On the opening day of the G8 summit, leading international debt cancellation advocacy groups declared that the deal leaders negotiated 2 years ago has not solved the debt crisis. They also issued a strong call to the G8 to stop the activities of 'vulture funds'.
Vulture funds are companies that seek to profit by buying distressed debt belonging to companies or countries on the secondary market at a steep discount, then seek to make a profit by claiming back the original debt and more.
In late April, a UK court ruled that Zambia must pay Donegal International, a vulture fund officially located in the British Virgin Islands but mostly owned by Debt Advisory International, $15 million for debt acquired for just over $3 million from the Romanian government. This year, Zambia expects to save $40 million from debt relief. Paying Donegal $15 million would severely limit the relief’s impact.
“These vulture funds are eroding the limited gains of debt relief approved at the 2005 G-8 summit, and they further threaten the prospects of meeting the MDGs,” said Sitali Muyatwa, Acting Coordinator of Jubilee Zambia. “The G8 leaders should explicitly reprimand these vulture funds in the same way they reprimand debtors who slide off the austere conditionalities required for debt relief.”
In response to pressure mobilized by civil society from Africa, Europe, and North America, G-8 Finance Ministers stated in their recent communiqué: “we are concerned about the actions of some litigating creditors against Heavily Indebted Poor Countries. We have agreed to work together to identify measures to tackle this problem, based on the work of the Paris Club.”
But campaigners demand concrete and immediate action. “The US is stonewalling on this issue, just like it is on climate change,” said Neil Watkins, National Coordinator of Jubilee USA Network. “We are very concerned by reports that the Bush administration is resisting to specific proposals to deal with vulture funds put forward by the UK and German governments in the G-8 process. We call on the G8 to immediately stop vulture fund profiteering.”
Lidy Nacpil of Jubilee South added: “The G8 governments claim to support calls for responsible behaviour by lenders. But The G8 must recognise that the issue of irresponsible lending and illegitimate debt begins first and foremost with themselves. We call on the G8 to acknowledge their co-responsibility in the accumulation of illegitimate debts and to cancel these claims immediately. Illegitimate debts include loans extended to non-democratic regimes and not used in the peoples’ interests; loans which involved corruption, fraud or unfair terms and conditions; loans for white elephant projects or harmful to people and the environment.”
Debt campaign groups in Germany for the G8 summit point to vulture funds as just one example of the failure of the 2005 G8 debt deal to solve the debt crisis. As Eurodad pointed out in its new report this week, 'One Step Forward, How Many Back?', while the 2005 debt cancellation deal cancelled US$39bn for African and Latin American countries, debt claims this year from Sub-Saharan Africa alone amount to over US$215.6bn and from Latin America over US$723.6bn. According to Oxfam, the most impoverished countries in the world continue to pay $100 million each day.