Norway cancels illegitimate debt

In early October Norway’s Minister of International Development Erik Solheim announced that Norway will unilaterally and without conditions cancel US$80 million in illegitimate debts owed by five countries: Egypt, Ecuador, Peru, Jamaica and Sierra Leone. Burma and Sudan, who also have debts to Norway after the Ship Export Campaign, will not receive any cancellation until the situation in the two countries changes.

The claims originate from the Norwegian Ship Export Campaign (1976-80), under which Norway exported 156 vessels and ship’s equipment totaling NOK 3.7 billion to 21 countries.

The campaign was financed through the Norwegian Guarantee Institute for Export Credits (GIEK). A great many of the projects proved to be financially unsustainable, so that government guarantees were triggered and the Norwegian government became a creditor. In 1988-89, Norway’s government conducted an evaluation of the Ship Export Campaign, in which the campaign was criticized for inadequate needs analyses and risk assessments.

In announcing the cancellation, the Norwegian government admitted that the campaign represented a development policy failure and that, as a creditor country, Norway has a shared responsibility for the debts that followed. In cancelling these claims Norway takes the responsibility for allowing these five countries to terminate their remaining repayments on these debts.

The government proposed that these claims be cancelled unilaterally and unconditionally, without budgetary allocation and without reporting the cancelled amounts as Official Development Assistance (ODA) to the OECD. The debt cancellation will, in other words, be additional to Norway’s ordinary ODA.

The campaign for debt cancellation has long said that debt incurred by dictators, for failed projects, or where money has disappeared in corruption is illegitimate.

In response to Norway’s announcement, Jubilee South/Americas said, “We … celebrate this step, ratifying our commitment to continue to struggle for the cancellation and repudiation of all the illegitimate financial debt burdening the South countries, promoting among other initiatives the realization of public audits to demonstrate its fraudulent character as well as the reality of the historical, social, and ecological debts of which South peoples are the creditors. We are calling on all North and South governments to take up the challenge posed by this action on the part of the Norwegian government, recognizing that it is possible to change these unjust relationships and to open up new paths in the building of relationships of solidarity that will allow us to take advantage and share the wealth generated by our peoples, and insure that financial resources are used to pay off the real debt, the one with millions of men, women and children who are living today in poverty and misery.”
Hugo Arias of the Jubilee 2000 Guayaquil Network in Ecuador reminded the world, “The Norwegian government has cancelled the debt for a sum of about 35 million dollars... The purchase totaled 59 million dollars. To date, the country has paid more than 100 million dollars.”

Norway has now broken the unspoken rule of creditor solidarity. Creditors have until now banded together to insist that poor countries repay their debts and have refused to admit that they share some responsibility for having extended loans irresponsibly, often for geopolitical strategic purposes. For additional information see www.eurodad.org.