Algeria
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Cape Verde
Central Afr. Rep.
Chad
Comoros
Congo (Brazzaville)
Congo (Kinshasa)
Côte d'Ivoire
Djibouti
Egypt
Equatorial Guinea
Eritrea
Ethiopia
Gabon
Gambia
Ghana
Guinea
Guinea-Bissau
Kenya
Lesotho
Liberia
Libya
Madagascar
Malawi
Mali
Mauritania
Mauritius
Morocco
Mozambique
Namibia
Niger
Nigeria
Rwanda
São Tomé
Senegal
Seychelles
Sierra Leone
Somalia
South Africa
South Sudan
Sudan
Swaziland
Tanzania
Togo
Tunisia
Uganda
Western Sahara
Zambia
Zimbabwe
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Africa: Debt Deal Substantive but Modest
AfricaFocus Bulletin
Jun 13, 2005 (050613)
(Reposted from sources cited below)
Editor's Note
G8 finance ministers have decided to write off 100% of stocks of
debt owed to international financial institutions by 18 countries,
including 14 in Africa. This decision, still to be ratified by the
G8 summit in July and by the annual meetings of the IMF, World
Bank, and African Development Bank in the fall, is estimated to
cover some $40 billion in debt, with annual savings to
the 18 countries coming to about $1.5 billion.
The $40 billion write-off, which came after years of campaigning by
debt cancellation activists and months of negotiations among rich
country policymakers, is substantive but modest compared to
Africa's estimated total external debt of $300 billion. While
celebrating the decision, many commentators and campaigners were
quick to point out that the move was only a first step to provide
countries with the chance to meet globally agreed minimum
development goals. Although nine other countries might soon become
eligible, as many as 40 more are still in need of similar action.
Moreover, G8 action to provide greater financial resources for the
Global Fund to fight AIDS, Tuberculosis, and Malaria and other
critical needs for international investment are still in doubt. And
international trade negotiations as yet show no signs of addressing
the concerns of developing countries. The pressure for further
action is therefore certain to continue through the G8 summit in
July and beyond.
This AfricaFocus Bulletin includes a brief summary of the G8 debt
plan, reposted with permission from allAfrica.com, and the full
text of the official statement on June 11 from the G8 finance
ministers meeting in London.
For previous AfricaFocus Bulletins on Africa's debt, see
http://www.africafocus.org/debtexp.php
On other related economic issues, see
http://www.africafocus.org/econexp.php
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G8 Debt Agreement to Benefit 23 African Countries; Separate Deal
for Nigeria Mooted
June 12, 2005
By Reed Kramer
Washington, DC
[Reposted with permission from http://allafrica.com]
The agreement on 100% debt relief for developing countries
announced by finance ministers from the eight largest industrial
nations on Saturday initially benefits 14 nations in Africa.
Another nine African countries could qualify for full debt
cancellation in the next 12 to 18 months, and the ministers pledged
"to provide a fair and sustainable solution to Nigeria's debt
problems in 2005" through the informal grouping of creditor nations
known as the Paris Club.
The nations first in line for debt forgiveness are 18 (including
four in Latin America) that have reached the "completion point" in
the Highly Indebted Poor Countries (HIPC) initiative launched by
the World Bank and International Monetary Fund in 1996. The 14 in
Africa include Benin, Burkina Faso, Ethiopia, Ghana, Madagascar,
Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal, Tanzania,
Uganda and Zambia. Nine others that are considered close to
completion are Cameroon, Chad, Democratic Republic of Congo,
Gambia, Guinea, Guinea-Bissau, Malawi, Sao Tome and Sierra Leone.
Britain put the price tag for writing off the debts of the 18
eligible countries at $40 billion, plus an additional $11 billion
for the soon-to-be eligible nine. Aid groups and debt relief
proponents say 62 countries need total debt forgiveness if they are
to meet the Millennium Development Goals that were adopted by the
United Nations in 2000 and include cutting poverty and disease in
half by 2015. The ministers said that the World Bank and African
Development Bank would be compensated 'dollar for dollar' for the
debt cancellation, while the cost of debt relief for the
International Monetary Fund "should be met by the use of existing
IMF resources" or, by "extra resources" where necessary.
For Nigeria, the G8 ministers provided encouragement that a relief
package, which has been under discussion with creditors in the
Paris Club, may be agreed during the G8 Summit in Gleneagles,
Scotland in early July. "Nigeria is key to the prosperity of the
whole continent of Africa," the ministers' declaration said. "We
welcomed Nigeria's progress in economic reform as assessed in the
IMF's intensified surveillance framework, noted its move to
IDA-only status, and encouraged them to continue to reform."
