BBC NEWS | Programmes | Newsnight | Vulture funds threat to developing worl

Ξ February 17th, 2007 | → 0 Comments | ∇ Politics and Society |


Is there a word bad enough for the people who would do this?

From the page: "'Vulture funds' threat to developing world
Meirion Jones
BBC Newsnight

On Thursday 15 February a high court judge in London will rule whether so-called vulture fund can extract more than $40m from Zambia for a debt which it bought for less than $4m.

There are concerns that such funds are wiping out the benefits which international debt relief was supposed to bring to poor countries.

Martin Kalunga-Banda, Zambian presidential adviser and a consultant to Oxfam told Newsnight, "That $40m is equal to the value of all the debt relief we received last year."

Vulture funds - as defined by the International Monetary Fund and Gordon Brown amongst others - are companies which buy up the debt of poor nations cheaply when it is about to be written off and then sue for the full value of the debt plus interest - which might be ten times what they paid for it.

Caroline Pearce from the Jubilee Debt campaign told Newsnight it makes a mockery of all the work done by governments to write off the debts of the poorest.

"Profiteering doesn't get any more cynical than this. Zambia has been planning to spend the money released from debt cancellation on much-needed nurses, teachers and infrastructure: this is what debt cancellation is intended for not to line the pockets of businessmen based in rich countries."

Martin Kalunga-Banda says $40m is equivalent to Zambia's annual debt relief
Debt Advisory International (DAI) manages a number of vulture funds which buy up the debts of highly indebted poor countries cheaply and then sue for the original value of the debt plus interest. Zambia - where the average wage is just over a dollar a day - is one of the highly indebted poor countries which the world's governments agreed needed debt relief.

In 1979 the Romanian government lent Zambia money to buy Romanian tractors. Zambia was unable to keep up the payments and in 1999 Romania and Zambia negotiated to liquidate the debt for $3m.

Before the deal could be finalised one of DAI's vulture funds stepped in and bought the debt from Romania for less than $4m. They are now suing the Zambian government for the original debt plus interest which they calculate at over $40m and they expect to win."

 

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