Environmental Management: Principles and practice

Debt, structural adjustment and environment
Debt and environment
The ‘debt crisis’ broke in 1982, and soon claims were made that it resulted in
environmental degradation, although there was little clear proof (Adams, 1991;
George, 1988; 1992; Reed, 1992a:143; UN, 1992). During the 1970s many developing
countries financed their economies by taking loans. Falling prices for exports of
primary produce, rising costs for oil imports, and in some cases disorder and
maladministration led to escalating debt. The 1973–1974 OPEC oil price increase
caused further recession, driving down export prices and making debt repayment
difficult. Various impacts of debt have been recognized: (1) money diverted to
servicing debt is unavailable for environmental management; (2) resources are put
under pressure to earn foreign exchange for interest or to pay off debt; (3) means to
combat debt cause difficulty, notably structural adjustment measures.
By the 1990s Latin American and sub-Saharan countries were spending roughly
25 per cent of their total foreign exchange each year servicing debt (Davidson et al.,
1992:161). In spite of paying US$6,500 million a month interest between 1982 and
1990, debtor countries were still 61 per cent more indebted in 1991. The struggle to
earn foreign exchange to service debts damages biodiversity and the environment.
Debt problems, by reducing biodiversity and degrading the global environment, and
by causing poverty and conflict, also affect richer nations indirectly (George, 1992:
1–33). In 1991 under the Trinidad Terms the Paris Club of creditors agreed to cancel
some debts.
Linkages between economics and environment are often complex and caution
should be exercised when debt—damage relationships are recognized. Debt servicing
is not the only reason countries exploit resources: it might be to support urban
facilities, industrialization or special-interest groups.