Developing Country Debt: Discussion with Debt and Development Coalition Ireland.

I welcome Ms Nessa Ní Chasaide, co-ordinator, Debt and Development Coalition Ireland. Debt and Development Coalition Ireland, DDCI, was established in 1993 by a number of development, environment, missionary and solidarity groups in Ireland concerned about the devastating effects of debt on developing countries. More than 70 organisations are now members of the coalition which is funded through membership subscriptions, with matching funding provided by the European Union. It also receives funding from Irish Aid under its development education programme. It is concerned that the current global financial crisis is spawning a renewed debt crisis in developing countries and raises questions about the policies of the World Bank and the IMF which are encouraging impoverished countries to take out new loans which, in turn, could lead to further unmanageable indebtedness for some of the poorest countries in the world.

In 2002 the Departments of Finance and Foreign Affairs published a joint paper on the question of debt, setting out the Government's position on issues such as debt sustainability, debt cancellation and enhancing developing country capacity for debt management. This paper is being updated and a revised statement on developing country debt is planned for publication towards the end of the year. The joint committee is keen to hear Ms Ní Chasaide's views on the direction Ireland's revised developing country debt policy should take and on Debt and Development Coalition Ireland's submission to both Departments on the issue.

I advise that while Members of the Houses enjoy absolute privilege in respect of utterances made in committee, witnesses do not enjoy such privilege. Accordingly, caution should be exercised, particularly with regard to references of a personal nature. I now ask Ms Ní Chasaide to address the committee, following which we will take questions from members.

Ms Nessa Ní Chasaide

I thank the joint committee for giving me the opportunity to share the concerns of Debt and Development Coalition Ireland about the urgent problem of international indebtedness. Despite some progress on achieving debt cancellations in the past decade — some $88 billion will be provided as a result of multinational debt cancellation agreements — the external debts of impoverished nations which we often term southern countries or countries of the global south have now reached a staggering US$2.9 trillion, with an estimated $100 million of debt repayments being made from the poorest to the richest countries every day. This demonstrates a serious failure on the part of the development co-operation community to adequately support southern nations in halting the massive drain of desperately needed resources from their economies.

The debt crisis is more pressing than ever. As a result of the significant deterioration in the budgetary positions of southern governments in the midst of the financial crisis, debts are steeply rising again. In the past year, the International Monetary Fund has extended loans worth $170 billion to 32 countries; the World Bank has announced $59 billion in new loans, a 54% increase in lending over the previous fiscal year; the Asia Development Bank has announced plans to increase its lending by more than $10 billion; and ten European Union member states have collectively increased their export credit capacities to the tune of €36 billion, an average increase of 35%. These are substantial increases, primarily in non-concessional lending, and constitute a tenfold rise in lending from the official sector to southern countries.

Official bodies such as the United Nations and International Monetary Fund are sounding the alarm that the poorest countries in the world are facing another potential debt crisis. The United Nations has pointed to serious concerns over the debt burdens of 49 least developed countries. Worryingly, the World Bank and IMF last month agreed significant changes in their debt sustainability framework which indicates the creditworthiness of southern countries. This decision will allow easier access to credit by southern governments.

Debt and Development Coalition Ireland and the international civil society movement for debt cancellation believe the provision of massively increased credit to be a deeply misguided response to the debt crisis. The human costs of unwise decisions at this point will be devastating. As many members will be aware, the World Bank has indicated that the major financial shortfall which southern countries will experience this year and next year may result in 89 million more people living in extreme poverty by the end of 2010 and between 1.4 million and 2.8 million additional infant deaths between now and the millennium development goals target date of 2015. All of these major challenges are taking place in the context of an urgent climate crisis which has potentially displaced 26 million people, with many more millions facing further climate related disasters in the near future.

The multi-layered crises being experienced by the people of the global south cannot be addressed through increased credit access. Instead, if the problem is to be addressed in a sustainable manner, significantly increased and speedy cancellation of unpayable and illegitimate debts of southern countries is required. This should be coupled with the provision of scaled up, non-debt creating finance in addition to longer-term steps to end unjust capital flight from southern countries. This reaches beyond debt repayments to other areas.

Four interlinked elements to the debt problem need to be addressed urgently. First, southern countries require significantly increased debt cancellation for their development. Despite the recent debt cancellation deals, some deeply indebted impoverished countries continue to be left out of existing debt cancellation arrangements. As a result, Kenya, which in 2005 spent 20% of its national budget on debt repayments and where life expectancy is just 52 years and one third of the population are undernourished, does not qualify for debt cancellation. This failure is all the more serious given that the positive impacts of debt cancellation finance are clear. For example, debt cancellation has enabled Uganda to abolish fees for primary school attendance, which has resulted in a doubling in school enrolments and an increase in school attendance among girls. The reason for this failure is the inadequacy of the debt sustainability ceiling measurements, as defined by the international financial institutions.

