Sojourners’ August issue highlights the problem of the crushing debt burden borne by many poor countries. While the global Jubilee movement has won some significant victories, some of this progress has been threatened by a new trend: “vulture funds,” private companies that buy heavily discounted debt and then sue impoverished nations for the full face value. British Prime Minister Gordon Brown has called vulture funds “morally outrageous,” but last June’s G-8 meeting of wealthy nations did nothing to change the international legal framework that vulture funds exploit. Below, Muyatwa Sitali, of the Jesuit Center for Theological Reflection in Zambia, describes how one such vulture swooped in not long after creditor nations and institutions such as the IMF had cancelled over 80 percent of Zambia’s debt to them.
Zambia was just beginning to benefit from the debt cancellation initiatives of rich countries and multilateral financial institutions [such as the IMF]. Then Donegal International, a commercial debt collector headed by Michael Sheehan and registered in the U.S. but nominally based in the British Virgin Islands, sued Zambia for $55 million in a London court; Donegal had bought the loan from Romania in 1999 for only $3.3 million. By the time of the litigation in 2005, Zambia had already paid Donegal a total of $14 million.
Mr. Sheehan and his company have joined the ranks of vulture funds because of their insatiable appetite for money—money that would have otherwise helped alleviate the disease and poverty that affect close to 7 million people in Zambia.
Such activities of commercial creditors, and the apparent lack of legislation in countries that host such companies and their proprietors, make it hard to forsee a global partnership [to fight poverty], such as that envisaged by the Millennium Development Goals.
In April, a London court ordered Zambia to pay Donegal International over $15 million, even though the judge highlighted immoral conduct by Mr. Sheehan and his accomplices. This means that some projects aimed at alleviating poverty will not be undertaken this year. With meager reserves at the Central Bank, Zambia’s ability to sustain its debt burden is threatened, and the prospects of meeting the Millennium Development Goals are at risk. For Zambia, $15 million translates to over 60 million Zambian Kwacha, which would be enough to facilitate 3 private manufacturers of animal-drawn plows and other equipment appropriate to and affordable for small-scale farmers (to complement the tractors for which Zambia originally got the 1979 loan from Romania).
Donegal International’s profiteering stands in the way of national development. Its “vulture fund” activities need to be curtailed.