President Olusegun Obasanjo said last week that his government is
hoping to utilize the oil-producing country's foreign reserves to
cancel its entire Paris Club debt. Obasanjo and his finance
minister, Ngozi Okonjo-Iweala, have waged an intensive lobbying
effort to persuade leading creditors that the democratically
elected government's ambitious economic reforms should earn the
country respite from the debt burden racked up by previous military
regimes. Nigeria, with a population exceeding 130 million, earns
the least revenue per capita of any of the large oil producing
nations, the minister has said. In recent years, Nigeria has been
paying about $1 billion annually to its Paris Club creditors, about
half of what was owed.
Various options for reducing or eliminating Nigeria's indebtedness
have been under discussion with Paris Club members. While Nigeria
is seeking a 100% write-off, some creditors are reportedly
insisting that some or all of what the country has earned from
recent rising oil prices be used to buy back the debt at a
substantial discount. "A fair discount might be in the range of
20-33 cents per dollar of face value," Todd Moss from the Center
for Global Development in Washington, DC wrote in a widely cited
article published in April. That would be consistent with recent
debt relief arrangements for Iraq and Argentina, Moss said, and
would cost Nigeria $6 - 9 billion - "about the recent increase in
their foreign reserves from the oil windfall." Obasanjo has argued
that debt payments would be better spent on improving education,
health and electricity generation.
Another 11 countries, including nine in Africa and two in Asia,
could benefit from the agreement announced Saturday, if they
continue to progress in meeting HIPC objectives. Burundi, Central
African Republic, Comoros, Republic of Congo, Cote d'Ivoire,
Liberia, Somalia, Sudan and Togo are classified as 'pre-decision
point countries', according to the HIPC criteria, and could become
eligible for debt cancellation if they complete the process
"We are absolutely insistent that transparency on all sides is
essential for granting future aid and debt relief.," said Gordon
Brown, Britain's chancellor of the exchequer, who chaired the
finance ministers meeting. "We're working with the IMF and World
Bank to improve transparency and tackle corruption."
Speaking after the meeting concluded, Brown said: "We are conscious
of the abject poverty and the relentless and unyielding poverty
that so many countries and individuals face. We are being driven
forward by the urgent need to act. We have found ourselves united
with a shared purpose." He called the statement "the most
comprehensive statement that finance ministers have ever made on
the issues of debt, development, health and poverty."
Brown, who was a member of the Commission for Africa established
last year by British Prime Minister Tony Blair, which called for a
doubling of aid to Africa over the next three to five years, said
"I'm very encouraged not just by agreement on debt we signed today
but also the EU's decision to double aid by 2010, so the agenda for
Gleneagles is aid, debt relief and trade justice."
While noting the EU action, as well as the "tripling" of U.S.
development assistance and the creation of the Millennium
Development Account by the Bush administration, the ministers said
"It is crucial that the international community improves the
effectiveness of aid," and they called on all donors to "harmonise
their operational procedures, align aid behind country-owned
priorities for growth and poverty reduction and provide for
measurable results."
The ministers' statement said "our highest common priority in trade
policy for the year ahead will bring real and substantial benefits
to poor countries." G8 members "want to deliver increasing market
access for developing countries" and eliminate subsidies that
distort trade opportunities.
"We recognise that all countries can benefit from a reduction in
trade barriers, but they will not benefit as long as they do not
have the capacity to compete in international markets," Brown said.
A British proposal for an International Finance Facility (IFF) that
would provide $100 billion for development by issuing bonds backed
by the development assistance budgets of wealthy nations has been
opposed by the United States and Japan. Instead Brown announced a
pilot IFF project to fund for vaccination efforts in Africa without
U.S. or Japanese involvement.
G8 Finance Ministers' Conclusions on Development,
London, 10-11 June 2005
United Kingdom Treasury (London)
June 11, 2005
London
- We reaffirm the commitments we made at our meeting in February
this year to help developing countries achieve the Millennium
Development Goals by 2015, to make particular efforts in Africa,
which on current rates of progress will not meet any of the
Millennium Development Goals by 2015, and to set out for G8 Heads
of Government and States the steps we believe can be taken to
further implement the Monterrey Consensus on an open world trade
system; increased aid effectiveness; absorptive capacity; increased
levels of aid; and debt relief.
