African leaders lobby for a fair debt relief process
Leaders of the developing world stepped up at Monterrey to highlight the various inequities in the international economic system which are obstructing their countries’ development efforts. While African heads of state issued fervent pleas for debt relief, their Cuban and Venezuelan counterparts denounced the very global economic order itself, exhorting the international community to correct the structural injustices of a “twisted” system.
by Ferial Haffajee
MONTERREY: If the noose of debt were removed from their necks, African governments would be able to take their destiny into their own hands and not have to depend only on increased aid flows from the industrialized countries.
This was the message from a succession of African leaders who spoke at the UN Conference on Financing for Development here.
It is estimated that African countries pay an annual $13 billion in debt-servicing costs, almost equal to the amount received in aid by the continent.
A series of debt relief efforts have failed to respond quickly enough to the debilitating impact of debt, including several versions of the IMF’s Heavily Indebted Poor Countries (HIPC) Initiative, said the leaders.
With his country weighed down by a $5 billion debt load, Nigerian President Olesegun Obasanjo has campaigned for relief under the HIPC Initiative. With a brief to develop a country ravaged by dictatorship, he has been unsuccessful.
“I was encouraged to go around and ask for debt relief when I took office,” Obasanjo told a forum of world leaders which included the debt master, the IMF managing director Horst Kohler. “Despite warm words of encouragement and sympathy, I’ve been unable to secure one cent. Not only was I unable to induce tangible action in the past three years, but I’ve by now repaid the debt two times over.”
While South Africa does not have a large foreign debt, Obasanjo’s call was taken up by President Thabo Mbeki. Appealing for a “drastic revision” of the HIPC Initiative, Mbeki said, “Unless we can staunch the outflow of scarce capital from the poorest countries, we will never enable the governments in poor countries to marshal the resources to improve on the quality of public services or to address the infrastructure needs.”
The heads of state of Botswana, Chad, Togo, Morocco and others had made similar calls earlier at the conference.
Jubilee, the international campaign to scrap debt, estimates that debt repayments can in some instances outstrip bilateral aid by up to 13 times. And countries often spend more on debt servicing than on development investment.
Mali is a case in point. Even after being granted HIPC status, the West African nation still spends much more on debt service payments than it does on education. In 2000, Mali paid $88 million in debt service payments, while it spent $54 million on education.
Now, African governments, Jubilee, the broader G-77 group of developing countries and some European governments are supporting a campaign for arbitration as a fairer way of negotiating debt restructuring.
“Looking at the relevant fora where debt is actually negotiated, we find that creditors are the ones who define the process and set up the rules. They decide upon particular cases on the basis of expertise they have commissioned or even produced themselves,” says German anti-debt campaigner Jurgen Kaiser of the Entwicklung braucht Entschuldung. He says the time is ripe for a “neutral decision-making body” to negotiate between debtor and creditor nations.
Five principles guide the call for debt arbitration. These are: the neutral setting; debt consolidation; the right of all stakeholders to be heard; the protection of debtor countries’ basic needs; and a “stay” once a case is opened.
A stay would freeze a loan agreement pending an outcome. “The institution of an automatic stay, once an international insolvency or arbitration case is opened, is in order to avoid a creditors’ run on the debtor’s remaining assets and to allow for an orderly procedure,” says Kaiser.
In Africa, the campaign for debt arbitration is being stewarded by the African Forum and Network on Debt and Development (AFRODAD). Says coordinator Opa Kapijimpanga, “A structural change is now required to reshape global relations around the debt crisis.”
Arbitration can be used to decide on different categories of debt. These include unserviceable debt; that incurred by illegitimate debtors and creditors; odious debt and loans stolen through corruption; debts incurred on white-elephant projects that did not benefit people; and debt incurred after inadequate policy advice. (IPS)
From TWE No 277 (16-31 March 2002)