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Africa Policy E-JournalMay 21, 2003 (030521)
Africa: G8 and Africa's Debt This posting contains excerpts from a new report on the inaction by rich countries on debt cancellation for African and other countries in the global South, from organizations involved in the Jubilee Debt Campaign in the UK. The report again notes the failure of the creditors' HIPC (Heavily Indebted Poor Countries) initiative, and calls for a new transparent mechanism for arbitration of debts that is not dominated by the creditors. Leaders of the G8 group of rich countries will be meeting in Evian, France from June 1-3, where they could take additional action on this issue. However, a pre-summit meeting of the G7 finance ministers (the G-8 minus Russia) gave no indication of this, despite a vague commitment to consider what action on development might be necessary to meet the UN's Millenium Development Goals. Instead they simply noted that "the debt of heavily indebted poor countries is already addressed under an existing international initiative." The finance ministers did propose a new approach of additional adjustments and flexibility for the debt of other countries handled under the "Paris Club," such as Iraq. Other countries in this group, not eligible for the HIPC initiative, include Indonesia, Ecuador, and Nigeria.
Note: For use in public education on Africa's debt, see the new
2-page Africa Action factsheet "Africa's Debt: Fueling the Fire of
AIDS" at http://www.africaaction.org/action/debt2003.pdf and
http://www.africaaction.org/action/debt2003.htm +++++++++++++++++end summary/introduction+++++++++++++++++++++++ Did the G8 Drop the Debt? May 2003
[Excerpts only - full report at:
Jubilee Debt Campaign
Jubilee Research @ NEF
CAFOD Romero Close Stockwell Road In 1998 seventy thousand people formed a human chain around the G8 Summit in Birmingham, UK. Their demand for an end to Third World debt pitched the issue to the top of the G8's agenda. ... Responding to a coalescence and amplification of campaigning forces that began with the Human Chain (described in some detail in this report), the G8 enlarged the scale of the Heavily Indebted Poor Countries (HIPC) debt relief process in 1999. Despite this, we find that since then:
In terms of the total debt stock of poor countries, the amount that has actually been written off to date (as opposed to that notionally in the pipeline for cancellation) is a mere $36.3 billion. This is less than one third of the $110 billion promised in 1999 and not much more than 10% of the $300 billion (at a minimum) of unpayable debt owed by a group of 53 countries that have been identified as very poor and indebted. On the positive side, HIPC has reduced annual debt servicing for 26 countries by an average of 40%. However, this benefit is not shared evenly amongst the 26. For example:
An examination of net resource flows (i.e. combining changes to debt servicing, new loans and variations in aid over the period) shows that the benefits of HIPC have been weakened by new loans and reductions in aid - these latter two factors have had an even more alarming impact amongst those not in receipt of assistance under HIPC:
Conversely, our calculations show that total (or neartotal) debt cancellation plus increases in aid will be necessary if the internationally-agreed 2015 Millennium Development Goals are to be met. HIPC flows must not be used as a reason for reducing aid, and the issuing of new loans rather than grants risks perpetuating the debt crisis. Moreover, there is ample evidence to show that debt cancellation is an effective means of mobilising resources. For example:
Nonetheless, the overall outlook is bleak, primarily for two reasons: (a) debt relief is based on the creditors' willingness to pay (expressed in arbitrary 'debt sustainability' criteria) rather than the need to fund basic social expenditure; (b) there is no proper mechanism in the international financial architecture to handle insolvency at the national level. We therefore call upon the international community in general and the G8 in particular to:
Irrespective of detailed policy questions, we reiterate that ultimately debt cancellation is a matter of simple justice. It is demanded as such by the South, and indeed the 70,000 people who gathered in Birmingham five years ago believed that the suffering and loss of life that was directly or indirectly attributable to Third World debt was intolerable and avoidable. They believed that with enough political will and relatively small sums of money, this injustice could be erased. That remains the belief of our coalition today. ...
