8th assembly/50th anniversary

Together on the Way
5.2. The Debt Issue: A jubilee call to end the
stranglehold of debt on impoverished peoples

December 1998

1. Debt and jubilee in the new millennium
On the eve of the third millennium, the jubilee assembly of the World Council of Churches must ponder God's jubilee command and Christ's proclamation, which affirms this vision. Gathered in sub-Saharan Africa, we have heard the cries of the millions of people who have borne the social, political and ecological costs of the tenacious cycle of debt. We are called, through a process of discernment and response, to seek new ways to break the stranglehold of debt, to redress its consequences, and ensure that debt crises will not recur. This can only be achieved through a new, just global order.

The WCC is firmly committed to joining people of faith and communities of conscience in implementing the sabbath-jubilee mandate, sounding the trumpet and rejoicing in the hope of jubilee when debt is cancelled. We offer this policy statement for reflection by all members of the ecumenical community, call our churches to action and commit ourselves to achieving debt cancellation.

Since the 1970s, the WCC, its member churches and ecumenical partners have placed high priority on addressing the debt crisis. On several occasions the WCC has spoken in solidarity with the victims of indebtedness. In response to a mandate of the central committee, the WCC Los Rubios consultation on debt (1998), involving representatives of 24 countries and diverse denominations, launched a process to develop this policy statement on debt. However, the churches' hopes for cancelling the debt of impoverished countries and for alleviating hunger have not been realized.

2. The sabbath-jubilee vision... a jubilee call to life for all
Through the sabbath-jubilee tradition, the Hebrew and Christian scriptures offer a critical mandate for periodically overcoming structural injustice and poverty and for restoring right relationships. In the earliest Hebrew sabbath traditions, consumption and exploitation of the land were limited by the sabbath and the sabbath year. People and animals were to rest every seventh day and the land every seventh year (Ex. 23:10-12). During the sabbath year, there was to be release from debts and slavery and during the jubilee year a restoration of all family lands (Lev. 25). These commandments are taken up in "the year of the Lord's favour" (Isa. 61:1-2a) and described in Isa. 65:17-25 as "new heavens and a new earth". In other words, justice brings peace for all God's creation. In the New Testament, Jesus extends the jubilee vision by proclaiming good news to the poor, release to the captives, sight to the blind and liberation of the oppressed. He taught his disciples to pray for the forgiveness of debts (as we forgive our debtors). Pentecost was characterized by the voluntary sharing of possessions, so that "there was not a needy person among them" (Acts 4:34, cf. Deut. 15:4).

The sabbath tradition of the jubilee vision is as relevant today as it was thousands of years ago. Debt bondage by the poorest countries to Western governments and creditors is today's new slavery. The accelerating concentration of wealth for a few in the richest countries and the devastating decline in living standards in the poorest countries call for correction along the lines of the ancient sabbath and jubilee cycles. The social, political and ecological costs of the debt crisis can no longer be tolerated and must be redressed. Only when we have implemented the sabbath-jubilee mandate can we "turn to God" and "rejoice in hope".

3. The eighth assembly of the World Council of Churches affirms that
a. Cancelling the debt of impoverished countries and addressing the devastating cycle of debt accumulation are matters of urgency.

Today's globalized economy promotes the accumulation of wealth in the hands of a few through lending money or through speculation. This process is promoted by G7 leaders through the Bretton Woods institutions, which have encouraged debtor nations to borrow on international financial markets, made easier by the International Monetary Fund's (IMF) deregulation of capital movements around the world. Because foreign debt can only be repaid in hard currency (e.g. US dollars or sterling), indebted countries are obliged to orient their economies towards the raising of these revenues from exports or new loans. This explains why debtor nations are forced to concentrate on cash crops such as coffee, cocoa and carnations, as opposed to staple foods, and why they are caught up in endless cycles of borrowing.

The foreign debt is growing exponentially. Present debt-management proposals such as those devised by creditors (the Heavily Indebted Poor Countries (HIPC) initiative) offer too little, too late, to few countries. Because these are designed by creditors, their purpose is debt collection not debt relief. Furthermore, Western creditors, represented by the IMF, impose conditions whose purpose is to generate revenues for debt service. Structural Adjustment Programmes impose unacceptable conditions on debtor nations and drain them of precious resources. Unless present debt-management plans are transformed into debt-release opportunities, the devastating cycle of debt accumulation will repeat itself, condemning millions more people to suffering.

The poorest countries are not the only ones trapped by the debt crisis. Countries that are arbitrarily defined as "middle income" are also threatened by debt crises. As the crisis in southeast Asia and in Brazil shows, reckless lending leads to speculative investment, high levels of debt and capital flight. When governments have to back their own currencies against speculative attack, they are forced to raise interest rates and seek new loans from the IMF. Furthermore, as illustrated in the case of Thailand, the IMF obliges debtor governments to "nationalize" private losses caused by the financial crisis, transferring the burden to the public, who did not benefit from the loan. Substantial debt reduction is urgently needed for these severely-indebted middle-income countries to enable them to escape the downward cycle of debt and economic degradation.

