those aged over 15 who can read has risen by 7 per cent; life expectancy has increased; and the numbers living in extreme poverty has fallen by 10 per cent. People weighed by the burden of debts imposed by the last generation cannot even begin to build for the next generation.

To continue to insist on payment offends human dignity.

What is morally wrong, cannot be economically right.

So, we propose, first, that this year the richest countries match bilateral debt relief of 100 per cent, with the bold act of offering 100 per cent multilateral debt relief - relief from the US$80 billion owed to the IMF, the World Bank and the African Development Bank.

This cancellation of debts owed to the International Monetary Fund should be accompanied by a detailed timetable, and countries should make a unique declaration, that they will repatriate their share of the World Bank, and the African Development Bank's debts, to their own country.

Our task remains to help developing countries build the capacity, the monetary and fiscal policies, the infrastructure and the support for private investment that are essential for their development. Fair trade is not simply about finance, it is also about empowerment and dignity - enabling people to stand on their own impoverished feet, and use trade as springboard.