What are ‘vulture funds’?
‘Vulture funds’ are private companies which buy up poor countries’ debts for a reduced price and then try to claim the full amount plus interest and penalties, through court cases. These can directly affect developing countries’ efforts to invest in health.
For example, a fund based in the British Virgin Islands won a case in the UK High Court in 2007 for $15.5 million in repayments for Zambian debt – a debt it had bought for $3.3 million. This was despite the fact that debt relief was intended to free up money for healthcare and education. There are growing calls for the UK to crack down on the abuse of the UK court system by such funds.
Debt swaps
‘Debt for development swaps’ involve a developing country putting some or all the money they would spend on debt repayments into a particular project, instead of repaying a creditor.
These began as ‘debt for nature’ swaps, aimed at addressing debt and environmental destruction together. Since then other ‘debt swaps’ have been developed, including ‘debt-for-health’ swaps. For example, the Global Fund for HIV, AIDS, TB and Malaria has been designing a swap in which poor countries’ debt repayments are exchanged for spending on HIV/AIDS.
Critics point out that such projects require a disproportionate amount of time and effort from developing country governments compared to the benefits they may bring. Swaps also risk the priorities of donors or international organisations taking a precedent over needs identified by countries themselves. The UK government is not part of swaps.
Last modified: 16/12/2010
