Jubilee Debt Campaign Birmingham

Ecuador is to default on its debts

Posted on: December 15, 2008

According to the BBC website on Sat 13th December the President of Ecuador has given the order not to approve a debt interest payment due on Mon 15th December. That was because a large proportion of Ecuador’s $10 billionhad been contracted illegally.

In July 2007 the government set up an investigating commission to examine debts for their legitimacy, legality, transparency, quality, efficacy and efficiency among other qualities and is now acting on the basis of its findings (published in November 2008) which, according to the Guardian, was that 40% of the debt was inadmissable.

The country’s foreign debt amounts to about one fifth of its Gross Domestic Product.

In the short run this decision could mean that others will refuse to lend Ecuador money which could put it in difficulties if oil, it’s main source of revenue, declines.

But in the long run Ecuador’s action forces the rest of the world to confront the immorality of many past loans, and flags up the need for an international mechanism for sorting such issues out in which poor countries can be represented as well as rich ones.

John Nightingale


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