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Africa: Debt Deal in Question

AfricaFocus Bulletin
Sep 22, 2005 (050922)
(Reposted from sources cited below)

Editor's Note

"Arbitrary criteria have been used to exclude most countries from debt relief. While it may be politically expedient for powerful countries to pretend that only a small set of countries need debt cancellation, it is time to explode this myth." - Christian Aid

As delegates gather for the World Bank and IMF meeting this weekend, debt cancellation is still on the agenda. But, say debt campaigners, the agreement reached at Gleneagles, Scotland by rich countries is not only inadequate. There may even be backtracking from that limited commitment, which promised full cancellation of debt for 18 countries..

This AfricaFocus Bulletin contains a press release from Jubilee USA Network, stressing the threat that the World Bank/IMF meetings this weekend will fail to implement the Gleneagles agreement. The Bulletin also contains a press release and executive summary from a new report from Christian Aid - UK. That report, "What about Us? Debt and the Countries the G8 Left Behind," stresses the need to expand full cancellation to a wider set of countries and calls for the immediate cancellation of approximately 20% of developing country debt as illegitimate "odious debt."

For the full text of the Christian Aid report "What about Us?," see http://www.christian-aid.org.uk/indepth/509debt
Additional information from Jubilee USA Network is available at http://www.jubileeusa.org

For earlier AfricaFocus Bulletins on debt, visit
http://www.africafocus.org/debtexp.php

The World Bank's latest information on the debt issue is at http://www.worldbank.org/debt

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

G-8 Debt Deal Hangs in the Balance On Eve of IMF/World Bank Meetings

Jubilee USA Network Condemns Attempts by Some To Weaken G-8 Debt Deal;
Calls on Institutions to Approve Deal, then Dramatically Expand Debt Cancellation

September 21, 2005

Jubilee USA Network

http://www.jubileeusa.org

Contact: Debayani Kar, 202-783-0215, 202-246-8143 Neil Watkins, 202-783-0129, 202-421-1023

Washington - As the IMF and World Bank prepare for their annual meetings in Washington, DC this weekend where they will consider the agreement reached by the G-8 in July on debt cancellation, Jubilee USA Network, the US arm of the global Jubilee movement, today condemned moves at both institutions to weaken the G-8 debt agreement.

Leaked documents obtained by Jubilee USA and reports from the US and UK have highlighted challenges to the deal by some European governments and World Bank staff. Specifically, these proposals would undermine the G-8 principle of 100% irrevocable debt stock cancellation for 18 impoverished countries and would add more economic conditionalities. African Executive Directors at the IMF have opposed such moves to water down the deal.

"The G-8 made a promise this summer that some of the world's poorest nations would see their debts to the IMF and World Bank totally and irrevocably erased. Now some governments and the World Bank are trying to take that promise back. That is unacceptable," said Neil Watkins, National Coordinator of Jubilee USA Network. "The IMF/World Bank must agree to full debt cancellation this weekend. But this will only be a first step towards our broader goal of expanding debt cancellation to all impoverished countries, without devastating economic conditions, in the months and years ahead."

Jubilee USA Network has characterized the G-8 deal on debt cancellation as an important and precedent-setting first step, but one that falls short of what is needed to conclusively end the debt crisis faced by the world's impoverished nations.

Any backtracking on the G-8 deal would result in serious consequences for those populations in the 18 initially eligible countries that urgently require the resources released through full debt cancellation. As an example, the presidents of Rwanda and Zambia - eligible countries - have called for the IMF and World Bank to immediately cancel their debts. Yet, current discussions at the institutions' boards have set the G-8 deal's implementation date at July 2006. This would continue to prevent the Zambian government from providing additional AIDS drugs to almost 100,000 infected people, an initiative the government announced in response to the G-8 agreement. Jubilee USA Network's analysis of the G-8 debt agreement, "First Step on A Long Journey: Putting the G-8 Deal on Debt into Perspective," highlights the benefits of the G-8 debt agreement, while detailing its shortcomings, and provides recommendations of next steps. The report and executive summary are available at http://www.jubileeusa.org.

Jubilee USA Network is the US arm of the international movement working for debt cancellation for impoverished nations. Jubilee USA is a network of over 70 religious denominations, labor groups, environmental organizations, and community and advocacy groups working for freedom from debt for countries in Africa, Asia, and Latin America.


Bold action on debt urged as G8 fails most of the world's poor

22.09.05

Christian Aid
http://www.christian-aid.org.uk

Millions of the world's poorest people are still suffering under the burden of international debt, despite agreements reached by leaders of the world's richest countries at the G8 summit in July.