Existing debt cancellation mechanisms are also too slow and weighed down by the inappropriate practice of attaching policy conditions recommended by the World Bank and International Monetary Fund to debt cancellation agreements. As a result, recipient countries have waited an average of almost four years to receive irrevocable debt cancellation, even when it has been acknowledged that they require debt cancellation. More fundamentally, the impacts of the policy conditions attached to debt cancellation processes have weakened democracy building efforts in the global south and hurt the most vulnerable people in the countries in question. For example, the impact of these conditions included the privatisation of the cotton industry in Mali, which has resulted in a 20% drop in cotton price for 3 million Malian farmers.

Second, specific action needs to be taken against the unjust practices of lenders and the accumulation of illegitimate debts. In the current international system borrowing countries bear the negative consequences of illegitimate debts in their entirety. As a result, lenders may operate with complete impunity where exploitation and irresponsibility on their part has taken place. Wide research in this area has recorded exploitative practices engaged in by lenders, including the extension of loans to repressive regimes and known corrupt officials, loans given for obviously useless, damaging or over-priced projects and loans granted on unacceptable terms and conditions.

The level of accumulated debts resulting from illegitimate lending is high. For example, it is estimated that some 20% of southern debts can be attributed to dictators. For example, lenders knowingly lent to oppressive regimes such as leaders in Indonesia, the Philippines and apartheid South Africa. The inaction in cancelling illegitimate debts has imposed a substantial financial burden on people in the south. For example, in 2005 Nigeria had $30 billion of debt outstanding to the Paris Club on an original loan worth only $8 billion.

The need for action on illegitimate debts is increasingly recognised. The Government of Norway, for instance, cancelled $80 million of debt as a result of what it described as its own failed development policy and has called for an international task force on illegitimate debts. The United Nations is also taking action through the development of a programme on responsible sovereign lending and borrowing, which includes as a core part of its objectives the development of guidelines and criteria for assessing the legitimacy of both past and future sovereign debts.

Third, the institutions that dominate policy and practice in debt cancellation and international lending are undemocratic, lack adequate standards and favour the interests of lenders. The imbalanced governance of the World Bank and IMF continues to be of serious concern. At board level, the richest donors dominate policy decisions in these organisations and their decisions frequently have massive negative economic and political implications for countries of the global south. In addition to the need to ensure provision of equal voice and votes to southern nations, there is an urgent requirement to create credible international mechanisms to deal with debt disputes, including illegitimate debt claims. International standards are also required to guide just lending and borrowing relationships in future. These standards would provide a principles based alternative to the policy conditionality of the international financial institutions. Templates for such standards have been developed by civil society groups, including the European Network on Debt and Development, EURODAD, and the wider debt cancellation movement.

Fourth, lending in development finance should be located within a wider development co-operation approach which addresses the root causes of the chronic dependence of southern countries on external finance. There is a serious danger that the provision of increased access to credit to southern countries, as currently advocated by the World Bank and IMF, may provide donors with "get-out clauses" from delivering on their official development assistance spending obligations. It is critical that these spending obligations are delivered and additional resources identified for debt cancellation, for example, by using the proceeds from IMF gold sales, as proposed by international civil society groups. In addition, urgently needed financial support to southern countries to help them cope and adapt to climate change must not be loan based, as proposed by the World Bank, or conditional or administered through undemocratic mechanisms such as the World Bank climate investment funds.

It is important that action for debt cancellation must be situated within wider efforts to curb unjust capital flight from southern countries. Critical to that is the problem of tax evasion. The most sustainable and independent source of revenue for southern nations is through domestic tax collection, yet southern countries lose an estimated $160 billion per year in tax revenue as a result of tax evasion by multinational companies. If invested according to current spending patterns that money would save the lives of 350,000 children under the age of five each year. The requirement for tax justice for southern countries is an additional key component to stopping capital flight from southern countries.

Debt and Development Coalition Ireland, DDCI, is advocating a set of interlinked policy changes that should form the basis for a new international debt policy for Ireland. Ireland's current — 2002 — debt policy and White Paper on Irish aid are comparatively progressive internationally. By being the first donor to support total debt cancellation as a viable political objective for highly indebted poor countries, Ireland has set a strong benchmark and example within the international lending community. Ireland has also done well in advocating a policy of debt cancellation payments, in addition to official development assistance, ODA, spending. It has also ensured bilateral development assistance has been provided through grants rather than loans and has made strong arguments that social considerations must be taken more into account in defining debt sustainability criteria at the World Bank and the International Monetary Fund. This country has also provided significant payments to international debt relief schemes. However, despite those positive contributions, Ireland's current policy does not address the serious failures inherent in the current approach.

For those to be addressed, DDCI believes that Ireland should support expanded, unconditional debt cancellation for all southern countries that need it using human rights measurements and people's basic needs as the central consideration. It also supports the cancellation of illegitimate debts by supporting a UN-led process to tackle the problem of illegitimate debts directly, including the formation of a UN-led international task force on illegitimate debts, as proposed by the Government of Norway. Ireland should also support equal representation for southern governments at the World Bank and the IMF and an end to conditionality-based financing in the financial institutions, and instead to advocate a shift to legally binding just and responsible financing standards and that no loans or conditional funding for climate change support should be provided. That funding should not be lending based.

