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Africa: Debt Update

AfricaFocus Bulletin
Jun 13, 2004 (040613)
(Reposted from sources cited below)

Editor's Note

Despite pre-summit news reports that rich country leaders gathered for the G8 summit might consider a British proposal for full cancellation of debt for poor countries, the summit only announced a two-year extension of the Heavily Indebted Poor Countries (HIPC) initiative. The Jubilee2000 USA Network and other groups reportedly flooded the U.S. Treasury Department with phone calls, and some officials were said to be considering the idea. But the White House was not convinced.

This issue of AfricaFocus Bulletin contains a call from Stephen Lewis, UN Special Envoy for HIV/AIDS in Africa, for the G8 to ensure that at least their HIPC pledge be put into effect for Zambia at an International Monetary Fund meeting on the country's debt scheduled for June 14. It also contains a statement from the Jubilee2000 USA and 50 Years is Enough networks on the outcome of the summit, and links to other related background information.

Among the six African countries whose presidents met with the G8 leaders last week, Ghana, Senegal, and Uganda have received limited debt relief under the HIPC plan (see
http://www.jubileeresearch.org/latest/realhipc250903.htm). Algeria, South Africa, and Nigeria are not included in the plan, but Nigeria in particular is in urgent need of debt relief. A total of US$ 1.4 billion, more than Nigeria's combined budget for health and education, has been set aside for debt servicing in 2004. Less than two weeks ago, in a speech in Abuja, Nigerian President Olusegun Obasanjo jokingly offered to resign if that is what it would take to get debt relief for his country. But there is no indication that the Nigerian president won the ear of the G8 leaders with his arguments.

As noted in a report from the UN's Integrated Regional Information Network (IRIN), the Nigerian president cited the recent cancellation of much of Pakistan's debt and forthcoming cancellation of much of Iraq's debt, and noted bitterly that "Debt relief, debt cancellation is a political, not economic issue." Obasanjo said Nigeria's original debt stock of about US $10 billion had been paid "twice over" if one included the "penalty for not paying and...penalty for the penalty" "This is ridiculous," he said. "The debt that is being held against us [Nigeria] is unpayable and unsustainable if we really want to have an equitable world." (For full text of the IRIN article see http://www.irinnews.org or
http://allafrica.com/stories/200406010031.html)

++++++++++++++++++++++end editor's note+++++++++++++++++++++++

Statement by Stephen Lewis,
UN Special Envoy for HIV/AIDS in Africa:
Zambia Test Case for G8 Summit

Friday, June 11, 2004

"At the Heart of Everything Lies HIV/AIDS"

The G8 Summit finished yesterday. It finished with a flourish about the HIPC (Highly Indebted Poor Countries) Initiative on debt reduction. The decision was to more fully implement HIPC, and to extend it for another two years. There was much self-congratulation amongst G8 members.

As it happens, the decision can now be put to an immediate test; a test of integrity, a test of the ringing G8 rhetoric. This very Monday, June 14, 2004, the IMF Board is meeting to consider the case of Zambia. Zambia is in desperate straits, and it all revolves around the IMF and HIPC.

I shall try to put the situation as simply as possible. But remember: everything has to be measured against the backdrop of a country where HIV/AIDS has taken, and continues to take a terrible toll.

In April of this year, the Government of Zambia negotiated its 2004-2007 Poverty Reduction and Growth Facility (PRGF) with the IMF. This was meant to be the programme to run the country financially for three years. But it had a particular premise on which everything was based: if Zambia could meet the conditions imposed by the IMF, then Zambia would achieve the requirements for HIPC eligibility by December 31st, 2004, thus reducing foreign debt service substantially, and freeing up significant resources for the new budget. Essentially, Zambia had to produce good economic performance for six months and the IMF would verify that the "HIPC completion point" had been reached. The entire programme (PRGF) depends on meeting the HIPC targets.

It is impossible to overstate how hard Zambia has been trying to comply with IMF requirements, including the imposition of a suffocating cap on wages. The Government truly thought it was meeting those six-month conditions by the agreed deadline, when the IMF suddenly informed Zambia that it wouldn't be possible to resolve things by the end of 2004; the evaluation of Zambia's performance would have to extend into the first quarter of 2005. For the Government, that would be a disaster. The entire country is wholly fixated on 2004; for the sake of a month (or two) a kingdom is lost.

