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Transition Unit How the world works

Transition Unit How the world works . The Debt Crisis Explained Part 2 Activity 5 . International Debt. ……. A story of 3 main problems ….. . Problem 1: Debt: It’s Loads of Money . The total external debt of the South is almost $ 3 Trillion.

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Transition Unit How the world works

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  1. Transition UnitHow the world works The Debt Crisis Explained Part 2 Activity 5

  2. International Debt ……. A story of 3 main problems …..

  3. Problem 1: Debt: It’s Loads of Money • The total external debt of the South is almost $ 3 Trillion. • Countries of the Global South continue to pay over US$ 100 million per day in debt repayments. • Cause: Reckless loans given out in 1970s and 80s that led to a vicious cycle of debt. • Despite some debt cancellation, Southern debts remain enormous due to continued dependence on loans.

  4. Problem 2: People’s Human Rights • Much of this debt is ‘unpayable’. • What does ‘unpayable’ mean? • Meeting the loan payments means that the basic human needs of people in the Global South cannot be met: e.g. Kenya paid 20% of its national budget in 2005 on debt repayments.

  5. Problem 3: Unjust relationships Between North and South Much of the remaining Southern debt is unjust or ‘illegitimate’. What is an illegitimate loan? • Loans given on unfair terms • Loans given for damaging projects • Loans causing human rights abuse • Loans with damaging conditions attached

  6. World Bank & IMF The World Bank and IMF give loans and implement debt cancellation deals What is the role of the World Bank? • It’s a global development organisation; It’s mission is: to fight poverty; It gives long term development loans Role of IMF? • ‘Lender of last resort’; Emergency lender; global economic advisor Rich countries are the main decision-makers in both organisations

  7. Global Movement for Debt Cancellation • There are social movements & campaigns all over the world calling for more debt cancellation. • Some debt cancellation has been won so far due to campaigning: approx US$ 100 billion • BUT many indebted countries are still left out. • Alert!: There is a new debt crisis on the horizon due to new loans being given to the South to deal with the current global economic crisis.

  8. Ireland’s Role? • The Irish government does not lend directly to Southern countries. (It gives grants directly through its aid programme). • However, Ireland lends money to Southern countries through its payments to global lending organisations including: the World Bank, the IMF and the Asian Development Bank.

  9. Get Involved! Learn more about Ireland’s role and responsibilities in the global debt problem: • Contact: Debt and Development Coalition Ireland, 01 6174835; campaign@debtireland.org, www.debtireland.org

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