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Debt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations. It concerns in particular the Third World debt, which started exploding with the Latin American debt crisis (Mexico 1982, etc.).

Debt relief for heavily indebted and underdeveloped developing countries was the subject in the 1990s of a campaign by a broad coalition of development NGOs, Christian organisations and others, under the banner of Jubilee 2000. This campaign, involving, for example, demonstrations at the 1998 G8 meeting in Birmingham,

was successful in pushing debt relief onto the agenda of Western governments and international organisations such as the International Monetary Fund and World Bank. Ultimately the Heavily Indebted Poor Countries (HIPC) initiative was launched to provide systematic debt relief for the poorest countries, whilst trying to ensure the money would be spent on poverty reduction. The HIPC programme has been subject to conditionalities similar to those often attached to IMF and World Bank loans, requiring structural adjustment reforms, sometimes including the privatisation of public utilities, including water and electricity. To qualify for irrevocable debt relief, countries must also maintain macroeconomic stability and implement a Poverty Reduction Strategy satisfactorily for at least one year. Under the goal of reducing inflation, some countries have been pressured to reduce spending in the health and education sectors.

The Multilateral Debt Relief Initiative (MDRI) is an extension of HIPC. The MDRI was agreed following the G8's Gleneagles meeting in July 2005. It offers 100% cancellation of multilateral debts owed by HIPC countries to the World Bank, IMF and African Development Bank.

Arguments in favour of debt relief
Supporters use a variety of moral and economic arguments to make the case for debt relief. Much of the debt was incurred by regimes different from those that currently govern the debtor nations. Supporters of debt relief believe that people in developing countries should not be burdened with debts accrued by dictators, a legal term called odious debt, especially as the borrowed finance was so often used for the benefit of the ruling elite, on prestige projects and to bolster the military. Iraq's debt was cancelled based on this argument that the people of the country should not have to pay for loans taken out under Saddam Hussein. Other examples of odious debt include Haiti's debt, accumulated under the father and son dictatorships of Fran?ois and Jean-Claude Duvalier, South African debt from the Apartheid regime, and debt taken out by Mobutu Sese Seko of Zaire.

Other debt, while not odious, may fall under the term of illegitimate debt, which includes debts arising from failed projects, projects which were never completed or were not implemented due to corrupt practices, and projects whose primary purpose was channeling funds to external actors (such as consultants and multinational corporations). It is also an expansive historical category that considers the environmental and social damage done to indebted countries over the past centuries.

Besides as a matter of justice concerning illegitimate and odious debt, debt relief has also been championed as a way of reducing poverty and achieving the Millennium Development Goals.

According to the International Monetary Fund (IMF) and World Bank, countries that received limited debt relief under existing programs have doubled poverty-reducing expenditures from 1999-2004, and saw no net increase in military spending.

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