Ireland should also support wider action to ensure sustainable finance for southern countries, including delivering on our commitment to spend 0.7% of GNP in ODA by 2012 at the latest, by supporting additional resources for debt cancellation, such as those for the use of the proceeds of at least $5 billion worth of IMF gold sales to fund expanded debt cancellation and to support legal measures to end tax haven secrecy and corruption including automatic information exchange between tax jurisdictions and country by country reporting on tax earnings and profits by multinational corporations.

DDCI believes that Ireland's new debt policy should also ensure strong policy coherence mechanisms are put in place for Ireland's decision making in terms of our membership of the World Bank and the IMF. We suggest that these should include an annual Dáil debate on the annual report on Ireland's participation in the IMF and the World Bank and an annual meeting between representatives of the Oireachtas Joint Committee on Finance and the Public Service, the Oireachtas Joint Committee on Foreign Affairs and the Canadian executive directors of the World Bank and IMF, with their Irish constituency counterparts who represent us on the boards of those bodies. We also suggest an annual joint meeting between civil society actors and the Minister for Finance and the Minister of State with responsibility for overseas development to ensure that civil society views are taken into account in Ireland's policy making on the international financial institutions. As Ireland drafts a new debt policy that will have a significant impact on the lives of impoverished people, we urge the joint committee to seek action on those important concerns.

I have just come from the Order of Business in the Seanad where a vote has now been called. I am afraid I will have to go back to the Chamber and then we will be straight into the Planning and Development (Amendment) Bill. I apologise to the witnesses. I have a copy of the submission and I listened to the end of it with great interest.

Senator Dominic Hannigan also has to leave for a vote in the Seanad.

The presentation was a comprehensive one and will provide useful information to the committee on the coalition's views and interests. This is a subject in which we have previously taken considerable interest.

I thank Ms Ní Chasaide for her contribution. There is very little in what she outlined with which one could disagree.

Seeking the repayment of debt from such countries is akin to giving with one hand and taking away with the other. It is similar to exporting corn from this country during the Famine in the 19th century. Successive Governments are to be commended on the approach they have adopted towards the cancellation of world debt.

Ms Ní Chasaide outlined on the first page of her submission that the International Monetary Fund had raised the alarm about the poorest countries facing into another financial crisis, yet it is willing to make it easier for southern hemisphere countries to access credit. Why does this inherent contradiction exist? That is akin to our banks saying they would make it easier for people to get credit, notwithstanding that they are trying to get out of the difficult situation in which they find themselves.

What is the downside to debt cancellation, aside from the obvious one that people give up the right to recoup the funding they have loaned? Is there a downside to debt cancellation? Everything in the contribution is on the side of the angels and it is difficult to put up a moral argument against it. Is there another side to debt cancellation?

I welcome Ms Ní Chasaide. The presentation was very effective. I have a certain view about the matter. We are not necessarily making progress of a fundamental kind on the debt issue. Ms Ní Chasaide has acknowledged this country's lead role and the role it took previously. I refer especially to its commitment in 2006, which was significant. We do not have bilateral debt. We were one of the first countries to speak out about heavily indebted poor countries and to promote the development of the enhanced instrument, which came later.

That said, we have been around this bush many times. One of the questions my colleague, Deputy Timmins, raised related to the international financial institutions, the IMF and the World Bank. They are not engaging with some fundamental issues. The first such issue relates to illegitimate debt, namely, debt incurred by dictators. A previously circulated paper referred to the proposed building of a nuclear station in the Phillipines, which was never built. It came out of a set up of corrupt arrangements between partners, namely, a United States company and a corrupt political regimein situ. The facility was never built, yet the burden of paying for it is carried by the community of the Phillipines today. Ms Ní Chasaide gave the example of the Nigerian debt. Again, the debt is rolled up.

Let me turn to a specific point, namely, how we came to our current position. How do we get rolled up interest, for example, even on illegitimate debts? We get it because the international financial institutions, for obvious political reasons, chose in 1982 to change the structure of the Mexican debt because Mexico was facing a default. Therefore, we had not ever returned to facing a fundamental moral issue regarding the status of illegitimate debt.

I do not intend to waste time on this matter as others may wish to speak. My next point concerns the servicing of illegitimate debt. We had not secured a human rights component in regard to debt service such that no country would be asked to pay in debt service a proportion of gross domestic product greater than what it needed for, let us say, health, education and housing. That is a second fault line.

The next part concerns the conditions attached to repayments, in respect of which I want to be practical. I understand our Department is revising its document on debt with the aim of having it completed by the end of 2009. Before this occurs, this committee should receive representations from UNCTAD, which prepared the document on better principles for sovereign debt and lending, as referred to in the presentation. That would be very valuable because we do not hear from UNCTAD often enough.