The G8 debt deal was so limited it leaves 19 out of every 20 people in the developing world - more than 5 billion people - living in countries mired in debt, says Christian Aid in a new report 'What About Us: Debt and the Countries the G8 Left Behind.'

Published to coincide with this weekend's annual meeting of the World Bank (WB) and the International Monetary Fund (IMF), the report calls for urgent steps by world leaders and creditors to alleviate the crushing debt burden.

'This is such a serious matter that a massive overhaul of the international debt system must be the next move,' said Jonathan Glennie, Christian Aid's debt policy specialist.

'The G8 deal was welcome but in the end proved only a small step forward. We now need a huge leap if the world is serious about tackling the poverty and despair of millions of poor people.'

Despite the huge importance of the debt issue for poor people, the G8 deal will only help 18 out of 153 developing countries, with the possibility that a further 10 would join them by the end of 2007.

Those left out in the cold include Bangladesh, Brazil, Kenya, the Philippines, India, Sri Lanka, Ecuador, Peru, Haiti, Guatemala and Indonesia.

Christian Aid urges an end to the 'drip-feed' approach to debt cancellation and proposes a new system be created that can independently assess whether poor countries should pay back all the debt that rich countries claim is owed them.

The report also examines the case for debt repudiation where poor countries might consider unilaterally declaring that they will not pay their debt.

'While rich countries must assess whether they are doing enough, it is important that debtor nations should be more assertive in negotiations with creditors, raising issues of injustice rather than simply asking for charity,' said Mr Glennie.

The world's poorest countries continue to pay more every year in debt payments than they receive in grants and loans - forking out a massive 100 million [pounds] every day - says the report.

The G8 debt deal left at least 40 countries needing immediate and total cancellation of their external debts with many more needing a substantial reduction in what they are required to pay if they are to eliminate extreme poverty.

'These countries are home to vast numbers of poor people and are forced by an iniquitous system to waste large amounts of money on debt repayments rather than spending it on the health care and education that their people so urgently need,' said Mr Glennie.

For further details contact:
Jonathan Glennie on 0207 523 2397 or 07881 780060. Or Katy Migiro on 0207 523 2058 or 07939 190145

Notes to editors

Kenya:

  • Kenya is one of the world's poorest countries. Life expectancy has declined from 57 in 1986 to 48 years today.
  • In 2000, more than half of Kenyans did not have enough food.
  • Its per capita income of US$360 in 2003 was lower than the level in 1990.
  • Kenya's external debt is close to $7 billion.
  • It spends about 40% of its annual budget ($600 million) servicing that debt, twice what it spends on public health.


What about us? Debt and the countries the G8 left behind

A Christian Aid report

September 2005

Executive summary

Half the world's population, around 3 billion people, live on less than œ1.40 a day. Every year more than 10 million children die of hunger and preventable diseases that's one child every three seconds. The bold targets set by world leaders aimed at halving poverty by 2015 the millennium development goals, or MDGs still appear out of reach. The grim statistics on poverty have become increasingly well known throughout 2005. Thanks in part to the worldwide Make Poverty History campaign, the cancellation of developing world debt is now recognised as a pivotal way to reduce global poverty. In the largest demonstration that Scotland has ever seen, more than 225,000 people marched through Edinburgh last July to demand debt cancellation, as well as trade justice and more and better aid a call that echoed around the world, not least when 3 billion people watched the Live8 concerts.

Campaigners have long realised that debt is one of the key obstacles preventing low and middle-income countries from developing and achieving their full potential. The world's poorest countries continue to pay more every year in debt payments than they receive in grants and loans, forking out an enormous œ100 million every day to the rich North. Cameroon, Gambia, Guinea, Mauritania, Senegal and Zambia are among the countries still having to pay back more in debt service than they spend on healthcare for their people.

The effect on poor people of this massive haemorrhaging of money has been substantial and devastating. The UN has estimated that 19,000 children die each day as a result of the social impact of debt. If the money spent repaying debt were instead invested in poverty reduction and economic growth, millions of deaths would be prevented and lives improved. There is abundant evidence to back this up. Tanzania has abolished primary school fees since receiving debt relief, meaning 1.6 million more children now go to school. Mozambique was able to offer all children free immunisation against common diseases, while in Uganda, 2.2 million people gained access to clean water.

