A new audit of the debt pile owed by developing countries to Norway, published last week, was the first of its kind anywhere in the world and should inspire other European countries to do the same, campaigners said.
The audit, carried out for Oslo's Foreign Affairs Ministry by the Deloitte consultancy, found that Oslo violated UN principles on responsible lending in four of its 34 loan contracts with Egypt, Indonesia, Burma, Pakistan, Somalia, Sudan and Zimbabwe.
The audit prompted Oslo to announce a review of unmanageable debt burdens which it said are one of the fundamental causes of poverty in developing countries.
“Although the solvency of many countries, such as Brazil, is improving, the debt burden is hampering development in some poor countries. These countries are having difficulty servicing old debt agreements made on unfavourable terms. We now want to address this,” said Norway’s international development minister, Heikki Eidsvoll Holmås..
Holmås said Norway had already cancelled foreign country debt to the tune of 7 billion Norwegian Krones over the last eight years, or approximately €910 million.
"I urge other countries to follow suit,” said Mr Holmås.
Calls to cancel debt
The Norwegian Coalition for Debt cancellation responded with a call for the debt to be cancelled immediately, while the European Network on Debt and Development (Eurodad) demanded that EU states now open their books to the auditors too.
“It is obviously an embarrassment for the European Union that the only European nation that is currently making credible moves towards more responsible lending is Norway – which is not even an EU Member State,” said Bodo Ellmers, a Eurodad spokesman.
“We know that some European governments have skeletons in their cupboards,” he added. “Citizens in Europe and beyond have the right to know the true picture.”
Campaigners say that European loans have been used to finance the export of weapons made in Europe, which dictatorships often use against their own people.
Export credit guarantees can also finance the dumping of overpriced and inadequate European products on poor countries in the guise of aid, they argue.
Although the Norwegian loans surveyed by Deloitte amounted to €130 million, when interest repayments were included, the total debt was almost four times higher.
But debt campaigners say that new aid from other EU states to poor countries that have overthrown dictatorships – such as Tunisia – is often used to finance the repayment of illegitimate aid racked up by previous military rulers.
The European Commission is aware of such problems and, in a recent communication on financing for development, called on “all actors to apply responsible lending and borrowing principles”.
But it gave no steers on how to do this.
“This is a classic problem of collective action: good donors’ aid finances debt repayments to dodgy creditors,” Ellmers said. “The European Parliament and the Commission must ensure that responsible financing becomes binding for everyone in the EU."
In 2005, EU member states pledged to increase Official Development Assistance (ODA) to 0.7% of Gross National Income (GNI) by 2015 and included an interim target of 0.56% ODA/GNI by 2010.
These were based on individual targets of 0.7% ODA/GNI for the EU 15 and 0.33% GNI for the 12 Member States which joined the EU in 2004 and 2007, according to the European Commission.
EU countries that were already at or above 0.7% ODA/ GNI pledged to sustain their efforts. The EU Heads of State and Government reaffirmed their commitment to reach the 0.7% target by 2015 at the European Council on 7/8 February 2013.
A Eurobarometer survey from October 2012, said that 85% of polled EU citizens believed that Europe should continue donating aid to developing countries.