Consider the history of debt initiatives from 1982, including those on foot of the Gleneagles G8 meeting. Here, as in many cases, there is no point in re-listing the commitments given on the debt position of the poorest of the poor countries when in fact these commitments have been broken. One notices a breach of commitments and a failure to honour them and this is why we need to address this matter.

To return to the practical issues, we should not only hear a submission from UNCTAD on its document; it would also be useful to have a presentation from the Jubilee movement, which does the same thing in regard to DFID, as I noted when I visited Britain to listen to the submission in this regard. My views on the annual debate on the World Bank differ from those in the submission made to this committee. While quite useful, such a debate would not bring one far enough. There is an interdepartmental committee dealing with these issues. It includes representatives of the Department of Enterprise, Trade and Employment whose job it is to focus on trade issue. Representatives are included who have expertise in the IMF and World Bank finance and there are officials from the lead Department, the Department of Foreign Affairs. The interdepartmental committee is crucial to preventing contradiction. Some of the countries we write about are paying more to service debt that we are giving them in aid. This is an unsustainable contradiction.

Consider the operation of international bodies that purchase debt, in other words, vulture funds. It is interesting that somebody reported recently that there was interest from an international body in purchasing part of the Irish debt. Although this is uncertain, may it never happen to us. Donegal International purchased the Zambian debt from Romania at a discount. In this case, two conditions of poverty are used to create a multiply-disastrous effect. The Zambian Government had bought tractors and equipment from Romania but was not paying Romania and the international body put in a bid for the debt. Romania was moved to consider getting out of the way for this because it, in turn, was poor and its economy was collapsing. The result of such circumstances is vulture-like activity.

This subject highlights the importance of this committee and it only reflects my long period of service thereon. We have already discussed the debt issue and the question of achieving a better policy through the IMF and the World Bank but we are still leaving to be addressed huge issues on which no progress has been made. For example, the IMF documents, which I read in preparation for this meeting, address the point the Chairman introduced and which is referred to in the submission. I refer to the new position in which we find ourselves in which people are forking out credit without addressing the issues of debt cancellation or illegitimate debt. The concept that is used is "sustainability". What the IMF means by "sustainability" is the extension of the period of the debt. It does not handle the issue of cancellation, nor the issue of rolled up interest on illegitimate debt. It simply changes the structure of the payments from a poor country.

The concept of sustainability, considered from the point of the view of the country in debt, would obviously include environmental considerations, health and education. Why should a country ever pay money to service debt when its children are dying? Therefore, it is inevitable that people will have to make up their minds.

Related to this is the question of how the climate challenge changes everything. This is what I took from the presentation today. The challenge, as we know from our work on this committee, is such that the very poorest of the poor are carrying the biggest burden in respect of climate change. However, at the same time, the failure of the north to address either its issues of adaption, or otherwise, regarding the south constitutes something close enough to an impunity. Therefore, all the riddle-me-ree about addressing climate change in a new time of debt really means nothing unless one is willing to consider the structure, how we have come to be where we are and how, in many cases, one needs entirely new definitions of concepts such as sustainability.

I thank Ms Ní Chasaide for her contribution. She presented some very startling figures. The number of people who will suffer from extreme poverty within the next year is to increase by 89 million. Between 1.5 million and 3 million additional infants will die between now and 2015.

I have a couple of questions on the presentation. Ms Ní Chasaide stated Uganda does qualify for debt relief or debt cancellation and that Kenya does not. Who draws up the criteria? Do some countries benefit while others that need debt cancellation do not? Reference was made to credible mechanisms and internationally binding and just standards. Who draws up the criteria and what work is being done in this regard by the different agencies involved, including the IMF, the World Bank and the United Nations? What should Ireland's priority be in this regard and what should it be doing? What is its priority in trying to ensure debt cancellation will be available to those countries that need it?

I thank Ms Ní Chasaide for her presentation. It is very timely as this is an issue that goes out of our minds very quickly. We must inform ourselves about the matter on a continuing basis.

A striking point in the presentation was on the climate crisis and the funds used by the southern countries to try to minimise or mitigate the consequences of climate change. I certainly agree that the isolation of funds and loans that were applied to this should be made so that the responsibility for these moneys should fall on those who created the climate crisis in the first place, which are countries such as the United States and those in northern Europe.

As regards the inappropriate practice of attaching policy conditions recommended by the World Bank and the IMF, can Ms Ní Chassaide elaborate on what policies are being applied and what effects they will have on particular countries?

It is estimated that $160 billion is lost each year due to tax evasion by multinational corporations. This is an astounding figure which should be focused on by the Department of Foreign Affairs and the Department of Finance in their multilateral discussions in the UN and other fora. I see no particular focus at the moment from those Departments in tackling tax evasion. The losers are the developing countries.