- We reaffirm our view that in order to make progress on social
and economic development, it is essential that developing countries
put in place the policies for economic growth, sustainable
development and poverty reduction: sound, accountable and
transparent institutions and policies; macroeconomic stability; the
increased fiscal transparency essential to tackle corruption, boost
private sector development, and attract investment; a credible
legal framework; and the elimination of impediments to private
investment, both domestic and foreign.
- We reaffirm our view of February that it is crucial that the
international community improves the effectiveness of aid. In
particular bilateral and multilateral donors need to: harmonise
their operational procedures; align aid behind country-owned
priorities for growth and poverty reduction; and provide for
measurable results. Donors must also: focus their aid on poverty
reduction; enhance efforts to untie aid, based on DAC principles;
and deliver aid in a more predictable way. We welcome the progress
made at the Paris OECD DAC High Level Forum in March, and call on
the OECD DAC to set by September this year, ambitious and credible
targets against all the indicators of progress agreed at the March
meeting.
- A successful outcome for the Doha Development Agenda, our
highest common priority in trade policy for the year ahead, will
bring real and substantial benefits to poor countries. The Hong
Kong Ministerial in December will be a critical step towards a
successful outcome of the DDA in 2006, which delivers substantial
increases in market access for developing countries; establishes a
timetable for the elimination of all trade-distorting export
support in agriculture; and provides effective special and
differential treatment for developing countries.
- However, not all countries will benefit in the short term from
reductions in trade barriers. Some countries lack the capacity to
produce and deliver goods to international markets competitively;
for others, the transitional costs of moving to more open markets
may be substantial. We also recognise that poor countries face
particular problems and need the flexibility to decide, plan and
sequence reforms to their trade policies to fit with country-owned
development programmes. We commit to provide support to enable
developing countries to benefit from trade opportunities. We call
on the IFIs to submit proposals for the Annual Meetings for
additional assistance to countries to develop their capacity to
trade and ease adjustment in their economies, based on a systematic
analysis of transition costs, so they can take advantage of more
open markets.
- Tackling diseases that undermine growth and exacerbate poverty
in developing countries will require not only strengthened health
systems, but also improved treatment, including universal access
for AIDS treatment by 2010 and development of vaccines, including
for HIV and malaria. We have made progress this year in
implementing the Global HIV Vaccine Enterprise agreed at Sea
Island, and are committed both to taking this further; and to
scaling up our support for vaccines and medicines research through
the successful Public Private Partnerships model. We call for a
report on progress by the end of the year. We recognise also that
advance purchase commitments (APCs) are potentially a powerful
mechanism to incentivise research, development and the production
of vaccines for HIV, malaria and other diseases. We asked Minister
Siniscalco to consult the relevant institutions, governments and
industry, with the aim of developing concrete proposals by the end
of this year.
- The Enhanced HIPC Initiative has to date significantly reduced
the debt of 27 countries, and we reaffirm our commitment to the
full implementation and financing of the Initiative. Moreover,
individual G8 countries have gone further, providing up to 100 per
cent relief on bilateral debt. However, we recognise that more
still needs to be done and we have agreed the attached proposal. We
call upon all shareholders to support these proposals which we will
put to the Annual Meetings of the IMF, World Bank and African
Development Bank.
- We also recognised at Monterrey that a substantial increase in
ODA and private capital flows will be required to assist developing
countries to achieve the Millennium Development Goals. We
acknowledge the efforts of all donors, especially those who have
taken leading roles in providing and increasing ODA and committing
to further increases.
- Specifically we welcome: the progress the EU has made towards
the 0.39 per cent ODA/GNI target agreed at Barcelona; the
announcements by France and the UK of timetables to reach 0.7 per
cent ODA/GNI by 2012 and 2013 respectively; and the recent EU
agreement to reach 0.7 per cent ODA/GNI by 2015 with an interim
target of 0.56 per cent ODA/GNI by 2010 - a doubling of EU ODA
between 2004 and 2010. In line with the EU agreement, Germany
(supported by innovative instruments) and Italy undertake to reach
0.51 per cent ODA/GNI in 2010 and 0.7 per cent ODA/GNI in 2015. We
welcome the tripling of US ODA to Sub-Saharan Africa and the near
doubling of US ODA to all developing countries since 2000. The US
now accounts for roughly 25% of all ODA to Sub-Saharan Africa. In
addition, we welcome the launch of the Millennium Challenge Account
and the President's Emergency Plan for AIDS Relief. We welcome
Japan's commitment to double its ODA to Africa over the next three
years and Canada's budget plans to finance its commitment to double
aid levels from 2001 to 2010, and to double aid to Africa by 2008.
