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Africa: Debt Relief and Development
Africa: Debt Relief and Development
Date distributed (ymd): 980926
Document reposted by APIC
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-Wide
Issue Areas: +economy/development+
Summary Contents:
This posting contains (1) a press release and a declaration from the Southern
and Eastern African Conference on HIPC and ESAF [debt and structural adjustment]
in Maputo, Mozambique, from August 31 - September 2, and (2) two articles
from Jubilee 2000 UK on (a) Mozambique President Chissano's statement on
the inadequacy of current debt reduction efforts and (b) World Bank plans
to review existing programs.
Additional notes:
(1) The Jubilee2000/USA campaign is holding its conference in Washington,
DC from October 1 - 4, 1998. For more information check the Jubilee2000/USA
web site (http://www.j2000usa.org)
or contact JUBILEE 2000/USA (e-mail: [email protected];
tel: 202/783-3566).
(2) For a wide variety of additional links on African debt, visit the Africa
Policy Web Site
(http://www.africapolicy.org/action/debt.htm).
+++++++++++++++++end profile++++++++++++++++++++++++++++++
Press Release
African civic associations sent a strong message to international creditors
this week that existing debt alleviation initiatives will not solve Africa's
debt crisis. From 31 August to 2 September unions, religious bodies and
non-governmental organizations came together at the Southern and Eastern
Africa Conference on HIPC and ESAF in Maputo, Mozambique. The Conference
focused on the Heavily Indebted Poor Country (HIPC) debt alleviation initiative
as well as the policies associated with the International Monetary Fund's
most concessional loan, the Enhanced Structural Adjustment Facility (ESAF).
The final Conference Declaration (attached below) clearly states that ESAF
schemes do not meet the needs of ordinary African citizens and that the
HIPC initiative alone will not resolve Africa's debt crisis.
The Conference, which was attended by more than 90 participants from
roughly 10 African countries, was organized by the Mozambican Debt Group
in collaboration with the African Debt and Development Network (AFRODAD)
and the European Debt and Development Network (EURODAD). Speakers at the
meeting included Foundation for Community Development (FDC) President Mrs.
Graca Machel, government officials from Mozambique and Uganda, the Mozambican
Resident Representatives of both the World Bank and the IMF, and representatives
from civic associations in Mozambique, Tanzania, Ethiopia, and Uganda.
In her opening remarks on behalf of the Mozambican Debt Group, Mrs.
Graca Machel set the tone for the meeting when she said: "We need
to accept that the debt crisis is a shared responsibility. Creditors, indebted
governments and civic associations all have to live up to their responsibilities.
The creditors need to realize that their contribution in this is the cancellation
of the debt."
During the Conference representatives from both the Mozambican and Ugandan
governments clearly articulated their willingness to translate debt reduction
into poverty alleviation. For their part African civic associations spoke
about the importance of ensuring Government transparency and in struggling
to break the linkage between unproven IMF conditionality and debt alleviation.
Otilia Pacule, coordinator of the Mozambican Debt Group said: "A
solution to the debt crisis is a prerequisite to poverty alleviation and
sustainable growth on the continent. African governments are prepared to
ensure that any freed resources from debt alleviation is directed at the
social sectors and at enhancing the productive capacities of the most marginalised
segments of society. African organizations are prepared to monitor the
process to ensure that this occurs. If Northern governments could create
the political will to provide the necessary level of debt cancelation we
could be an important step closer to eliminating the unacceptable levels
of poverty in countries such as Mozambique, Tanzania, Malawi, Uganda and
Ethiopia. The HIPC initiative reduces unpayable debts but it will not free
significant new resources in Mozambique. For that reason it is not the
answer."
For more information contact:
Otilia Pacule, Coordinator
Mozambican Debt Group
Tel. (00258-1) 43 0486
Fax (00258-1) 42 3140
E-mail: [email protected]
Maputo, Mozambique
DECLARATION
Towards a solution of Africa's External Debt Crisis
The Conference was held in Maputo from August 31 to September 2, 1998.
It brought together more than 90 participants representing African and
Northern Civil Society Organisations (CSOs) and Government Representatives
from Mozambique and Uganda. Represen tives of the World Bank, the International
Monetary Fund, United Nations, Donor Agencies and inter-governmental organisations
were also invited in order to enhance a multilateral dialogue. The principal
objective of the Conference was to work towards finding a solution to Africa's
External Debt Crisis.
The Conference identified the following:
A solution to Africa's Debt crisis is a political issue requiring political
solutions. Donors do not have the political will to cancel Africa's Debt
because where that will existed in the past they have cancelled Debt or
bailed out countries and creditors.
However, the CSOs present here acknowledge and welcome the new tendency
for Consultative Group Meetings to take place in Africa, as will occur
later this month in Maputo. A call is made for other meetings such as the
Paris Club to also take place in Africa in the future.
The lack of Debtor Coalitions weakens the bargaining power and negotiating
capabilities of the individual African Governments in negotiations on Debt
issues.