Ms Ní Chasaide recommended that Ireland's policy should seek a democratisation of the governance structures of the World Bank and the IMF, and a shift within the institutions from a conditionality-based financing approach to one of legally-binding, just and responsible financing standards. I agree with her that this would be an aspiration, but would it mean a reduction in the funds available? It would be a quantum step from the strict conditions that are applied at the moment to what effectively is being recommended, which is a more liberal approach. Would it mean a clamp-down on the funds that are available?

The committee could certainly put more focus on this matter. Debt and Development Coalition Ireland suggests an annual joint meeting between civil society actors, the Minister for Finance and the Minister of State with responsibility for overseas development, to ensure that the views of civil society are taken into account more in Ireland's policy. There is a role for the committee to help facilitate that type of broad meeting. Perhaps the Chairman will respond to that item.

I see that a revised joint statement on developing country debt is planned for publication towards the end of this year. That is another item that I am looking forward to reading. I hope there will be more discussion on it. I thank Ms Ní Chasaide for her presentation, which has been timely. I hope the profile given to the issue of debt relief, and Ireland's part in that, will increase and improve as a result of our deliberations today.

I wish to raise the issue of vulture funds, which may have been mentioned. I apologise for my absence earlier as I had to be present for a vote in the Seanad. I am concerned that vulture funds continue to be unregulated. One example concerns the case of Zambian debt, which is held by the Romanians. It was sold to a vulture fund for just over $3 million in 1999. In 2003, the Zambian Government paid off almost $2.5 million of that $3.2 million so the outstanding amount was $0.7 million. Because of difficulties in reaching a further agreement between the vulture fund and the Government, the fund took them to court in the United Kingdom. The British High Court found in favour of the vulture fund and the Zambian Government ended up having to pay a further $15.5 million to that fund. It was a great profit for the fund, but it was clearly taking money from those who could least afford to pay it. What are Ms Ní Chasaide's thoughts on the continued lack of regulation of vulture funds, given that some of these funds are using European courts to process their claims?

I thank Senator Hannigan. A few points have been raised because Ms Ní Chasaide's report was very stimulating. We will follow through on the points raised by Deputy Michael D. Higgins and others and will examine those matters closely. We will have the report at the end of the year and will place it as one of our priorities for early next year. We have pushed these points at various meetings. Deputy Higgins mentioned some of the points about which we have been fulminating at international conferences. What is happening is absolutely disgraceful so this consideration is timely. We will try to get a representative of UNCTAD, the United Nations Conference on Trade and Development, which is responsible for sovereign lending and borrowing. We will speak further with the Department of Finance and the Department of Foreign Affairs shortly about the issue. We must deal with this illegitimate debt and its components, as well as the extraordinary way it is mounting up through interest charges, which are a major problem.

As well as its implications for development.

It has implications for development, which is being wiped out by this. Some €100 million per day is going to the rich countries while we are trying to provide funds for development. I am thinking of Ethiopia where there is a famine now. We examined some of the Irish experiments there, which are working perfectly, notwithstanding the great drought. The climate effect is becoming urgent. It is part of the drought problem caused by the increasing irregularity of rainfall. That is happening in many regions, but particularly in sub-Saharan Africa. Some six million people are now on the safety-net programme which started out with some of the money provided by Irish Aid and others. Some people from University College Cork were involved. We must tackle that situation, which is currently hopeless. One can imagine trying to develop an economy and help people socially and economically, while facing those kinds of debt repayments.

Ms Ní Chasaide's report has been very stimulating. I would not like her to think, however, that we have not made those arguments. With other members, I have represented the joint committee at IMF meetings and elsewhere, but we need to bring the matter to a head. I accept that we need to get some strong leadership on it. Perhaps Ms Ní Chasaide will comment on the questions that have been raised. If there is any information she wishes to give us subsequently, she can do so.

Ms Nessa Ní Chasaide

I thank the Chairman and other members of the joint committee for their insightful comments and questions. I will take them in the order in which they came. Deputy Timmins asked why access to credit is currently being promoted by the World Bank and the IMF. That is a good question because it seems so contradictory to build international development policy on debt-creating mechanisms. It is a really serious problem that must be addressed by donor governments. The reality is that the World Bank and the IMF exist as commercial entities which engage in lending practices for development purposes. The challenge for the Irish Government is how we balance our aid programme and how much of our funding should be given to international financial institutions, such as the World Bank and the IMF. This is so, given that the IMF is highly non-concessional as regards its lending terms currently, and because it has a high level of policy conditions attached that have such macro-level impacts on economic policy, which then have a fundamental effect on the lives of people in the global South. It is true that Ireland makes efforts in channelling its funding to the World Bank to IDA, the International Development Association arm of the World Bank, which lends to the poorest countries, but nevertheless this is a highly conditional forum of finance. There should be a review of where the Government stands on the quality of this type of official development assistance.

I suppose this is more related to the politics of the urgent development finance required by southern governments to cope with the impacts of the multi-layered crises they are experiencing, but the money is not forthcoming. The G20 met in April and declared the need for $1.1 trillion to assist governments in coping with the current financial crisis. A very low percentage of that package, it appears, will go to the poorest countries in the world, who are the most vulnerable to these types of shocks.

