Alarm bells have to immediately go off in your head when you hear that an international financial transaction is named after a VULTURE. Yep, the vulture fund is all in the name, preying on the wounded or already dead...

Donegal International is a classic example of a vulture fund; a company set up for the single purpose of buying up Zambia’s debt in order to make a profit from claiming it back... yes you read correctly. They 'repay' Zambia's debt , only to get Zambia to repay them.

They bought a debt that Zambia owed to the Romanian government for about $3.3 million and then sued the Zambian government for $55 million. The loan was made to Zambia in the first place by Romania so that Zambia could buy tractors and other farm equipment... from Romania! Vicious twisted circles.

Up until a couple of weeks ago, I didn’t know anything at all about vulture funds. Part of me wishes this was still the case; because what I’ve learnt so far is pretty incomprehensible to a person who wants to believe there is more good in the world than bad.

Vulture funds have made the news because of the Debt Relief (Developing Countries) Bill that was recently blocked in parliament by an objection from a single Conservative MP. There’s hardly any chance now it’ll be passed before the general election. The Bill wanted to stop private companies taking poor country governments to court for debts that were in the process of being written off anyway.

According to the Jubilee Debt Campaign, there have been at least 40 cases of lawsuits by commercial creditors against highly indebted poor countries (HIPC). HIPC are those that have a debt so big they need to get it written off or massively reduced. Basically, they are some of the most underprivileged countries in the world.

Vulture funds are a depressing development in the story of the debt crisis. The crisis arose due to massive and often self-interested lending by rich countries, mostly back in the 1970s during the oil boom.

But a successful debt cancellation campaign took off around the new millennium, highlighting that it made no sense to take more from developing countries in debt repayments than we were giving in aid; particularly from countries that never saw the benefits of the loans in the first place. In some cases these loans were made to corrupt governments. For example, the South African Government is still paying off a $22 billion loan that was made to prop up the apartheid regime.

You couldn’t make it up. Developing countries are giving money to rich countries to pay back loans that previous governments made, and in many cases didn’t benefit the people who needed it most. High interest rates mean some developing countries spend more on debt repayments than on all their public services combined - even though they have already paid back more than was borrowed.

We reach a stage where the lending governments realise they may never get all of the money back, which is when private companies step in and buy the debts, at a lower price because of the risk involved.

Somewhere along the line, countries agree to wipe off the debts because of the injustice of the situation in the first place. But hang on a minute...  the government doesn’t own the debt anymore; a private company does and they refuse to drop the debt, and so instead, they take the already struggling country government to court immediately - and sue them for the full whack!

The secrecy surrounding international financial transactions in general means it’s not surprising that stuff like this goes on, and most of us don’t take any notice. Not surprising either to find out that Donegal International is incorporated in the British Virgin Islands, a tax haven with no income tax and an ‘ideal offshore location for clients seeking confidentiality’.
A classic feature of tax havens is the secrecy that surrounds their operation, making it extremely difficult for anyone investigating companies based there to find out what money has been made and how, and therefore what tax has been avoided.

Yeah it seems hard to get passionate about debt and taxes. With all the jargon, politics and tax laws you need to understand, but I don’t think it’s as hard to get passionate about the 86% of Zambia’s population that are still living below the poverty line.

And, the point is, these things aren’t separate and unrelated. Debt and tax = the cause of many people's suffering.

Words: Sarah Rowe