The following year at the G8 Summit in Cologne the leaders promised to write off $100 billion of the 42 poorest countries' debts (over a 40-year period) via the Heavily Indebted Poor Countries (HIPC) Initiative. Compared to the $300 billion of unpayable debt that campaigners wanted cancelled this wasn't enough, but it was a good start.

Subsequently all the major industrialised countries announced that they would cancel bi-lateral debts owed to them by the poorest countries. This brought the total promised for cancellation up to $110 billion.

But unfortunately progress has been slow. This year sees an event marking the fifth anniversary of the Birmingham Summit. Campaigners aim to remind leaders that more debt cancellation is still needed. According to the initial schedule, by now total debt relief should amount to $68 billion. But Jubilee Research estimates that actually only about $36.5 billion of debt has been dropped (at 11.03.03).

This year's G8 Summit on 1-3 June, will be hosted in by France, in Evian. Campaigners are calling on President Chirac to use his chairmanship to push for more debt cancellation.

What's currently on the agenda?
A process for reviewing debt (the Sovereign Debt Restructuring Mechanism / Fair and Transparent Arbitration Process) is being discussed at the World Bank and IMF Spring Meetings 12-13 April.

At the G8, this process will be discussed along with implementation of the New Economic Partnership for Africa (NEPAD) and the 2015 Millennium Development Goals . France is particularly interested in the goal of reducing by half the proportion of people without access to safe drinking water. French officials have also suggested that they will raise the need for deeper and broader debt cancellation in order to meet the Millennium Development Goals and as part of providing "finance for development".

How do we judge progress so far?
The good news: to date debt cancellation has enabled:

• Introduction of free vaccinations for children in Mozambique;
• Abolition of primary school fees in Uganda, Malawi and Tanzania, and in rural areas of Benin;
• Increased spending on HIV/AIDS prevention in Mali, Mozambique and Senegal;
• Economic growth at impressive rates of over 5% per year in Uganda and Mozambique (among the first countries to benefit from debt relief and increased aid).

The bad news: Debt cancelled falls far short of what's needed. Even countries that have had some debt cancelled have not escaped the burden of unsustainable debt. While the Jubilee 2000 campaign called for the cancellation of the "unpayable debts of the world's most impoverished countries", the HIPC Initiative is only concerned with restoring countries to levels of indebtedness that they can sustain or repay. This "sustainability" is measured by comparing a country's debt to its income from exports. Levels of debt above 1&Mac184; times a country's annual export income, are deemed unsustainable and thus eligible for cancellation.

But basing cancellations on the level of export earnings means that the way debt cancellation is judged has nothing to do with the levels of poverty. Indeed, under current official measures, it is possible for a country to be judged to have a sustainable debt burden while not having a single penny for poverty reduction programmes.

What's worse is that at least 13 out of the 20 countries now in the pipeline for debt cancellation will not receive enough to bring their debts down even to the level deemed "sustainable" by this problematic method of calculation.

Another problem is exemplified by Rwanda, Niger and Ethiopia. These countries have drawn up poverty reduction strategies to enable them to meet the 2015 Millennium Development Goals3. But if they borrow money (even at the lowest possible rates) to fund these strategies, the debt they would incur would take them above their "sustainability" threshold. So the countries currently face a choice: EITHER they continue with a "sustainable" debt burden, making their repayments as now and do not borrow new money to enable them to reduce poverty and meet the Millennium Development Goals, OR the countries borrow money to reduce poverty and meet the Goals, but are then left with an unsustainable debt burden. Not an enviable situation to be in!

What's the alternative?
CAFOD has proposed an alternative "human development approach to debt sustainability". This would mean debt cancellation on the basis of how much governments can earn in revenue (taxes) compared to how much they need to reduce poverty and reach the Millennium Development Goals in their country. CAFOD's approach is backed by other UK aid agencies, the House of Commons Select Committee on International Development, all African governments, the Irish government and others. But the world's richest governments are resisting it, fearing it would cost too much.

How much would it cost?
If all the debts of the poorest countries in Africa were to be cancelled, the cost to creditors would be about US$6 billion over 5 years. If that cost was shared between the world's 10 richest creditors, it would be about $120 million per year - about two thirds of the cost of a jumbo jet. From CAFOD's ongoing meetings with G8 officials it is clear that the only thing stopping those governments agreeing to further debt relief is a lack of political pressure.

What can we do?
In the run up to the G8 Summit (1-3 June 2003), campaigners are sending post-cards to the Summit's chair, President Chirac, asking him to push for more debt cancellation to enable the poorest countries to reach the internationally agreed Millennium Development Goals.

If you have already sent a post card please encourage others to join in. Order 'Two sides of the coin' postcards today.