The death of HIPC The one common factor in all the debt cancellation deals announced between the Birmingham Summit in 1998 and the puny $1bn offered by the G8 in 2002 was the linkage with the HIPC initiative. Despite campaigners' concerns that HIPC was measuring debt cancellation in the wrong way, for too few countries and with the wrong set of conditions, leaders of the major creditor countries continued to maintain their faith in HIPC as an appropriate mechanism for providing debt cancellation. Five years on from Birmingham, however, HIPC's track record could scarcely be worse:
Delays in debt cancellation would be understandable if such delays were caused by corruption, human rights abuses or the failure of governments to account for the money saved from relief. Delays might also be justified if the government needed more time to consult civil society about the use to which funds freed up by debt cancellation should be put. But mostly, the reasons for delays have not been benign. Instead, they have been due to failure of countries to privatise at the rapid pace demanded by the IMF. ... Moreover, HIPC is not providing enough relief to bring down debts to 'sustainable' levels, even according to the narrow definitions used within the HIPC initiative. ,,, By April 2002, the World Bank and IMF had admitted that their export projections had in fact been grossly inaccurate and that up to half the countries that were expecting to reach Completion Point in the next few years would not achieve the HIPC debt sustainability targets. ,,, Stocking up So, the debt cancellation commitments which came directly and indirectly out of the Birmingham Summit seem to have cut the debt stocks of the 53 Jubilee 2000 countries (the 'J2k 53') by around $36bn, or roughly 10%. But this does not mean that debt stocks are that much lower. For in the meantime, the loan pushers of the World Bank and IMF have continued to bear down on African countries offering gilded loans with - conveniently enough for governments without a long life expectancy - a 10 year grace period. Despite the growing international attention being paid to the problems of long run debt sustainability, the loan pushers just keep on pushing. The World Bank alone has lent Uganda the first HIPC country to reach Completion Point and an oftquoted 'success story' of the initiative $850m since the year 2000, against total debt cancellation under HIPC of around $2bn. Congo DR, a war-ravaged country with a colossal $12bn foreign debt and in desperate need of the kind of grants given to Germany in 1953, has instead received almost $1bn in loans from the World Bank between June and August 2001 alone. This new lending adds to her burden and undermines any hope that she will reach long term debt sustainability. ,,,
A framework of justice for resolving international debt crises The Jubilee 2000 petition, signed by the end of 2000 by 24 million people, called for 'cancellation by the year 2000 of the unpayable debt owed by the world's poorest countries under a fair and transparent process.' ... the experience of the last few years suggests that the need for a 'fair and transparent process' has never been more apparent. Take the Millennium Development Goals, for example. The argument that debt sustainability should be linked to the MDGs has gained international currency, from African governments to the United Nations, from Southern NGOs to creditor countries such as Ireland and Sweden. This proposal, first made by UK aid agencies belonging to the Jubilee 2000 network, argues that judgements about the level of debts countries can afford to 'sustain' or repay, must be judged from the revenue remaining after governments have financed their poverty reduction programmes or MDG targets. Many in official circles accept that if the MDGs (to which almost all countries have committed themselves) are to be met, total debt cancellation will be needed. Even the World Bank and IMF have admitted this. In a recent report, they noted that such an approach 'would likely be complete debt cancellation plus increased foreign assistance.' How can creditors get away with making such statements without comprehending the logical consequences? How is it that HIPC can perform so badly? Why are creditors reneging on their promises? The short answer is that all current frameworks for providing debt relief are unjustly dominated by creditors. Creditors make loans, often very bad loans; set conditions and interest rates; insist that the loans are repaid in the creditor's not the debtor's currency; determine whether to re-schedule or not; undertake debt sustainability analyses using their own criteria and their own methodology. Under this framework, creditors effectively act as witness, plaintiff, policeman, judge and jury in their own court. This is a deeply unjust process, in which the debtor is perceived as the 'sinner' and has to have debts 'forgiven', while the creditor is perceived, on the whole, as blameless, capable of 'forgiving'. Jubilee Debt Campaign, like many sister organisations in both the North and South, argues that a new procedure must be created which fully embodies the principles of fairness, transparency and independence, and which places human development needs at its core. In particular, Jubilee Research and CAFOD favour the model of Chapter 9 of the US Legal Code which provides a bankruptcy framework for governmental (municipal) organisations. The new framework would be transparent, independent and accountable to global taxpayers, North and South. Furthermore, such a framework would not require an international treaty or an amendment to the articles of the IMF. Instead, ad-hoc panels could be appointed, almost immediately, in countries like Argentina. Just as in international arbitration between corporations and sovereign countries, the debt arbitration panel could consist of just three people. One nominated by the sovereign debtor, another nominated by creditors and the third appointed by the first two. This method of appointing the panel would give sufficient authority to proceed with debt restructuring. Most importantly, the panel's work would have to be transparent and accountable particularly to parliaments and civil society in the debtor nation but also to those in the lending nation. The work of the debt arbitration panel would be guided by three fundamental principles. First, the application of justice and reason. Secondly, as in any domestic bankruptcy process, any debt re-structuring would ensure the protection of the human rights and the human dignity of the debtor nation and its people. This means that no debtor country should be forced to make debt repayments if such payments are undermining her ability to meet the Millennium Development Goals. Finally, the process should be open and transparent. It should ensure that citizens affected by a debt crisis have a legal right to have their voices heard in the resolution of that crisis, both in the creditor and in the debtor nation. Freedom of information, transparency of process and accountability to the public would be central to the resolution of debt crises. ... The process of obtaining debt relief could be initiated by any debtor government which considers that their ability to meet the MDGs is being undermined by the requirement to make debt service payments. Once the debtor enters into the framework, she would automatically be granted protection from her creditors for the duration of the programme. This would prevent 'rogue' creditors from litigating against the debtor country in order to receive the full value of their claims. The Secretary General of the UN would have responsibility for ensuring that the entire process is conducted in a way that is transparent, independent and fair in particular by monitoring progress and making the panel's reports public, particularly in the debtor nation itself. Only through the application of justice and reason to the resolution of debt crises, do we believe that debts could be made truly 'sustainable.' Only through such a framework of justice will debtor countries genuinely be given a 'fresh start.' Only through such a framework will we achieve the international economic justice demanded by 70,000 people that day in Birmingham and later, by 24 million people worldwide. +++++++++++++++++++++Document Profile+++++++++++++++++++++
Date distributed (ymd): 030521
Documents previously distributed in the e-journal are
available on the Africa Action website: To be added to or dropped from the e-journal subscription list, write to e-journal@africaaction.org. For more information about reposted material, please contact directly the source mentioned in the posting.
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Africa Policy E-Journal