As a result, something unprecedented has happened. The Minister of Finance and National Planning, The Honourable Ng'andu P. Magande, has issued a two page document outlining the issues, acknowledging the overwhelming crisis which the Government faces, and appealing to the diplomatic and multilateral communities to intervene with the IMF to get it to behave in a different manner on Monday.

The economy of Zambia is in crisis. The Government has frozen wages in the public sector, and raised taxes. Incomes are so low that people are barely surviving. The imposed macroeconomic policy means that the Ministry of Health can hire no more staff, and fully twenty per cent of the municipal districts have no doctors and no nurses. It is estimated that there is a shortfall of 10,000 teachers, and there are 9,000 newly-trained teachers who cannot be hired. Average pupil- teacher ration is approaching 56:1 . fatally wounding the quality of education. The damage to the social sectors is staggering.

Why do I choose to issue this statement? Because at the heart of everything lies HIV/AIDS. The pandemic is methodically and destructively eating away at the capacity and infrastructure of Zambian society. It cannot be allowed to continue. The Government urgently wants to confront the pandemic, but it cannot do so with its financial policy and planning in a straitjacket. The Board of the IMF must come to realize that rigid macroeconomic conditionality is putting Zambia at risk. Observers within the country worry about the potential for social unrest. Even the Minister of Finance signals the Government's acute anxiety when he says: ". the Government of the Republic of Zambia has asked the people of Zambia to see the year 2004 as a period of sacrifice so as to reach the HIP completion point by December 2004. Thus, Government has taken difficult and unpopular decisions . If the prospect of Zambia .attaining the HIPC completion point is made impossible at next Monday's IMF Board meeting, then the credibility of, and public support for, the Government's programme with the IMF . will be severely eroded".

I have argued before in cases involving the International Monetary Fund, and I argue again that it has failed to grasp the demonic force of the human and economic carnage caused by HIV and AIDS. The poorest sectors of society: the extended families, the women, the children, the orphans . they have all made incredible sacrifices to keep life going in Zambia in the face of wrenching austerity. I appeal to the IMF Board to introduce the tiny quotient of flexibility being requested by the government of Zambia. To do otherwise is to give continued momentum to the pandemic.

There's a bitter irony here. The former Government of Zambia was a Government that often flouted every injunction of the international community. The present Government, and the people of Zambia, are falling over backwards, in the face of incomparable odds, to comply with the demands of the international community. I have visited Zambia four times in the last eighteen months; I've met with many segments of society in various parts of the country, with my colleagues in the UN family, and with the President and members of his cabinet. This is a Government doing everything in its power to restore economic growth and social equity.

For heaven's sake, give Zambia some breathing room. Was the G8 serious in its avowed embrace of HIPC? We'll know on Monday.


Jubilee USA Network * 50 Years is Enough Network

FOR IMMEDIATE RELEASE - June 10, 2004,

CONTACT: Marie Clarke, Jubilee USA, c: 202-255-7849 / Neil Watkins, c: 202-421-1023 Njoki Njehu, 50 Years Is Enough Network, c: 202-746-4318 Online Press Room -- http://www.jubileeusa.org

US Movement for Debt Cancellation Outraged by G-8 Failure on Debt

Failure to Act on 100% Debt Cancellation a Tragedy, Will Cost Lives

SAVANNAH, Ga. - Jubilee USA Network and the 50 Years Is Enough Network expressed disappointment this afternoon at the failure of the G-8 leaders to take decisive action by committing to support 100% multilateral debt cancellation for impoverished nations.

Over the past several days press reports had indicated that UK Prime Minister Tony Blair had put forth a proposal for 100% debt cancellation for poor countries. This afternoon, however, the leaders of the Group of Eight wealthy nations instead announced a meager 2-year extension of the Heavily Indebted Poor Countries (HIPC) Initiative instead of a definitive commitment to full cancellation.

"At this critical moment, when every minute another African child dies of AIDS, the global community needs 100% cancellation of multilateral debt without harmful conditions," said Marie Clarke, National Coordinator of the Jubilee USA Network. "By failing to seize the opportunity, the G-8 has once again chosen baby steps over bold action."

