Playing the debt relief numbers game
by Gumisai Mutume
Washington, 13 Dec 2000 (IPS) -- With the yearend fast approaching, the World Bank and the International Monetary Fund (IMF) are racing against time to keep their pledge of approving at least 20 countries for the enhanced Heavily Indebted Poor Countries (HIPC) debt relief initiative by the end of 2000.
“We’ve got several other country cases of some prominence and some end-of-the-year rush going on, but I think, by and large, we are on track,” says Thomas Dawson of the IMF.
“I think the count at the moment is 14 or 15 ... but we believe we will be up to 20,” notes Dawson, referring to the yearend goal the two financial institutions set at their annual meetings in Prague in September. Back then, only 10 countries had reached the decision point (at which debt relief begins to flow).
The current count is 13, following the recent approval of Zambia’s application. Zambia’s approval will see the southern African nation begin receiving relief for its $3.8 billion debt. The IMF says Zambia’s deal will save the country $30 million annually on average for the next 15 years.
However, critics note that in the rush to play the numbers game, the international financial institutions have delivered very little in real benefits for the majority of the countries they have approved under the programme.
Jubilee 2000, the international anti-debt lobby, cites Zambia as one of the countries “hoodwinked” by the enhanced HIPC numbers. Its debt service payments are $170 million this year, and the figure will fall temporarily to $144 million by 2002, according to Jubilee 2000 projections.
But Zambia’s debt repayment numbers will begin to rise again in 2004 to $204 million and by 2007 will reach $212 million annually, the group says. The impoverished southern African nation currently spends $70 million annually on education and $76 million on health. “Despite the steps taken by the creditors, debt is still one of the major blocks to development in the poorest countries,” says Ann Pettifor, director of Jubilee 2000 UK Coalition. “They simply have not done enough.”
The international anti-debt movement notes that the first 13 countries to receive debt relief under enhanced HIPC have had an average of only 37% reduction in annual debt payments and all but two still spend more on debt than on providing healthcare for their citizens.
The rest of the countries will fare even worse, the movement says, projecting that they will see debt payments fall by only 29% on average.
“Niger, for example, will be left spending $40 million a year on debt, compared with only $27 million on health,” Jubilee 2000 notes in a report released this week. More than 70% of Niger’s population have no access to health services.
Other countries that have reached the decision point under the enhanced framework include Benin, Bolivia, Burkina Faso, Cameroon, Guyana, Honduras, Mali, Mauritania, Mozambique, Senegal, Tanzania and Uganda. Uganda has reached completion point.
It was in September 1996 that the IMF and World Bank first endorsed HIPC, an initiative that would bring debt relief to 41 poor countries. The initiative was enhanced in 1999 at the Group of 7 meeting of major industrialised countries, to provide faster and deeper relief. At that meeting, G7 leaders declared that by the end of this year, 25 countries would have begun to receive debt relief. But that figure was scaled down in Prague and the conditions eased to enable more countries to qualify for the programme.
Critics have often charged that the enhanced HIPC remains overly complex and too slow in delivering results and that only a miracle will see 20 countries pass the stringent conditions, especially with only two weeks of the year 2000 remaining.
Under the programme, eligible countries qualify for debt relief in two stages. In the first stage, the debtor country has to demonstrate a satisfactory track record in implementing an IMF-Bank-supported structural adjustment programme. This condition has now been eased slightly and is determined on a country-by-country basis.
During the second stage - after reaching the “decision point” - the country has to implement a “full-fledged poverty reduction strategy, which has been prepared with broad participation of civil society, and an agreed set of measures aimed at enhancing economic growth”, notes the IMF. During this stage, interim debt relief is given.
At the end of this stage, the “completion point” is reached - provided the country stays on track with its IMF- and World Bank-supported programme - and the remainder of the committed debt relief will be provided.
This year, decision points under the enhanced HIPC framework could still be reached for Chad, Gambia, Guinea, Guinea-Bissau, Malawi, Nicaragua and Rwanda.
“The deadline has helped to coalesce support and has focused everyone’s attention on making sure that everything is running as smoothly and as rapidly as possible,” notes Jack Boorman, director of the IMF’s Policy Development and Review Department which designs, implements and evaluates IMF policies.
“At the same time, we feel, as do our shareholders, that the elements of the programme have to be right and designed in a way to ensure that the objectives of poverty reduction in these countries can be met and that the debt relief provided is used to further those objectives.”