In addition the commitments to deliver on that financial package are not forthcoming. Even where there are some pledges, it is not clear whether that funding will be in addition to existing official development assistance spending obligations. It should be noted that Ireland is currently considering what its contribution to the IMF will be to support this emergency finance package, and it may result in a commitment of more than €1 billion to the IMF towards this fund. We would raise serious questions about any decision that will be made to give such a guarantee to the IMF, given its track record in impoverished countries. The IMF has reviewed its lending criteria recently because of the enormous demand for loans it is being faced with. However, recent research carried out by the European Network on Debt and Development and others demonstrates that there are still serious concerns around the policy conditions attached to IMF lending in the medium-term.

Is there a down side to debt cancellation? This relates to fears on the part of southern governments in accepting debt cancellation. There have been cases where southern governments have not accepted debt cancellation for fear of the international stigma attached. This emphasises the need for a multilateral approach to debt cancellation agreements, because frankly, southern governments are being faced with high levels of scare-mongering to the effect that they should not default on their debts, and that they should be seen to be in a position to pay their debts. That is why Ireland should be a strong voice in advocating multilateral collective approaches to support expanded debt cancellation initiatives for southern countries, so that these fears may be allayed.

In terms of Deputy Higgins's comments, I agree that we are not making fundamental progress on the problem of international indebtedness. While a significant amount of resources have been freed up through existing multilateral debt relief mechanisms, the highly indebted poor countries' initiative and the multilateral debt relief initiative formulated more recently, the fundamentals have not been addressed. These include the circumstances of loans being extended and accepted, and that relates to the illegitimacy question, who has benefited from the lending system, what has been the impact of the loans on the ground and how they have impacted on the lives of people in the global South. Unfortunately, there are myriads of bad examples of lending, where lenders have extended loans in the full knowledge that they would not benefit the people of the recipient countries. The question from the Debt and Development Coalition's viewpoint focuses on justice and just relations between borrowers and lenders. It is not merely a matter of freeing up finance.

Deputy Higgins was right to allude to the example of the Filipino nuclear power plant, involving a loan extended by a US bank involving a contract gained by a US company to build a power plant in the Philippines on the Bataan Peninsula. As he says, it was never opened, it was built on an earthquake fault line and never produced 1 watt of electricity. The project was rife with corruption and cost $2.3 billion. The last payment was made by the Filipino people in 2007. This is a loan that originated in the 1970s.

The failure to ensure speedy and efficient action is costing the economies of southern countries enormous amounts of resources, which should not be used, as I am sure we all agree, for social spending. I completely agree with Deputy Higgins's comments on the need for speedy action. This presents a real political challenge, because the current Irish debt policy that was published in 2002 raised concerns about the need for speedier debt cancellation. The Government was right to highlight this, but given that debt cancellation has remained slow, inflexible, problematic and damaging to impoverished people, what now will Ireland's position be? This highlights the need for a much more vocal approach by the Government through its membership of the World Bank and the IMF, and an assurance from the Canadian representatives who speak at the World Bank and IMF board on our behalf that they will promote Ireland's concerns in that regard.

It also raises a fundamental question around Ireland's membership of the World Bank and the IMF, given that there is a point at which we must do a stock take and decide whether these institutions are effective. This is where there is a challenge for the Government to decide where its money is best spent. There are serious questions to be asked on continuing to channel moneys through the World Bank and the IMF if debt cancellation processes are not adequately fixed and policy conditionality is not adequately addressed.

I very much support the notion of a visit from UNCTAD to the committee. It is currently implementing a programme, working closely with the government of Norway, and China, too, is interested in engaging as a new lender in discussing standards for future lending and how to address past illegitimate debts. It should be noted that this is a programme, not a piece of research. It will be ongoing for the next three years and we would very much encourage engagement from Irish Aid, members of the committee and the Department of Finance in policy making and discussions around this programme. It is important to note that it is very difficult for social movements and citizens' groups in countries of the global South to engage with these types of processes, because they are based, usually, in Europe or in Washington. The discussions tend to take place far away, so we should strongly encourage Irish Aid to support the participation of southern justice campaigners to be in a position to give their viewpoint through the implementation of the UNCTAD programme.

Also, we work closely with the Jubilee Debt Campaign UK movement, and collaborate with it. To jump to the issue of vulture funds, the Jubilee Debt Campaign UK has worked actively on this because of the Zambia debt case, which was held in London in recent times, as has been referred to. The UK justice campaigners have been engaging in public consultations with the British Government around the problem of vulture funds. Ireland can play a role through its European Union membership to ensure that this is discussed at EU level and that the issue is closely linked to the problem of tax havens and the secrecy surrounding financial transactions. We find that the opportunistic debt collection companies, or so-called vulture funds, are often based in tax havens. We need to be able to access the information about these companies that are behaving in such an opportunistic manner.

