Norway moving towards debt justice

Recently Norwegian Minister of Development Erik Solheim announced that Norway will make an assessment of the legitimacy of developing countries’ debt to Norway. This means that the government will be the first ever to carry out a creditor’s debt audit.

The financial crisis and the Euro crisis leave no doubt that irresponsible lending and borrowing  have severe negative consequences for countries and their peoples. Norway is trying to change the rules of the game. The Norwegian government’s political declaration promises to carry out a debt audit, as well as working to establish binding guidelines for responsible lending. Norwegian Government has promised that the audit will be followed up with new and stronger guidelines for responsible lending.

This is an important step towards more responsible lending practices, and if followed up by other creditors this initiative has the potential of reducing unsustainable and illegitimate debts in the future, said Gina Ekholt, director of the Norwegian Coalition for Debt Cancellation (SLUG).

Norway pardons $80 million debt

Norway’s Minister of International Development Erik Solheim announced that Norway is unilaterally and without conditions cancelling US$80 million in illegitimate debts owed by 5 countries: Egypt, Ecuador, Peru, Jamaica and Sierra Leone.

Norway’s Government has, in effect, admitted that its lending in these particular cases was irresponsible and motivated by domestic concerns, rather than an objective analysis of the development needs of the countries involved. The debacle involves the export of Norwegian ships to developing countries between 1976 and 1980. It exported these ships mainly to secure employment for a domestic ship-building industry in crisis, not because these ships served the development needs of the countries concerned. It is only fair therefore that Norway accept co-responsibility for the debts which resulted from these deals.

So far, however, creditor countries have been incredibly reluctant to accept shared responsibility for negligent and often politically motivated and corrupt lending in the past. They have continued to insist that poor countries service these debts. Today, however, this practice effectively ended with the unilateral action of one government.

 Setting up an example

This is not the first time the Norwegian government demonstrates boldness in the area of debt justice. A decision from 2006 made it to the history books when the government announced that they would cancel debts for seven countries based on their co-responsibility as a creditor. Since then, Norwegian initiatives have led to the establishment of international principles for responsible lending and borrowing in the UN Conference on Trade and Development (UNCTAD). The principles will be applied in the Norwegian debt audit.

European Network on Debt and Development (Eurodad) hopes that the Norwegian announcement will now prompt other creditor countries to open public and serious enquiries into their lending policies and practices of the past. “This is a ground-breaking decision which has huge consequences for other lenders that acted irresponsibly in the past”, said Eurodad’s Gail Hurley. “We urge Norway to continue to be at the forefront of international efforts to gain recognition for illegitimate debt. It is not fair that the populations of debtor nations continue to pay the price of corrupt, negligent and politically motivated lending in the past. Today the silence has been broken and we urge other creditor countries, in particular in Europe, to follow Norway’s bold lead”.

Norway has now broken the unspoken rule of creditor solidarity. Creditors have until now banded together to insist that poor countries repay their debts and have refused to admit that they share some responsibility for having extended loans irresponsibly, often for geopolitical strategic purposes. This has been at the expense of poor countries.

Norway is setting an example and creates a precedence that other countries surely must follow. Norway is now in a position to demand action from other countries and international institutions on this issue. “By cancelling these debts we want to give raise to an international debate on lender responsibility”, says Solheim.

“The debt crisis is not over. We will make sure that Norway continues to push for a just international monetary system where debts are legitimate and responsible lending the norm, not the exception”, says Abildsnes Kjetil, member of SLUG. 


It is also worth noting that Norway will NOT count its cancellation of debt as Official Development Aid (ODA). Typically, creditor nations count debt cancellation operations as ODA which has the effect of artificially inflating aid budgets and making-out that more aid is being made available to poor countries than is really the case. The Norwegian Government must also be praised for this and it becomes very clear that most donors simply must (and can) do far better.

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