Global Policy Forum

By Merrill Goozner

On Sunday, Trevor Ngwane, a 39-year-old city councilor from Soweto Township in South Africa, will be among the protesters outside the International Monetary Fund meeting. He's traveled thousands of miles because of the havoc huge foreign debts have inflicted on his country.

Paying off the $40 billion-plus debt inherited from the apartheid government is now the second largest expense of the South African government, exceeded only by education. So instead of building health clinics in his impoverished township, the government is selling off zoos and libraries to stay in the good graces of the IMF.

Ngwane has watched helplessly as privatized electric and water utilities cut service to squatter homes to adhere to World Bank policies designed to put those utilities on sound financial footing. "Many of those loans were used to buy weapons and suppress the people during apartheid," Ngwane said. "So we are paying twice for it--once with our lives, and now with an inability to fund critical social services."

Led by an international campaign known as Jubilee 2000, public officials and non-government organizations from the developing world are calling for the IMF, the World Bank and foreign aid lenders such as the U.S., Europe and Japan to cancel $100 billion in Third World debt. Many of those loans were wasted by corrupt governments and military dictatorships, or went to failed development projects that never generated the expected benefits for local economies.

For most of the 1990s, the IMF and World Bank insisted governments of developing countries make payments on those debts as a condition of receiving new loans. The payments often displaced spending on health, education and other vital social services, the groups say. In the last year, the IMF and World Bank heeded the call of Jubilee 2000 and other groups and launched a program to forgive some of those debts. But according to some of the people organizing protests here this weekend, the program has bogged down.

Only five of the 40 countries targeted for the initial round of debt relief have qualified under IMF guidelines. Some of those nations are still waiting for the funds to be released. Stanley Fischer, acting managing director of the IMF, said the promised relief "still hasn't been paid for." While the IMF has sold some of its gold reserves to fund debt relief, the U.S. has failed to come up with $210 million that represents its share of this year's program.

Treasury Secretary Lawrence Summers said the administration's failure to win passage of a $210 million supplementary appropriation for debt relief hasn't slowed its progress. "We have not been constrained by a lack of resources," he said, "but it is one we could face if Congress doesn't move forward with the appropriation soon."

The bill passed the House, but was tacked to an "emergency" appropriation that has brought about its delay. Senate Majority Leader Trent Lott (R-Miss.) has balked at the price tag. Another problem has been the new strings the IMF attached to its debt relief packages. To qualify for debt relief, a country must come up with so-called poverty reduction strategies to ensure that the savings from debt relief go for human services--not military expenditures to entrench regimes or support a bloated civil service.

"There is a tension between the need to move with speed and the need for countries to develop growth strategies that their countries believe in," Fischer said. "Everyone wants the debt relief to be used productively." Stepping up the pace of poor country debt relief will be a major point of discussion among the seven leading industrialized nations that meet Saturday, and during the IMF and World Bank meetings that will take place Sunday and Monday, respectively. Those meetings will be ringed by thousands of demonstrators from around the globe.

Meanwhile, Germany announced Thursday that it will forgive 100 percent of its bilateral debt as part of the IMF's heavily indebted poor country initiative. Germany said almost 30 countries would benefit from the measure. Earlier in the week, Japan announced it will contribute up to $190 million to the IMF trust fund for that initiative.

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