State urged to stop ‘vulture funds’ from undermining debt cancellation
Co-ordinator of Debt and Development Coalition Ireland Nessa Ní Chasaide said the latest hearing occurred yesterday of a court case instigated by an international debt collection agency aiming to claim millions of euro from the Zambian government.
“The case is set to damage further the chances of one of the most impoverished countries in the world to escape poverty. What’s more, if paid, it will simply reward the profiteering opportunism of commercial debt collectors. But more importantly it highlights the continuing need for a just settlement to the international debt crisis,” she said.
She explains the hearing relates to a case taken by Donegal International — a commercial firm which purchases sovereign debt in order to make a profit on recovering that debt. Donegal International’s claim originated in 1999, when Zambia was in the process of negotiating the clearing of a debt of $15 million (€11m) it owed to the Romanian government for agriculture machinery and vehicles.
Donegal International bought up the debt, by then valued at around $30m with accrued interest, for a knockdown price of $3.3m (€2.5m), she explains.
“Donegal International then proceeded to sue the Zambian government for the full amount of the original debt, plus alleged interest and costs, resulting in a court demand for a staggering $55m from the Zambian government,” she said.
While the court indicated that Donegal International will not be entitled to such a huge payment, the case has raised many concerns among debt cancellation campaigners, including the Debt and Development Coalition Ireland, about how these funds can legally undermine existing progress toward achieving 100% debt cancellation for impoverished countries.
Most of Zambia’s debts, were cancelled as a consequence of the G8 cancellation deal in 2005.
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