During the winter of 2011 the world witnessed a political earthquake in North Africa and in the Middle East. The Arab spring raised several questions around debt cancellation and especially on debt legitimacy. This report by Eurodad members Norwegian Church Aid and SLUG identifies Norway’s loans to Tunisia, Egypt and Bahrain and discusses the legitimacy of these debts.
Egypt has paid over 80 billion USD in foreign debt and interests since 1981, the years in which Mubarak came to power. In the case of Tunisia, during the reign of Zine el Abidine Ben Ali, Tunisia serviced debt and interest for more than 40 billion USD; the legitimacy of these debts must be questioned.
Norway lent money to these countries through export credits and through the Government Pension Fund’s investments in sovereign bonds. The report questions the legitimacy of the loans and raises dilemmas with respect to lending procedures for export credits and for investments in sovereign bonds.
The report concludes that
Debt cancellation for Egypt and Tunisia on the grounds of illegitimacy should be considered once new governments are established.
Current lending guidelines are insufficient to prevent new illegitimate debts being created. This is particularly true for government bonds.
The Norwegian Government ought to investigate the possibility of establishing guidelines for investment in government bonds, as requested by the Norwegian Parliament. Such a discussion should consider whether the guidelines should be expanded to include more than today’s guidelines, which today only exclude investment in Burmese government bonds.
The Government should also conduct a debt audit, as it has promised in its two past government platforms. The debt audit must include an assessment of the loans to Egypt, Tunisia and other states which have experienced regime change after the original loan was given.