Vulture Funds

Pompey · Feb 16, 2007, 02:57 AM

Quote:

A High Court judge has ruled that Zambia must pay a substantial sum to a so-called "vulture fund".

British Virgin Islands-based Donegal International paid less than $4m (�2m) for a debt the African nation owed, but sued Zambia for a $42m repayment.
It said its bill was the result of interest and costs, but the judge has indicated that Zambia should pay less. The ruling has angered anti-debt campaigners, who say it will undermine Zambia's plans for poverty reduction.

Vulture funds - as defined by the International Monetary Fund and UK Chancellor Gordon Brown among others - are companies which buy up the debt of poor nations cheaply when it is about to be written off, then sue for the full value of the debt plus interest.
There are concerns that such funds are wiping out the benefits which international debt relief was supposed to bring to poor countries.
A Zambian presidential adviser and consultant to Oxfam, Martin Kalunga-Banda, said $42m was equal to all the debt relief it received last year.
He told the BBC that this would take a serious toll on education in Zambia. "It also means the treatment, the Medicare, the medicines that would have been available to in excess of 100,000 people in the country will not be available," he added.

In 1979, the Romanian government lent Zambia money to buy Romanian tractors.
Zambia was unable to keep up the payments and in 1999, Romania and Zambia negotiated to liquidate the debt for $3m.
But before the deal could be finalised, Donegal International, which is part owned by US-based Debt Advisory International (DAI) stepped in and bought the debt from Romania for less than $4m. DAI founder Michael Sheehan was confronted by the BBC's Newsnight programme before the court ruling, but said only: "No comment. I'm in litigation. It's not my debt."

BBC NEWS | Business | Zambia loses 'vulture fund' case

Im shocked that people like this exist. Shocked, but not surprised.