‘Vulture funds’ exploiting debt cancellation in poor countries

By staff writers
October 10, 2007

A new report from the World Bank and International Monetary Fund has revealed that ‘vulture funds’ and other commercial creditors are chasing a staggering $1.8 billion from some of the world’s poorest countries - after they have had debts cancelled by rich countries.

Jubilee Debt Campaign is calling for urgent action to stop vulture funds from operating, and pressure on all commercial creditors to take part in the international debt cancellation process.

Of the 24 countries that have received debt cancellation under the Heavily Indebted Poor Countries initiative, 11 have been targeted for legal action by private creditors.

More than half of these private creditors have already won lawsuits, with a total of $991 million awarded so far.

Eight new legal actions have been reported in the last year, five against Nicaragua, two against Cameroon, and one against Ethiopia.

Trisha Rogers, Director of Jubilee Debt Campaign said: “These figures show that there are systemic problems with the international debt relief process. Vulture funds are continuing to exploit loopholes to chase millions of dollars from desperately poor countries. Funds freed up by debt cancellation are intended for health, education and other social spending, they are not rich pickings for speculators and private banks. It’s time for concerted action from the UK government, the IMF, and the World Bank to tighten up the system and make sure the benefits of debt cancellation go to the people who need them.”

Vulture funds have been in the spotlight since February this year, when Jubilee Debt Campaign and Oxfam revealed that Donegal International, an offshore investment fund based in the British Virgin Islands, was suing the Zambian government for $55 million for a debt it had bought for $3 million. Concern has been expressed by the UK government, the G8, the IMF, the World Bank and the Paris Club about the activities of vulture funds, but so far no concrete proposals for how to tackle them have been produced.

Trisha Rogers continued: “In addition to the countries listed in this report, countries like Cote D'Ivoire and Liberia, which are preparing to enter the debt cancellation process, have large commercial debt burdens. This leaves them very vulnerable to litigation, in particular from vulture funds who want to buy up their debts in order to sue. We are calling for national and international regulation to stop vulture funds from operating. In the meantime, the international community must provide poor countries with speedy access to affordable legal advice and support, so they can defend themselves against the vultures.”

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