Ghana Debt - Odious Debt
Tuesday, 23 August 2011 14:27
The high debt burdens suffered by many developing countries that have seen their debts written down over recent years were not the consequence of high levels of borrowing. This has been convincingly argued by Todd Moss in a paper produced for The Centre for Global Development (CGD)ii . The high debt burdens have resulted from poor economic growth.
The idea that developing countries borrowed too much is characterised in the discussion over ‘odious debts’. An odious debt is a moral category that has come to take on pseudo economic meaning. Lists have been drawn up by Western NGOs and campaign groups determining the moral character of particular African governments over time. Debt taken on by governments deemed to be illegitimate are said to be odious.
The notion is that developing countries have had access to too much cash, and have frivolously run up debts – like global shopaholics developing countries have been unable to control their urges and have recklessly borrowed vast sums with little thought about how they could afford to pay their bills.
This is not a small quibble, but is an argument that has consequences for the ability of countries such as Ghana to raise funds for much needed infrastructure development. According to debt relief campaigners and Western donors, if countries have simply borrowed too much in the past, the best course of action is to forgive their sins out of compassion for the poor and to ensure that it doesn’t happen again. This is the logic of debt relief, to cut developing countries off from their supply of credit. It is because of this reasoning that donor nations are beginning to worry about Ghana’s plans to issue new debt.
This view of the developing world as addicts to debt is to be found not only within the governments of the G8, but from their critics also. The Jubilee Debt Campaign usefully offer a concise summary of these arguments: ‘many [loans] simply propped up dictators or went to projects that failed because of corruption and poor lender advice.’iii
The Jubilee Debt Campaign argue that debt has either been pushed upon developing countries or has been taken out by dictatorial or incompetent regimes. These are dangerous assumptions that paint a contemptuous picture of developing countries. Namely that developing countries are unable to govern their own affairs – they lack the sophistication and expertise needed; the governments and officials of developing countries are corrupt and cannot be trusted; and that the failure of development is a consequence of vast sums going to waste But above all, the most damaging charge levelled by the critics is that developing countries have had access to too much cash.
‘Much of the debt of poor countries…arose through the reckless or selfinterested lending by the rich world.’iv Jubilee Debt Campaign
High levels of debt are presented as the consequence of the unscrupulous practice of pushing loans on developing countries that did not need them. In reality, the group of countries that has been placed under the HIPC (Heavily Indebted Poor Countries) banner are separated from the rest of the developing world in that development assistance, in the form of loans or grants, has been the main source of external funding available to them (charts 1.1 and 1.1). Arguing that debt is a problem for these countries has the effect of cutting them off from a much needed source of cash for infrastructure developments.
Chart 1.1 OECD Statistical Database, 2006. Chart 1.2 OECD Statistical Database, 2006.