HIPC, even by IMF and World Bank standards, has failed to provide an exit from the debt crisis. After eight years of the HIPC program, two things are clear: when countries have more access to their own resources they use them well, but HIPC has been too little relief, too slow, for too few countries and with too many conditions.

"Indebted countries need 100% debt cancellation without deadly conditions on the occasion of the IMF and World Bank’s 60th Anniversary year," said Njoki Njehu, Director of the 50 Years is Enough Network. "Cancellation of impoverished country debt by the IMF and World Bank must be financed through their own resources."

Bi-partisan legislation calling for the IMF to cancel 100% of the debts of 50 nations without harmful conditions has been introduced in the U.S. House of Representatives. The JUBILEE Act, HR 4511, will legislate what the G-8 has failed to propose.

Jubilee USA Network, the 50 Years Is Enough Network, and the broader debt cancellation movement will turn up the heat on global leaders and the multilateral creditors in the coming months. "President Bush and the G-8 might have found it hot in Georgia in June, but we will turn up the heat even more in this election year on the issue of debt cancellation. We will be bringing our calls for 100% cancellation to pulpits throughout the country, to the halls of Congress with the JUBILEE Act, and to the streets," said Clarke.

Earlier this week, Jubilee USA Network released a letter signed by more than 250 religious leaders, including Jesse Jackson and leaders of Protestant, Catholic, and Jewish denominations calling for 100% cancellation of the debts of impoverished nations without harmful conditions in light of the AIDS crisis.


Groundbreaking Debt Legislation Introduced in U.S. Congress

Jubilee USA Network Applauds the Introduction of the JUBILEE Act and calls on G8 to Pressure IMF to Cancel 100%

Jubilee USA Network http://www.jubileeusa.org

June 3, 2004 : Marie Clarke, 202-783-0215 / c: 202-255-7849

Neil Watkins, 202-783-0129 / c: 202-421-1023

WASHINGTON - Representatives Waters (D-CA), Leach (R-IA), Frank (D-MA), Bachus (R-AL) and Lee (D-CA) introduced the JUBILEE Act today into the House of Representatives. The JUBILEE Act is groundbreaking legislation that would require the U.S. Treasury to work in appropriate multilateral settings to achieve 100 percent cancellation of the debts of 50 nations by the International Monetary Fund. The IMF would be required to finance the cancellation from their own resources without harmful conditionality.

"The JUBILEE Act will help build a better, safer world by providing impoverished nations the fresh start necessary for development," said Marie Clarke, National Coordinator of Jubilee USA Network. "The cancellation of debts owed to the IMF would remove a major impediment to poverty eradication and economic growth in Asia, Africa and Latin America and enable the nations to invest their own resources in health care, education, and poverty reduction."

"Jubilee USA Network applauds the prophetic action of these five Congress people who have demonstrated their political, spiritual and moral courage to call for the IMF to do their fair share of debt cancellation," Clarke said. "We face the greatest health crises in our times, a crisis that threatens the very survival of the global community. Without full debt cancellation, AIDS will continue to be a death sentence for the developing world."

The introduction of the JUBILEE Act is timed to coincide with the G-8 summit next week in Sea Island, Ga. The G-8 are likely to address the issue of the debt crisis faced by impoverished nations. UK Prime Minister Tony Blair and Chancellor of the Exchequer Gordon Brown are proposing an extension of the World Bank and IMF's debt relief scheme, the Heavily Indebted Poor Countries' Initiative and the extension of debt relief to countries that have not yet benefited from the program.

Jubilee USA Network argues that rather than taking small steps with this failed program, we must follow the lead of sponsors of the JUBILEE Act and commit to a lasting solution to the debt crisis and leverage 100 percent cancellation of the external debt of the most impoverished nations by the International Monetary Fund, the World Bank as well as all other significant bi-lateral creditors.

"Jubilee USA calls on the G-8 to adopt the call for 100 percent cancellation by the IMF of the fifty eligible countries as a part of their strategy to resolve the debt crisis," stated Clarke.