Peoples participation in policy matters such as Debt negotiations is
a fundamental necessity for development (as enshrined in the African Charter
for Popular Participation).
It is clear that there are differences in perceptions between the civil
society organisations on the one hand and the Governments on the other,
regarding development policies and the Debt crisis. But fundamental must
be the position that Debt repayments should not undermine fulfilment of
human needs and rights to food, shelter, clothing, health and education
and a secure, safe and sustainable environment and not jeopardise human
development and economic growth.
HIPC will fail to achieve genuine debt sustainability in Africa for
many reasons, including:
First, the indicators of debt sustainability are designed to serve the
purposes of the creditors by the use of formulas to deliberately reduce
the eligibility of most African countries to qualify for HIPC. Furthermore,
these formulas have been designed to ensure that countries that do qualify
for HIPC, are obliged to continue servicing their debt at "sustainable"
levels which go beyond their ability to safeguard their own development
priorities and needs.
Second, many countries have not been taken into consideration; others
have been unduly declared sustainable and out of 33 HIPC countries in Africa
only three qualified for a questionable level of debt relief before the
year 2000, turning them predominantl into "good" debtors.
Third, it is of great concern to note that human development indicators
are not seriously considered in the debt sustainability analysis. The greatest
irony of the HIPC initiative is that the debt service of countries that
do qualify for HIPC is not significantly reduced.
Lastly, ESAF programmes do not meet the needs of ordinary African citizens.
ESAF conditionality (which is tied to HIPC) does not address long term
development priorities and problems of these countries. This threatens
overall long term sustainable development, including balance of payments
sustainability in these countries.
MOZAMBIQUE PRESIDENT CALLS FOR DEBTORS
TO UNITE AND FIGHT FOR DEBT CANCELLATION.
HIPC REJECTED AS INADEQUATE
Developing countries should fight together on the issue of foreign debt,
and seek "not a reduction, but the total scrapping of our debt",
Mozambique's President Joaquim Chissano said in a speech in Kingston, Jamaica,
Sunday 20 September. "It is abundantly clear that there is no way
we can repay our debt and still make our economies remain competitive and
viable."
Chissano's statement carries special weight because Mozambique has been
cited as the biggest success of the present debt relief process -- the
World Bank/IMF HIPC (Heavily Indebted Poor Countries) Initiative. It has
already been promised all possible debt cancellation available under HIPC,
yet annual debt service payments will only fall from $113 million per year
before HIPC to $100 million after HIPC; Mozambique's government will still
spend as much on debt service as on health and education.
Thus, Chissano is explicitly rejecting the HIPC as inadequate, and is
calling for collective action by debtors to press for cancellation. He
said "creditors should be made to accept this step [cancellation]
immediately, and as a matter of urgency". External debt has proven
to be one of the most serious hindrances to economic prosperity of our
countries, Chissano said.
Chissano's attack on HIPC comes as Mozambican civil society is also
attacking both HIPC and the perceived failure of IMF programmes in Mozambique,
and when a confidential World Bank study also shows that HIPC is inadequate.
LINKED TO GLOBALISATION
Chissano linked debt to globalisation, and called for debt cancellation
as part of global restructuring. "There is no question of us seeking
to survive outside the context of the global economy," he said. "It
is within the Global Village that we must press for a more acceptable and
fairer relationship between the developed countries of the north and the
poor and underdeveloped countries of the south."
Globalisation is marginalising the poor countries. "Global economy
should be made to mean global participation -- as things stand now, we
run the risk of remaining just as globalised countries deprived of any
expression," he said. Poor countries must act together, particularly
over debt cancellation.
Globalisation is not new. During the colonial epoch "our economies
and those of the north were already globalised," Chissano noted. There
had always been "interdependence", but it was controlled from
the north.
Interdependence between north and south "is like the interdependence
between the cow and its owner", said Chissano. "The owner needs
the cow because of its milk. The cow needs the owner because he provides
it with hay. But when the cow ceases to produce milk, the owner may well
decide to slaughter it. The cow cannot do the same to the owner".
No-one had asked African or Caribbean nations their opinion about the
international division of labour, continued Chissano. Instead "circumstances
have confined us to act as producers of raw materials and unprocessed goods
for export to the rich countries of the north". But "we don't
have much say in the establishment of commodity prices, either for our
own raw materials or for the processed goods the we usually import."
"International political and economic imbalances, far from narrowing,
have become greater", he said. "Old and unfair relationships
are reproducing themselves in a much wider, faster and dramatic way".
"While we are pressed to open up our countries and streamline our
methods of doing international business, so that the global economy may
sink roots, invisible barriers are still making it difficult to for us
to access resources and advanced technological know-how", Chissano
accused. "Our manufactured goods can hardly find a place in the rich
markets of the north."
CIVIL SOCIETY ATTACKS HIPC
The IMF and World Bank, despite paying lip service to civil society,
in fact paid no attention to proposals that came from within civil society.
