Debt Audits

Debt audits and lessons from the global South…

Debt audits are used by activists in the global South to inform people about the scale and nature of their country’s debts, which are often not transparently publicised. Debt audits also function as a building block to popular discussion about the legitimacy of certain debts and whether they should be repaid. Audits have been carried out by citizens groups in countries of the Global South, such as the Philippines, Brazil, and elsewhere. They are usually citizen initiatives—although one borrowing government-led debt audit has been carried out by the government of Ecuador.

Ecuador is a historic case as it is the first government in the Global South to establish a national debt audit commission to examine the country’s debts contracted between the period 1976-2006. Interestingly, the audit examined the scale of Ecuador’s debt but also its political nature, such as the social impact of loans to Ecuador during that period. Ricardo Patiño, former Economy and Finance Minister in Ecuador and key backer of the independent audit, outlined its intended wide-ranging nature:

"[The audit] will consider all relevant legal, political and economic factors, which have led to the accumulation of illegitimate debt in this country. The audit commission must also consider social and environmental damages to the local populations caused by debt. Debts which are found to be illegitimate must not be paid. Debts which are legitimate must be reimbursed."

The Ecuadorian audit report details a litany of lending failures and exploitative loan contracts. After the audit, the Ecuadorian government refused to repay two global bonds worth about US$30 million, not because of an inability to repay, but because the government believed they were illegitimate and should not repaid. In 2012, Norway further promoted the debt audit concept by announcing an independent audit of all debts owed to it by countries of the Global South, focussing on loans extended by its export credit agency to Southern nations.

Inspired by these examples, Debt and Development Coalition Ireland, Action from Ireland (Afri), and the trade union UNITE commissioned an independent audit of Ireland’s debts as a first step toward supporting people in Ireland to understand the scale and nature of Ireland’s national debt. Working with a team of researchers from the University of Limerick, Dr. Killian outlined the various facets of Ireland’s sovereign debt, explaining the link between bank debts and the state.

From a campaigning perspective, the Irish debt audit is very valuable for four reasons:

1. It provided clear evidence from independent researchers that the Irish debt crisis was caused by the socialisation of commercial banking debt.
2. The audit outlined the various facets of Ireland’s complex sovereign debt and explained the link between banking debt and the citizens.
3. It highlighted that while much of Ireland’s debt results from debt owed to private bondholders, it is not possible to identify who the private bondholders are.
4. Finally, and practically, it brought together locally and globally-focused justice groups to work together on an Irish economic issue. This prepared the ground for a broad set of campaigners to begin questioning the legitimacy of the banking debt—another concept drawn from Global South campaigners.

This page is an extract from the article 'The Battle for Debt Justice', by DDCI's Nessa Ní Chasaide, which appeared in 'The Future We The People Need', 2013.