Many developing countries owe huge debts to rich countries and to institutions such as the IMF and World Bank. This means that they have to spend a large proportion of their tax revenues on paying back rich western creditors, rather than meeting the basic needs of their own people.

These debts not only hurt those in poverty, they are also deeply unjust. Often, loans were made by irresponsible creditors to corrupt regimes which are no longer in power. Some loans were for failed projects designed by creditors, often to meet western interests rather than the needs of the poor. Yet it is the poor, not the creditors, who pay the price of these mistakes.

Thanks to massive public campaigning to drop the debt of poor countries, some progress has been made. In 2005 the G8 cancelled 100% of the debts owed by 18 poor countries to the World Bank, IMF and African Development Bank. This amounts to $40bn of debt cancellation.

However, many more poor countries, such as Kenya and Ecuador are still waiting for their debts to be cancelled. Every day, developing nations still pay $100 million in debt repayments to rich nations. Even the countries who do have their debts cancelled are often forced to implement harmful economic policies such as privatisation.

Most rich countries, including the UK count this debt cancellation as part of their aid budgets, meaning that ultimately it is poor countries who pay – through reduced aid. In 2005, for example, if you take out debt relief, Germany’s aid budget actually fell.

Full debt cancellation
ActionAid works with campaigners in the UK and around the world to push for full cancellation of the debts of the world’s poorest countries, by fair and transparent means. Any money used to fund this debt cancellation must be additional to current aid. We also believe that the international financial institutions (IFIs) such as the World Bank and IMF must stop requiring poor countries to implement harmful policies such as privatization and free trade in order to obtain debt relief