The IMF will respond to the call for 100 percent cancellation by pleading poverty. But reports by British accounting firms, and just last fall by Jubilee Research in the UK, have shown that the World Bank and IMF have enough resources to cancel 100 percent of the Heavily Indebted Poor Country debts without any impact on their credit rating or ability to lend, and could probably expand to cover cancellation for many countries outside the HIPC Initiative.


Additional Links on G8 Meeting

The White House, June 10, 2004
Press Conference of President Bush after the G8 Summit http://www.g8usa.gov/sp_061004f.htm

Joint Press Conference By Abdelaziz Bouteflika, President of Algeria, John Agyekum Kufor, President of Ghana, Olusegun Obasanjo, President of Nigeria, Abdoulaye Wade, President of Senegal, Thabo Mvuyelwa Mbeki, President of South Africa,
And Yoweri Kaguta Museveni, President of Uganda
http://www.g8usa.gov/sp_061004c.htm

G8 Information Centre
University of Toronto
http://www.g7.utoronto.ca

InterPress Service, June 10, 2004
G8 offers Meagre Debt and Aids Plan
http://allafrica.com/stories/200406110023.html

Africa Action, June 10, 2004
AIDS and Debt Relief Plans 'Inadequate and Off-Target" http://allafrica.com/stories/200406100859.html

Previous Issues of AfricaFocus Bulletin on African Debt

Jun 3, 2004 Zambia: Condemned to Debt
http://www.africafocus.org/docs04/zam0406.php
"The evidence suggests that the past twenty years of IMF and World Bank intervention have exacerbated rather than ameliorated Zambia's debt crisis. Ironically, in return for debt relief, Zambia is required to do more of the same. The country has been condemned to debt." - World Development Movement report

Feb 13, 2004 Ethiopia: Debt Relief Backstep
http://www.africafocus.org/docs04/eth0402.php
Ethiopia's debt is becoming more and more unsustainable, even under the narrow criteria used by international agencies to calculate what countries can afford to pay. Changes in interest rates and continued low coffee prices are projected to drive the value of the debt up to 220 percent of Ethiopia's exports, even after promised relief.

Feb 8, 2004 Africa: Who Owes Whom?
http://www.africafocus.org/docs04/debt0402.php
Rich-country finance ministers meeting in Florida this weekend focused on the sinking dollar and rising U.S. debt, cautioning against excessive volatility in currency markets. They also called for more reductions in the debt burdens of Iraq and Afghanistan, and warned debt-strapped Argentina to comply with International Monetary Fund policies. Africa's debt, estimated at more than $300 billion, was not on the agenda.

Nov 25, 2003 Africa: Debt Meeting Consensus
http://www.africafocus.org/docs03/debt0311.php
African experts meeting in Dakar under the auspices of the United Nations Economic Commission for Africa (UNECA) deplored the lack of a consolidated African position in response to global policy proposals that have vast economic implications for Africa. They agreed that current debt relief schemes are inadequate, that increased debt relief is the most effective way to provide rapid additional funding for development, and that additional measures were also essential to advance the globally acknowledged goals of ending proverty.

Nov 4, 2003 Senegal: Debt and Destruction
http://www.africafocus.org/docs03/sen0311.php
As the U.S. Congress approves $87 billion for the U.S. occupation of Iraq, long-standing promises by rich creditors to provide debt "relief" of some $49 billion for 42 countries remain unfulfilled, and largely off the radar screen for policymakers. Yet debt remains a crippling burden not only for the 34 African countries that qualify as Heavily Indebted Poor Countries (HIPC), but also for major African powers such as Nigeria and South Africa.

Nov 4, 2003 Africa: Debt and Deception
http://www.africafocus.org/docs03/hipc0311.php
As the U.S. Congress approves $87 billion for the U.S. occupation of Iraq, long-standing promises by rich creditors to provide debt "relief" of some $49 billion for 42 countries remain unfulfilled, and largely off the radar screen for policymakers. Yet debt remains a crippling burden not only for the 34 African countries that qualify as Heavily Indebted Poor Countries (HIPC), but also for major African powers such as Nigeria and South Africa.


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

AfricaFocus Bulletin can be reached at africafocus@igc.org. Please write to this address to subscribe or unsubscribe to the bulletin, or to suggest material for inclusion. For more information about reposted material, please contact directly the original source mentioned. For a full archive and other resources, see http://www.africafocus.org


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