In addition, we welcome Russia's $2.2 billion contribution to the
HIPC Initiative.
- As we prepare for decisions at the G8 Summit in Gleneagles we
continue our work programme on: the IFF and its pilot, the IFF for
Immunisation; some of the revenue proposals from the Landau Report,
including a pilot project, supported and led by France and Germany,
for a contribution on air travel tickets to support specific
development projects and to refinance the IFF; the Millennium
Challenge Account; the Enhanced Private Sector Assistance with the
African Development Bank; and other financing measures; so that
decisions can be made on how to deliver and bring forward the
financing urgently needed to achieve the Millennium Development
Goals.
- Nigeria is key to the prosperity of the whole continent of
Africa. We welcomed Nigeria's progress in economic reform as
assessed in the IMF's intensified surveillance framework, noted its
move to IDA-only status, and encouraged them to continue to reform.
We are prepared to provide a fair and sustainable solution to
Nigeria's debt problems in 2005, within the Paris Club.
G8 Proposals for HIPC debt cancellation
Donors agree to complete the process of debt relief for the Heavily
Indebted Poor Countries by providing additional development
resources which will provide significant support for countries'
efforts to reach the goals of the Millennium Declaration (MDGs),
while ensuring that the financing capacity of the IFIs is not
reduced. This will lead to 100 per cent debt cancellation of
outstanding obligations of HIPCs to the IMF, World Bank and African
Development Bank. Additional donor contributions will be allocated
to all IDA and AfDF recipients based on existing IDA and AfDF
performance-based allocation systems. Such action will further
assist their efforts to achieve the MDGs and ensure that assistance
is based on country performance. We ask the World Bank and IMF to
report to us on improvements on transparency on all sides and on
the drive against corruption so as to ensure that all resources are
used for poverty reduction. We believe that good governance,
accountability and transparency are crucial to releasing the
benefits of the debt cancellation. We commit to ensure this is
reaffirmed in future bilateral and multilateral assistance to these
countries.
Key elements:
- Additional donor contributions will be allocated to all IDA and
AfDF recipients based on existing IDA and AfDF performance-based
allocation systems.
- 100 per cent IDA, AfDF and IMF debt stock relief for Completion
Point HIPCs.
- For IDA and AfDF debt, 100 per cent stock cancellation will be
delivered by relieving post-Completion Point HIPCs that are on
track with their programmes of repayment obligations and adjusting
their gross assistance flows by the amount forgiven. Donors would
provide additional contributions to IDA and AfDF, based on agreed
burden shares, to offset dollar for dollar the foregone principal
and interest repayments of the debt cancelled . Additional funds
will be made available immediately to cover the full costs during
the IDA-14 and AfDF-10 period. For the period after this, donors
will commit to cover the full costs for the duration of the
cancelled loans, by making contributions additional to regular
replenishments of IDA and AfDF.
- The costs of fully covering IMF debt stock relief, without
undermining the Fund's financing capacity, should be met by the use
of existing IMF resources. In situations where other existing and
projected debt relief obligations cannot be met from the use of
existing IMF resources (e.g. Somalia, Liberia, and Sudan), donors
commit to provide the extra resources necessary. We will invite
voluntary contributions, including from the oil-producing states,
to a new trust fund to support poor countries facing commodity
price and other exogenous shocks.
- Globally and on this basis we are committed to meeting the full
costs to the IMF, World Bank and African Development Bank. We will
provide on a fair burden share basis resources to cover
difficult-to-forecast costs, in excess of existing resources, to
the IMF, IDA and AfDF over the next three years. Subject to further
analysis by the institutions we will provide up to $350-500 million
for this purpose. We are also committed, on a fair burden share
basis, to cover the costs of countries that may enter the HIPC
process based on their end-2004 debt burdens. We will also seek
equivalent contributions from other donors to ensure all costs are
covered and we will not jeopardize the ability of these
institutions to meet their obligations. Utilize appropriate grant
financing as agreed to ensure that countries do not immediately
re-accumulate unsustainable external debts, and are eased into new
borrowing.
We call upon all shareholders to support these proposals which
would be put to the Annual Meetings of the IMF, World Bank and
African Development Bank by September.
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.
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