As the facts about debt's stranglehold reached an ever-growing audience, and a flicker of intent was detected among some of the world's most influential decisionmakers, hopes were high that July's G8 summit at Gleneagles would see a significant push forward on cancellation. Unfortunately, despite the hype and the hope, the world's richest nations again failed to deliver. Only 18 out of 153 developing countries will receive anything from the G8 deal on debt, with, at best, a further ten joining them by the end of 2007.

As we discuss in annex three, the deal leaves at least 40 countries still needing immediate and total cancellation of external debts. Many more require massive reductions in debt repayments if they are to eliminate extreme poverty.

The stark truth is that nine out of ten people in developing countries will remain unaffected by the G8 debt deal.

The countries left out in the cold include Bangladesh, Brazil, Eritrea, Kenya, the Philippines, Sri Lanka, Ecuador, Peru, Haiti, Guatemala and Indonesia. All are home to vast numbers of poor people and are forced by an iniquitous system to divert large amounts of money away from critical social expenditure to debt repayments which end up in the bank accounts and government exchequers of the rich North.

Christian Aid believes that this situation is unsustainable. The G8's achievements at Gleneagles, however limited, are welcome but they will also force campaigners around the world to ask whether it is time for a fundamental reappraisal of the tactics required to end the injustice of debt once and for all. This report argues that it is.

In chapter 1 we make the case for broadening debt relief to a much wider group of countries, because it is not only the poorest countries that are paying billions of dollars a year in debt servicing. Arbitrary criteria have been used to exclude most countries from debt relief. While it may be politically expedient for powerful countries to pretend that only a small set of countries need debt cancellation, it is time to explode this myth.

In chapter 2 we look at why countries are in debt. Contrary to the way western politicians often portray the situation, poor governance and corruption are by no means the only reasons. We argue that the governments and institutions that lend money have to take a large part of the responsibility. By lending to oppressive and corrupt regimes that used the money unproductively or unscrupulously, creditors are complicit in today's debt crisis and must share the blame. Christian Aid says that these 'odious debts', which comprise about 20 per cent of total developing-world debt, should be cancelled immediately.

We also examine unfair trade conditions imposed by creditors, which, along with falling commodity prices, have meant countries have not only been prevented from making the money to pay back the debt, but have actually got more into debt.

The report lays bare other unfair factors that increase debt. For example, huge penalties for late payment and high interest rates have meant that countries have paid back far more than they ever borrowed. Between 1970 and 2002 Africa received US$540 billion in loans, and paid back US$550 billion. But it still owed US$295 billion because of penalties, interest and arrears.

In chapter 3 we show how creditors have made decisions on debt relief in their own interests and not in the interests of poor people in developing countries. We conclude that there is an urgent need for this unjust system to be changed, and call for a new fair and transparent process to ascertain what debts should be paid, taking into account lender liability for odious and unfair debt.

Chapter 4 argues that, given the apparent reticence of creditor nations to deal with the crushing debt burden, developing-country governments should consider what actions they need to take unilaterally to protect the interests of their citizens.

We make three recommendations for debtor countries. Firstly, we urge them to emphasise the injustice of debt when dealing with creditors by underlining the real reasons so much debt was accrued, and how they were denied the means to repay it. We call on debtors to be more assertive in negotiations with creditors, and review arguments for and against debt repudiation as a strategy, contending that creditor nations and organisations should act now to cancel debt before countries become so desperate that they default to everybody's detriment. And finally we encourage poor countries to reduce their reliance on loans by maximising domestic income sources, minimising the illegal outflow of money and bringing government decisions under greater scrutiny.

Campaigners should take heart. In April 2004 senior UK Treasury officials told nongovernmental organisations that there would be 'no further movement' on debt cancellation in the foreseeable future. Just over a year later, in response to the Make Poverty History campaign, the UK government had reversed its position and worked towards achieving the important, though very limited, progress at Gleneagles. And this wasn't the first time creditor governments had responded to pressure on debt. In 1999, after years of campaigning, world leaders announced substantial debt cancellation to date US$50 billion has been cancelled for some of the world's poorest countries as a result of this commitment.

The debt campaign is working and poor people are benefiting. Now is the time to redouble our efforts.

Recommendations to creditors

  • Immediately write off odious and unfair debt
  • Establish a fair and independent process to solve debt crises, to replace the present biased and arbitrary system
  • Immediately cancel the debts of those countries that need it to achieve the millennium development goals

Recommendations to debtors

  • Emphasise the injustice of the debt
  • Be more assertive in negotiations with creditors
  • Reduce reliance on loans


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