What is Debt and Why Should We Care?

Debt is a situation where a person, country or organisation owes some money or possessions to another person, country or organisation (a creditor).  A country's debt usually falls in the following categories;

• Bilateral Debt - debt owed by one government to another
• Commercial Debt - debt that is owed to private sector creditors and commercial banks
• Domestic Debt - debt owed to creditors resident in the same country as the debtor, and denominated in local currency
• External Debt - debt owed to foreign creditors and denominated in foreign currency.
• Multilateral Debt - debt owed to a consortium of lenders like the World Bank or regional development banks such as the  African Development Bank (ADB)
• Official Debt - debt that is owed to public sector lenders
• Publicly Guaranteed Debt - debt originating from loans made to state owned enterprises (parastatals) or private companies, the payment which has been guaranteed by the government of the debtor country

We should be concerned about the issue of a country's indebtedness because debt is an obstacle to human development. Debt results in the use of scarce resources for servicing debt , instead of investing in people's well being. For example, the UNDP estimates that Sub Saharan governments transfer to northern creditors four times what they spend on health. Citizens should also be concerned about paying debt that is ODIOUS or ILLEGITIMATE, and this type of debt is explained further in this pamphlet.

A profile of Zimbabwe's Debt

Zimbabwe is now one of the few countries with such a high and unsustainable level of indebtedness. Almost half of that debt can be traced from the Rhodesian government during the 1970s. Secondly, almost a quarter of that debt is due to Apartheid destabilisation acts in the 1980s, because government had to borrow to strengthen itself to fight off these disturbances. Thirdly, the last quarter of the external debt originated from IFI lending during the 1990s, based on the disastrous Economic Structural Adjustment Programme (ESAP).
What is Odious and Illegitimate Debt? 

According to AFRODAD  the legitimacy of Africa's debts is highly questionable. Many of the loans, which are being paid now, were made to repressive regimes (e.g. UDI Rhodesia and Apartheid South Africa) and corrupt leaders who used the money to strengthen their rule or line their own pockets. Loans were made without any attention to the viability of planned projects or to the capacity of the recipient country to make repayments.

"The doctrine of ODIOUS DEBT deals with one exception to the inheritance of state debt. The norm is for a new government automatically and unconditionally to accept the debts contracted by its predecessor. As a departure from this norm, a debt is odious and not transferable to a successor government if the previous regime was any form of dictatorship acting contrary to the needs and wishes of the subjugated population. Apartheid was a racial dictatorship, a circumstance that contaminated all loans to apartheid South Africa, thereby making the debts automatically odious." 

ILLEGITIMATE DEBTS can simply be classified as Debt incurred by illegitimate debtors and creditors acting illegitimately, for instance:

• Odious debt or debt incurred not for the needs of the state but to strengthen a despotic regime and repress the population that fights against it;
• Loans which were stolen through corruption;
• Debts incurred for illegitimate uses;
• Debts for projects which did not happen or did not benefit the people as they were intended;
• Debt for projects that were destructive to the community or its environment and,
• Debt contracted for fraudulent purposes.

The only way a country can unpack the legitimacy or legitimacy of debt is to carry out a Debt Audit.

What is a Debt Audit?

Debt audits are comprehensive examinations of the public debt. These should be public, transparent and participatory, involving political mobilization of civil society. There are two types of debt audit, CITIZEN'S DEBT AUDITS and OFFICIAL DEBT AUDITS.

How Can You Get Involved?

• Participate in an Independent (Citizen's) Debt Audit
• Urge your local Member of Parliament to support an Official Debt Audit