In his July 8 article "Thickheadedness on African debt," Franklin Cudjoe paints an inaccurate picture of debt forgiveness. Debt relief is a pragmatic and tested tool in the fight against global poverty.
Today, countries such as Cameroon, Ghana and Uganda are using money preserved by debt relief for critical investments in health care, education and infrastructure. Cudjoe's premise that so-called vulture funds "play an important role in international finance" is terribly misguided.
The progress made by the Group of Eight and international financial institutions to relieve the debts of poor countries is being undermined by vulture funds. These commercial creditors target countries that are scheduled to receive debt relief. They do not simply recover what is owed to them, as Cudjoe suggests; they make millions of dollars in profit on debts purchased at deep discounts.
Take Zambia, for instance. Donegal International bought a Zambian debt valued at $3.28 million, then sued the Zambian government for $55 million seven years later, after Zambia had received debt cancellation. Zambia was required to pay Donegal $15.4 million -- straight from debt cancellation savings budgeted for rural health care.
Money that would have been used for HIV/AIDS medication or vaccinations was funneled into the pockets of a wealthy hedge fund. Make no mistake, the purpose of vulture funds is to make money, not expose corruption and improve governance in their target countries.
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.