External debt is a cancer to Nepal. Cancel it now!
Earthquake-hit Nepal’s debt stands at $3.8 billion. Writing off its loans will go a long way in helping it to recover, says former Nepali MP Sunil Pant.
Sunilbabu Pant/Pahichan-I would like to express my heartfelt thanks to all the kindhearted people across the world for their generosity and solidarity in response to the horror of Nepal’s earthquake. And as Nepali people, Nepalese security forces, Nepali government and civil society along with international rescue teams tirelessly help the survivors with shelter, water, food, medicine; I would like to call on the World Bank, ADB and other bi/multilaterals to stop blood-sucking the money Nepal so badly needs now in the name of ‘debt servicing’.
Nepal was already one of the world’s poorest countries and now it has become far poorer after the recent deadly earthquakes that already killed more than 8,000 people in Nepal. So it’s unacceptable that the World Bank and Asian Development Bank (ADB) still intend to collect tens of millions of US$ from Nepal this year, as much or more than the total amount pledged so far to Nepal in aid.
Nepal’s government external debt is $3.8 billion. The debt payment due in 2015 is $210 million.
Of this, $1.2 billion is owed to non-World Bank multilateral agencies (a lot of this will be to the Asian Development Bank), $1.1 billion to the World Bank, $250 million to other governments (among them India and China), $64 million to the IMF, and $1 million to private lenders.
Nepalese debt may appear small by global standards but trying to repay it is a crushing burden. Debt incurred by Nepal during the feudal government during the ‘Panchayat era’ hardly benefited the grassroots and poor people in Nepal, despite that debt pouring into the country. After democracy in 1990, corruption rose but despite that, debt continued pouring into Nepal. During 12 years of the Maoist insurgency, development not only could not reach the neediest rural population, but already built infrastructure, including schools, hospitals, bridges, power stations, etc., were destroyed. Despite that, debt continued pouring into Nepal. Then, in the ‘new-constitution-writing-era’ over the past 7 years, development has been forgotten by the government. Despite that, debt continued pouring into Nepal.
Now, this deadly earthquake has struck Nepal, destroying massive public and private properties and basic infrastructures in the hills and mountainous regions of Nepal which were already poor. All those years, Nepal’s government has been borrowing in the name of development, but the results are not only insignificant but also raise the question of whether the debts to Nepal were used or abused. For a small and poor country like Nepal the debt is not just a ‘crisis’ but has become a chronic condition, like a cancer that never allows Nepal to grow. Some even say debt to “third-world countries” is a conspiracy meant mostly for the benefit of bankers.
There seem no valid economic reasons whatever for the rich world to have made Nepal drag its debt burden so far, for so long.
According to Jubilee Debt Campaign’s statistics for Nepal, in 2012 the country paid 5.9% of total revenue (US$ 210 million) to service foreign debt. Nepal’s Government foreign debt was 18 % of GDP (US$3.8 billion). That’s a lot of money! And Nepal is losing resources by having to service that debt year after year.
Reimbursement of Nepal’s debt has been a huge burden and now will lead to unimaginable human suffering. The Nepali economy has been wrenched by ‘structural and/or policy adjustment’ measures dictated by the bilateral and multilateral creditors.
Nepal is among the poorest and least developed countries in the world, with about one-quarter of its population living below the poverty line. Nepal is heavily dependent on remittances, which amount to as much as 22-25% of GDP. Nepal has considerable scope for exploiting its potential in hydropower, with an estimated 42,000 MW of commercially feasible capacity, but these external debts are rarely used to invest in hydropower generation projects in Nepal. And while a few creditors have invested into hydropower, the unjust contracts result in the creditors taking all the benefits and Nepal is left with load-shedding and less access to energy produced.
Nepal can’t afford to pay the debt back as per the creditor’s terms (it will be interesting to know how much Nepal actually has paid of the debt: how much interest and if any of the principal has been paid). While these sums are relatively paltry – Japan, China, India, South Korea and the West don’t need the money – the burden on Nepal is enormous. So why the continuous blood-sucking?
One reason the ‘debt as cancer’ is metastasizing is that in the last few decades, Nepalese governments have never had the guts to sit face to face with creditors at a debt-negotiating table. This is despite the fact that these supposedly democratic governments are supposed to take up the matter of unjust debt taken by previous governments and at the same time not to add further debt with similar impossible conditions, conditions that are demonstrably against the interests and needs of the Nepali people. Political parties supposedly stand united on this front, but party interest, personal interest makes the government ministers and parties fail to raise this serious matter at all. This inability has made it even easier for creditors to isolate and browbeat the Nepalese, government after government.
The World Bank, ADB and other institutions that can cancel this debt are under the influence of rich countries like the USA, Japan, UK, EU, South Korea, Australia, China, and India. Hence I like to call our friends from developed countries as well as other countries to put pressure on their governments and these institutions.
The Ministry of Finance (the Debt Management Unit in the Foreign Aid and Coordination Division) should calculate up-to-date debt figures for Nepal from different countries, the World Bank, ADB and other institutions. The government should propose paying for earthquake relief, rebuilding and rehabilitation, and poverty reduction with the funds that will be available after cancellation of the debts. Debt cancellation for Nepal will lift a huge burden from its ability to recover and rebuild.
I believe this is something that the World Bank, ADB and other bi/multilateral donors also want to see happen to Nepal now. Saving the population from the recent earthquake-caused hunger, poverty, diseases and destruction of livelihoods by cancelling Nepal’s unjust debt from the past is ‘Just and Human Rights’, now more than ever.
Sunil Pant is a former Member of Parliament (2008-12) of Nepal and founder of the Blue Diamond Society.