Archive Article: Australias Foreign Aid Policy. 6 Nov 98.
December 27, 2008

There is a great deal of debate over foreign aid from Australia to Third World countries. But there is very little attention given to the way that Third World countries pay more money back to the rich western countries than they get in foreign aid. In the early 1970s there was a dramatic increase in the price of oil, so that the oil producing countries in the Middle East suddenly acquired huge amounts of money. The money was invested in western banks, which then lent it to the Third World countries. Some of the loans were worthwhile but many were used by corrupt dictators to finance their own personal wealth. The banks in most cases knew they were lending money inappropriately and yet still went ahead and did so. Similarly, western governments also made some loans to Third World countries.

Corrupt rulers come and go but the debts remain. Even if a country now has a democratic government, it is still on the treadmill of repaying old debts. Owing to the high interest rates, Third World countries have repaid more money to the private banks than the original sum they borrowed. Indeed, they pay more money to First World countries as interest repayments than they get as foreign aid. In 1996, for every $1 that Africa got in foreign aid grants, it paid out $1.31 in debt repayments. In short: Third World countries are helping to finance us in the west.

In the Philippines, the repayment of debt means that 43 per cent of government revenues must be set aside to repay debts before the government can consider expenditure on other, more productive sectors. Some African countries now spend at least twice as much on debt repayments than they do on the health care of their own citizens. Services for children are the easiest to cut because children cannot rebel against a government. Therefore, children are dying through a lack of services so that interest can be paid to western governments and banks.

Churches around the world, such as Wesley Mission, are drawing attention to this crazy and immoral situation by their involvement in the Jubilee 2000 petition. The petition has three points. First, people signing the petition believe that the start of the new millennium should be a time to give hope to the impoverished people of the world.

Second, to make a fresh start, they believe it right to put behind them the mistakes made by both lenders and borrowers, and so cancel the unrepayable debts of the most impoverished countries.

Third, the leaders of the lending countries are called to write off these debts by the year 2000 and to take effective steps to prevent such high levels of debt building up again.

This type of debt cancellation will bring about some order and discipline to the international financial system. It will make governments and bankers more careful about how they lend money in the future.

In the meantime, 40,000 children will die today – as they die everyday – through a lack of food, clean water and sanitation. Some of the money that would have kept them alive has gone instead to western governments and banks.

BROADCAST ON FRIDAY NOVEMBER 6 1998 ON RADIO 2GB’S “BRIAN WILSHIRE PROGRAMME” AT 9 PM, AND ON NOVEMBER 8 1998 ON “SUNDAY NIGHT LIVE” AT 10.30 PM.