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African ministers demand 100% debt cancellation

by Gumisai Mutume

Washington, 29 Apr 2001 (IPS) - African finance ministers, meeting with officials here at the annual spring meetings of the World Bank and International Monetary Fund, have joined the chorus of anti-debt activists demanding no less than 100% debt cancellation for the poorest nations.

“Yes, 100% relief, why not? If you look at history, there are countries in the world that were able to take advantage of such relief,” says Emile Doumba, Gabon’s finance minister. “History shows that after World War I, Germany was able to have advantages like that.”

“And if you look at the type of expenditures in industrialised countries, you see that subsidies granted in some countries reach practically the GDP of African countries, so why not?”

Developing countries, especially poor agricultural exporters, have long argued that subsidies in the North - such as the $300 billion that the Organisation for Economic Co-operation and Development (OECD) countries spend annually on the sector - kill their chances to compete fairly on international markets.

The anti-debt movement has mainly been driven by civil society. The international civil society movement Jubilee 2000, which closed last year, helped push the Bretton Woods institutions to bring 22 of 41 countries to the qualification stages of the enhanced Heavily Indebted Poor Countries (HIPC) initiative.

But, finance ministers, the direct conduits of IMF and World Bank policies into developing countries, have largely left the role of publicly pushing the institutions to civil society groups.

“This 100% demand really is an expression saying what you are doing is not good enough, is not enough,” Basil Mramba, Tanzania’s finance minister, told journalists attending the 26-30 April annual spring meetings of the World Bank and IMF.

“And I think that should be the message to our sympathisers outside and elsewhere in the world, that if the donor communities did more together with the banks, perhaps a lot more could be achieved.”

A small group of protestors gathered outside the meeting halls of the IMF and World Bank Sunday, demanding, among other things, debt cancellation for the poorest nations and an end to structural adjustment programmes.

“Everyday, 19,000 children die in indebted nations in Africa,” says Njoki Njoroge Njehu, director of the 50 Years is Enough Network, and one of the organisers of the protest. “For every dollar given in loans to Africa, one dollar thirty comes back to Washington in debt servicing.”

A review of the enhanced HIPC initiative, released in March by the Bank, notes that debt service will, on average, fall from 27% to 12% of government revenues in the 22 HIPC countries in the next few years. But, what these averages hide is that some 16 countries will continue to pay more on debt than on healthcare.

At their summit in 1999, the Group of 7 (G7) leaders decided to broaden debt relief under the HIPC initiative (first launched in 1996), giving birth to the enhanced HIPC initiative. The Bank and IMF adopted the enhanced scheme at their annual meeting that same year.

Under pressure, some G7 countries agreed that the debt could not be collected and also agreed to provide relief at the bilateral level. The United Kingdom, the United States and Canada have pledged 100% cancellation for HIPC countries.

But as major shareholders of the IMF and Bank, the G7 countries have not pressed these institutions to go further than the minimum required under the HIPC initiative, which commits them to cancel a third of the debts owed to them by the poorest countries.

“The limitation that the Bank has is a limitation of our capital,” says Bank president James Wolfensohn. “It is a limitation that we have $29 billion of capital and if we forgave all the debts of 63 developing countries which are on the list, we would have to give up $29 billion of debt. That would bankrupt the institution.”

“Debt relief is an important component, but it is far from the most important component. The most important component in countries is how they govern themselves ... and anyone who thinks there is a silver bullet with any number is completely mistaken, in my judgement.”

While the African ministers concede that they too need to tidy up their backyards by bringing an end to conflict and improving governance, they say that, it takes magic tricks to sustain debt repayments and direct adequate funding to the social sector.

“I think the answer will be that these institutions, knowing that there is a limit beyond which they cannot go, should perhaps heighten their campaign to get the bilaterals to reach their commitment as donors so that the donor countries, working with these institutions, can, in effect, reach that 100% that the poor are looking for,” says Mramba.

But civil society sees a different reality.

At a debt meeting in Senegal last year, African civil society organisations declared that the real reason the G7 and the Bretton Woods institutions refuse to cancel the debt is because it is a mechanism that allows them to impose unpopular policies, such as structural adjustment programmes, on the poorer nations.

Every year, sub-Saharan Africa, the world’s poorest region, forks out an estimated $15 billion in debt repayments - equal to 15% of annual exports.

Oxfam International says that of the 22 countries receiving relief under the enhanced HIPC scheme, more than three-quarters will still be allocating unsustainable levels of finance toward debt - between 10% and 27% of government revenues.

“Oxfam believes it is unacceptable for any HIPC country to be spending more than 10% of revenue on debt.” The reason, Oxfam says in a policy brief prepared for the spring meetings, is that such resource flows will hinder these countries’ ability to meet the 2015 international development goals, which include halving poverty, providing every child with free, quality, basic education and reducing child mortality by two-thirds.

Oxfam urges the Fund-Bank institutions to agree to a new HIPC3 initiative at the spring meetings, which would link debt servicing to the needs of countries to finance social sectors in order to meet the 2015 goals. The new HIPC scheme would also expand eligibility to poor countries such as Bangladesh, Georgia, Haiti and Nigeria. – SUNS 4886

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