This "results in implementing policies that have been decided in advance
and take no account of local realities," said Otilia Pacule, coordinator
of the Mozambique Debt Group.
'"Important programmes such as the Country Assistance Strategy,
the Policy Framework Paper, and the HIPC debt relief initiative are designed,
approved and implemented without any open discussion with the target population,"
she added.
"Since 1987, Mozambique has been implementing structural adjustment
programmes with the IMF, but 11 years later few people are feeling any
benefits from such programmes," the Debt Group said in a message sent
to the World Bank's Consultative Group on Mozambique, which met in Maputo
22-23 September.
Pacule criticised the IMF for its obsession with macro-economic indicators,
which leads it to ignore the real conditions of people's lives. "In
assessing its programmes, the IMF attributes the greatest importance to
the development of the money supply, the exchange rate, and the government's
budget deficit," she said. '"But the true sources of long term
growth and of poverty reduction have been neglected."
Pacule cited agricultural marketing as an example. "In the countryside,
where the main pillars of the national economy reside, the people produce,
but they receive no clear incentives to market their crops. ... Without
any prior consultation with rural people, price liberalisation is advocated,
which leads to a deterioration in the terms of trade, and eliminates any
mechanisms for guaranteeing the marketing of all surplus crops," she
argued.
WORLD BANK STUDY CITES FUNDING GAP
Meanwhile, a secret World Bank study shows that Mozambique cannot meet
its education goals without further debt cancellation. The "Mozambique
Education Sector Expenditure Review" estimates that Mozambique needs
an extra $50 million per year if it is to meet internationally agreed education
targets, including primary education for all.
This money must be met from domestic resources, the study says, because
aid to Mozambique is falling. The confidential study was done earlier this
year, before the HIPC decision in April, and it assumed that substantial
new money would be released from debt service payments. This would cover
both the fall in aid and at least some of the $50 million shortfall.
In the event, HIPC released only $13 million per year. Mozambique will
still pay $100 million per year in debt service, which is similar to the
government budget for health and education. The only way to fill the $50
million gap would be to cut debt service payments in half.
Other studies indicate that the funding gap in health is similar. Thus
Mozambique would need total debt cancellation, as demanded by President
Chissano, if it is to meet internationally recognised health and education
targets.
By Joseph Hanlon, Jubilee 2000, 25 September 1998
[This article will appear on the upgraded Jubilee 2000 website on 28
September. http://www.jubilee2000uk.org]
Sources: Mozambique Information Agency (AIM), 22 September 1998; Daily
Top News e-mail edition, Maputo, 22 September 1998; Panafrican News Agency,
24 September 1998; Jubilee 2000.
WORLD BANK AGREES 'FUNDAMENTAL' HIPC REVIEW, BUT IMF & GERMANY
ARE OPPOSED
The World Bank board of executive directors has called for a "fundamental"
review of the HIPC (Heavily Indebted Poor Countries) Initiative, the World
Bank's Andrew Rogerson told a press conference in London on 22 September.
The review would be completed in time for the World Bank annual meeting
in October 1999.
The intention is to have a joint review with the IMF, but Rogerson said
that the IMF has so far not agreed. He also admitted there are divisions
between creditor countries as to just how "fundamental" it is
to be.
The new review is intended to be much more thorough than the widely
criticised HIPC review this year. The new review has been pushed by Britain,
and Chancellor Gordon Brown told a meeting of aid agencies on 22 September
that it would specifically include issues of debt sustainability and the
impact of HIPC on poverty relief.
Aid agencies and Jubilee 2000 have been consistently arguing that HIPC
"debt sustainability" calculations, which are now based only
on export earnings, must include some consideration of essential spending
on social services and poverty alleviation.
The new "fundamental" review was agreed without dissent by
the World Bank board in mid-September, but by the time it came to the IMF
board a few days later opposition had built, and a decision was deferred.
Germany and France are known to the be leading the opposition to any reconsideration
of HIPC.
Unexpectedly the Nordic and Dutch executive directors also expressed
caution. They apparently fear that the United States will refuse to contribute
to any deeper debt cancellation, and that their countries will be left
to come up with the extra money.
The division over the fundamental review also reflects the traditional
split between the Bank and the Fund. In general, Fund executive directors
are appointed by central banks and are much more conservative, while Bank
executive directors are appointed by government ministries (albeit often
finance rather than development ministries) and take more account of development
and poverty objectives.
There will be considerable lobbying over the new review during the World
Bank and IMF annual meetings in Washington in October. The fear is that
in order to get agreement of Germany and of the IMF board, there will be
a watering down of just how "fundamental" the review will be.
Joseph Hanlon, 25 September 1998
[This article will appear on the upgraded Jubilee 2000 website on 28
September. http://www.jubilee2000uk.org]
This material is being reposted for wider distribution by the Africa
Policy Information Center (APIC). APIC's primary objective is to widen
the policy debate in the United States around African issues and the U.S.
role in Africa, by concentrating on providing accessible policy-relevant
information and analysis usable by a wide range of groups and individuals.
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