Norway first in the world to audit developing country debt

A new report of developing countries’ debt owed to Norway, was presented in Oslo yesterday. “Norway is the first country in the world to have carried out an independent audit of debt agreements. We are doing this to make sure that we are living up to our responsibility as a lender to developing countries,” said Minister of International Development Heikki Eidsvoll Holmås.

Unmanageable debt burdens are one of the fundamental causes of poverty in developing countries. While the international community gives USD 141 billion in aid to developing countries annually, the developing countries pay back USD 464 billion each year to their creditors. Many of the debt agreements were entered into when economic, political and social conditions were uncertain.

“Although the solvency of many countries, such as Brazil, is improving, the debt burden is hampering development in some poor countries. These countries are having difficulty servicing old debt agreements made on unfavourable terms. We now want to address this,” said Mr Holmås, who referred to the first creditor-initiated debt audit as a milestone in Norwegian and international debt policy.

The audit report has been carried out by Deloitte under commission from the Ministry of Foreign Affairs. It covers 34 debt agreements with seven countries: Egypt, Indonesia, Myanmar, Pakistan, Somalia, Sudan and Zimbabwe. Most of the agreements are between 20 and 30 years old. The debts have a total value of almost NOK 1 billion, and when interest on overdue payments is added to this, the total amount is almost four times as much. The report shows that the agreements were largely concluded in accordance with the previous rules and regulations, and partially in accordance with the current rules and the UNCTAD principles. However, it also identifies weaknesses in some of the agreements, which the Government will examine more closely.

“We are once again demonstrating that we are leading the way when it comes to international debt policy, which was a goal for the current coalition Government. We have cancelled almost NOK 7 billion in debts owed to Norway by developing countries over the last eight years, and this has helped the countries to release national resources for poverty reduction. I am pleased that Norway is setting new standards for using the UNCTAD Principles on Promoting Responsible Sovereign Lending and Borrowing, and I urge other countries to follow suit,” said Mr Holmås.

Read the report.