I also agree that the interdepartmental committee is a key forum in working for greater coherence between the Department of Foreign Affairs and the Department of Finance on debt policy. We have said that we hope to be in a position to meet officials from both Departments to ensure that civil society views are taken on board and that we have a sense of collaboration between both Departments on the issue.

We have serious concerns about increasing levels of debt occurring in southern countries as a result of the new role taken on by the World Bank in financing what it calls "climate investment funds". Climate justice campaigners have very serious concerns about these funds because they will be delivered through existing World Bank group mechanisms, which are highly conditional lending mechanisms. While some of the loans will be concessional or grants-based, some of them will not be so. This is a breach of the polluter pays principle which the UNFCCC has endorsed. We understand that Ireland has not contributed any money to the climate investment funds. We advocate that Ireland should not give funding to the World Bank climate investment funds and should express its concerns about the potential undermining of the UNFCCC process by the establishment of these funds.

Deputy O'Hanlon asked why Uganda is included in debt cancellation while Kenya is not included. This is a good question because it goes to the heart of the problem with decision-making in the existing multilateral debt cancellation processes. The World Bank and the IMF have specific measurement criteria which define who qualifies for debt cancellation. One of the most commonly used criteria is the measurement of a country's debt to export ratio, which must be over 150%. It does not take into account social needs, even emergency food aid needs. This is of great concern to the global debt cancellation movement and to our colleagues who are struggling to address this issue throughout Africa, Asia and Latin America.

Research carried out by the New Economics Foundation and the Jubilee Debt Campaign in the UK found that if human needs-based measures were used in identifying what resources are required for southern countries to meet the Millennium Development Goals by 2015, we would be looking at 100 countries needing debt cancellation worth at least $400 billion. Comparing that with what has been delivered so far through the multilateral debt relief mechanisms, we have a promise of about €88 billion through the HIPC and MDRI mechanisms. Therefore, we are far from finding the resources that are required to deliver real and effective debt cancellation.

Financing standards are unfortunately still in the realm of civil society dialogue. We have had discussions with the World Bank on this issue after a long period of efforts to engage them in discussions on the problem of illegitimate debt and future responsible financing standards. The work in the civil society sector involved drawing up a detailed charter on what a responsible loan would look like. The charter is detailed because it outlines some of the key mistakes, opportunism and difficulties that southern governments experience with current loan contracts. However, the solutions we are looking for involve simplifying the whole process and stopping the use of lending as a lever to achieve other things. We advocate that international financing standards should involve ensuring that it is clear what the loan is being extended for, that it is spent on what it was intended for, that it is spent transparently and effectively, that human rights in the environment where the loan is being extended are not a concern and that policy conditions are not attached to the loan. This is the sort of simple and principled approach that we are looking for in international financing relationships between northern and southern governments and institutions.

The World Bank engaged with us on future financial standards and at the same time engaged with us in talking about illegitimate debt. It has a high discomfort in talking about past mistakes. The World Bank is much more comfortable talking about future standards because it means that past mistakes remain unaddressed. The new debt policy for Ireland must stress the need to address the historical wrongs that have been done to countries of the global south through illegitimate lending. As things stand, the international financial institutions, of which Ireland is a member, are not prepared to do that.

We have circulated to the committee the paper we submitted to the Department of Finance and the Department of Foreign Affairs, which details our priority for the new debt policy. Our priorities deal with illegitimate debt and policy conditionality at the World Bank and the IMF. This is because these are the hard issues. These are the issues where the power relationships between northern and southern countries become very exposed. We believe that a country like Ireland can play an honest broker role in pushing for action and dialogue on these issues at a multilateral level, without having a vested interest. Frankly, it will not cost Ireland anything because we have a very good policy of not extending bilateral loans directly, except through our membership of the World Bank, the IMF and other multilateral lending institutions. Ireland is well placed to show leadership in these two areas, in the way that it showed leadership in 2002 by being the first donor government to come out in support of debt cancellation for the poorest countries.

I gave a more detailed presentation in the hand-out on policy conditions. I outlined a number of examples of policy conditions in that hand-out. One of the examples not mentioned that causes most concern is the case of Malawi. This is a very poor southern African country that took six years to the completion point for debt cancellation. This happened partly because it was declared to be off track by the IMF. The IMF suspended interim debt relief and delayed debt cancellation due to the Malawi Government's additional expenditure on grain purchase. The reason for the delay in debt cancellation in an emergency such as that which existed in Malawi is morally unacceptable from our point of view.

The principles outlined in the White Paper on Irish Aid are very strong. They stress sustainable development and ownership of development processes by countries of the global south. The example of what happened to Malawi with the IMF in a situation of acute emergency demonstrates a real contradiction between the practices of the IMF and the principles outlined in Ireland's White Paper on Irish Aid.