The policies of the Bretton Woods institutions, in particular the rapid liberalization of capital flows, are increasingly being questioned. Recent public statements by the chief economist of the World Bank have drawn attention to fundamental flaws in these policies. Furthermore, he has noted the double standards applied by the Bretton Woods institutions to Western economies on the one hand and indebted nations on the other. It is important to support those leaders in the World Bank and IMF who promote poverty eradication policies.

b. The basic human needs and rights of individuals and communities and the protection of the environment should take precedence over debt repayment.

Highly indebted countries pressed by capital shortages to seek new loans are forced to adopt IMF policies and renounce control of their economic sovereignty. Debtor governments are obliged to give debt repayments over spending on health, sanitation, clean water, education and other social needs. This undermines accountability by debtor governments to their people, which in turn erodes local democratic institutions. Debt and loan negotiations are always conducted in secret between elites in the North and elites in the South, fostering corruption.

The diversion of resources from impoverished peoples in debtor countries to rich Western creditors is a violation of human rights. Furthermore, the impunity with which creditors are able to impose such policies is a travesty of justice. Children and women are forced to bear the full costs of debt repayment through reductions in health, sanitation and clean water programmes. In addition, by concentrating on exports, poor countries strip forests and over-exploit land and non-renewable resources, further aggravating serious environmental problems. High levels of debt and economic degradation inevitably lead to social conflict and disintegration, in particular war. Military and corrupt dictatorships and those of the apartheid regime have incurred the most unacceptable kind of debt, defined in international law as odious debts.

c. New structures and mechanisms, involving participation and dialogue between creditors and debtors, are critically needed.

Both lenders and borrowers must take responsibility for the debt crisis. It is unjust that creditors dominate the debt relief process. We need new, independent and transparent structures for governing relations between debtors and creditors. In particular, we need a new just process of arbitration for international debt cancellation, such as the introduction of an international insolvency law, which ensures that losses and gains are equally shared.

Collective political will is urgently needed to develop an international, ethical lending- borrowing mechanism, which involves civil society, including churches, in the process of debt relief and in preventing future debt crises. These mechanisms must produce ethical, mutually responsible and transparent solutions, which not only satisfy requirements for economic efficiency, but also for the protection of basic human needs and rights as well as the environment. Where funds are released through debt cancellation or other relief measures, civil society organizations must be enabled to take part in determining how monies are reallocated for social priorities.

d. Churches can play a powerful role in providing solutions to the debt crisis, particularly in the area of building partnerships.

Significant work towards debt cancellation has been done by churches and Christian world communions. The WCC encourages member churches, church-related institutions, relevant campaigns and movements such as the jubilee 2000 Coalition, to renew their commitment to solving the debt crisis, informing and mobilizing the public to generate political will to transform unjust international structures and relations. Churches can best do this by demanding information from their governments on lending and borrowing policies.

The assembly encourages member churches and its partners to provide critically needed fora for discussion with governments and international financial institutions. They should urge governments of the wealthier countries to: (1) increase support for bilateral and multilateral debt cancellation, and (2) undergird efforts to make international financial institutions more democratic, transparent and responsive to the needs of the world's most impoverished.

4. The eighth assembly of the World Council of Churches calls on the member churches and the ecumenical movement to work for:
a. debt cancellation for severely indebted, impoverished countries to enable them to enter the new millennium with a fresh start;

b. substantial debt reduction for severely indebted middle-income countries within the same time frame;

c. participation by civil society in deciding and monitoring how funds made available by debt cancellation should be used to restore social and ecological damage;

d. establishment of an independent, transparent arbitration process for debt cancellation, and ethical lending and borrowing policies to prevent future recurrence of the debt crisis;

e. ethical governance in all countries and legislative action against all forms of corruption and misuse of loans;

f. full support to impoverished people of the indebted nations which cannot service their debts and suffer sanctions as a consequence.

5. In line with the sabbath-jubilee vision, the eighth assembly of the World Council of Churches appeals to the leaders of the G8 nations to recognize the urgent need to:
a. cancel the debts of the poorest countries to enable them to enter the new millennium with a fresh start;

b. substantially reduce the debts of the middle-income countries within the same time frame;

c. accept that debt cancellation cannot wait until conditions set by creditors are met;

d. introduce a new, independent and transparent arbitration process for negotiating and agreeing upon international debt cancellation;

e. implement measures to promote accountability of debtor countries when debts are relieved; these measures must be determined and monitored by local community organizations, including churches and other representative organizations of civil society, to ensure that debt cancellation leads to a just distribution of wealth;.

f. use their powers to ensure that funds illegitimately transferred to secret foreign bank accounts are returned to debtor nations;

g. engage, in consultation with civil society, in a process of global economic reform towards a just distribution of wealth and preventing new cycles of debt.

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