There is no question that the figure for tax evasion is enormous and it has only lately become clear to civil society organisations. This issue of global tax justice is one that might be worthy of revisiting by the committee. The Department of Finance is engaged in the ongoing dialogue regarding global taxation policy, particularly through the medium of the OECD. However, we are greatly dissatisfied with the level of dialogue at the OECD regarding international information exchange on taxation issues. The OECD is advocating bilateral information exchange agreements but those agreements are based on a "by request" practice. This is not a viable model for southern countries because they do not have the capacity to unearth all the information they require to allow them to make the type of request that will provide the answers they seek. That is why the global tax justice movement is advocating country-by-country reporting by multinational corporations so that southern governments and citizens can see the amount of profits being earned by multinationals in their countries in addition to the level of tax they are paying. In addition, there is support for automatic information exchange so that information is readily available and there are no obstacles for southern governments in accessing the information they need to ascertain whether they are in receipt of the correct amounts of tax.

The question of whether policy conditionality implies a reduction in funding is essentially a matter of political will and what donor governments view as effective ODA expenditure. If donor governments wish to give money with strings attached and have another agenda in giving aid, that must be addressed. This is a serious problem in aid giving, with high levels of tied aid. Even countries such as Italy have reduced their ODA expenditure once they have paid out for debt cancellation, which amounts to giving with one hand and taking with the other. There is a serious contradiction in this regard in terms of aid giving by donor governments. Ireland is certainly one of the more principled donor governments but we have identified a substantial gap in policy in terms of the lack of clarity regarding Ireland's position on World Bank and IMF policy conditionality. The response given by some of the more influential members of those bodies is that they have streamlined policy conditionality. However, research we carried out before Ireland made the decision two years ago to provide a further €90 million to the international development aid arm of the World Bank showed that while the number of policy conditions had reduced, this was only at micro level. Macro level policy conditions have not reduced in number and remain a serious problem.

To contextualise the issue on a moral level, we must consider the types of relationships we wish to have with southern governments through our aid giving. Given the wide evidence of the damaging implications of policy conditionality, the lack of capacity within the World Bank and the IMF to make any decent policy recommendations shows that this practice is completely outmoded. If Ireland is to be a progressive donor, it must not only meet its ODA spending obligations by 2012 at the latest but must also ensure it takes clear action in promoting a shift to a more mature relationship between donor governments and southern countries, that is, a shift from conditional money, which is highly influenced by external factors, to a system of agreed international financing standards.

I answered Senator Hannigan's final question on vulture funds. On the broad question of debt policy, I understand from the Departments of Finance and Foreign Affairs that the review process will be completed by the end of the year. It is critical, given that southern countries are facing another potential debt crisis, that the committee actively engages on this issue before the end of the year. There is little value in having a completed debt policy which has not been engaged with at parliamentary level. I urge the committee to seek clarification on the timeframe for the development of the policy and consider means by which to engage with its development before that timeframe is completed.

I apologise for being late. I came into this debate with little knowledge of the matter under discussion, having had insufficient time to research it, but Ms Ní Chassaide's explanation of the various issues has stimulated my interest further. We should revisit the matter in the future to explore several aspects, particularly the development of our debt policy in terms of how we work with the IMF and the World Bank. I would like further discussion of the measurement criteria used for cancellation and the question of where we go from here in regard to the relationship between donor governments and southern governments——

That was dealt with earlier and we will come back to it.

That is good. It is an area that has certainly stimulated my interest and I would appreciate further discussion of it. Ms Ní Chassaide has given us plenty to think about.

I thank Ms Ní Chassaide for her informative and comprehensive presentation. I draw members' and delegates' attention to the attendees in the public Gallery who include: Mr. Thomas Tichelmann of Irish Aid; Mr. Abdelmalek Achargui, deputy head of mission at the Embassy of the Kingdom of Morocco; Zbigniew Rucinski, counsellor and head of the economic department of the Polish Embassy; Richard Lemoshira, counsellor and deputy head of mission at the Embassy of Kenya; Megan Succi, who is currently with the IPA and who can bring messages back to the United States for us; and Stephanie from the Embassy of Romania. I thank all the visitors for attending.

This meeting has been very timely as a new policy statement is expected from the Departments of Finance and Foreign Affairs before the end of the year. We will bring the points raised today to the attention of both Departments to ensure that all relevant concerns are given urgent consideration. I assure the delegates that we are very concerned with finding means of emphasising and highlighting the issues and problems put forward by them and by members. We will try to do that at the international fora we attend as representatives of the State. The issue of the seizure of assets was initially raised at this committee. We began work separately on the moneys being salted away in particular countries, especially when the data from Transparency International showed which countries were at the top of the list in terms of being most transparent. I had the gall to point out that some of these were also the countries which held most of these secret moneys.

The joint committee encourages movement in this very important area, of which there has been some. Moreover, the point Ms Ní Chasaide has made about looking backwards at what has happened historically in such countries to ascertain the reason it happened and the reason they are in their current position undoubtedly is essential. I again thank her for her attendance; she has given members a lot on which to work. She has represented Debt and Development Coalition Ireland very effectively.

The joint committee went into private session at 4.50 p.m. and adjourned at 5.05 p.m. until 11.30 a.m. on Wednesday, 11 November 2009.