Global Policy Forum

IMF Debt Relief Welcomed as "First Step"


By Emad Mekay

Inter Press Service
December 21, 2005

Nineteen of the world's poorest nations will get debt relief worth 3.3 billion dollars by early next year under a programme announced by wealthy nations, the International Monetary Fund (IMF) said Wednesday.

The IMF says that the debt relief will help those nations channel more money into social spending on sectors like health and education, as part of their struggle to alleviate profound poverty. The deal is part of the so-called Multilateral Debt Relief Initiative (MDRI) announced in July by the Group of Eight (G8) most industrialised nations -- Britain, France, Germany, the United States, Japan, Italy, Russia and Canada. Under the plan, G8 nations offered 100 percent cancellation of debts owed by at least 18 of the most heavily indebted nations to the IMF, the World Bank and the African Development Bank, three of the world's largest public creditors.

The move announced Wednesday includes 17 of the original 18 countries that were promised the debt relief in July, in addition to two more also deemed poor enough to qualify. The beneficiaries are Benin, Bolivia, Burkina Faso, Cambodia, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tajikistan, Tanzania, Uganda and Zambia. They include heavily indebted poor countries, known as HIPCs, or, in the case of Cambodia and Tajikistan, which fall under the 380-dollar per capita income threshold need to qualify for the programme.

The IMF said in a statement that more countries would eventually qualify, but still needed the final approval of donors. The Fund says that Mauritania, which meets the criteria, did not qualify because of concerns over its public expenditure management. However, an IMF spokesman said the country is expected to get debt relief "once it demonstrates satisfactory progress in a few policy areas". The announcement put to rest speculation by anti-debt campaigners in the run-up to the IMF's board meeting Wednesday that the Fund was dragging its feet on the initiative and that its board was considering denying relief to some countries that failed to meet certain economic benchmarks.

"Let me start off by making it clear that we are on track to deliver 100 percent debt relief within the coming weeks to 19 of the 20 countries, mostly in Sub-Saharan Africa and Latin America, and we are optimistic that the one country that remains eligible will qualify for relief within just the next few months," said IMF spokesperson Thomas C. Dawson. Concerns that the IMF would try to tie the plan to more stringent conditions prompted an outcry among anti-debt campaigners, many of whom sent emails and made phone calls in protest. Anti-debt campaigners who have lobbied for years to erase poor nations' debts welcomed the IMF's decision. The 50 Years is Enough Network, a group that advocates debt cancellation, said the move was "a glimmer of real hope for the millions of impoverished people".

"After decades of paying back often illegitimate debts contracted under dictatorships for dubious projects, and siphoning away critical funds from social spending and development, these countries now have the opportunity to invest the much-needed resources into their societies," said Sameer Dossani, the group's director in Washington. Debt cancellation advocates, however, said that they still considered the announcement to be just an initial move, and urged further steps towards eliminating all forms of debt that have crippled the world's poorest nations for decades. "We also serve clear notice that this agreement is only a first step on a long journey," said Neil Watkins of Jubilee USA Network. "We will continue to pressure world leaders to cancel the debts of all impoverished countries in the months and years ahead."

The IMF said in its statement Wednesday that other countries would have to make the right economic decisions before they can qualify, renewing concerns among anti-poverty activists that potential candidates will have to implement harsh economic reforms. While poor nations can now expect some relief from debt payments, the G8 plan still falls short of the sweeping measures anti-debt campaigners have been calling for. For example, the plan does not address debts owed to the Inter-American Development Bank, a Washington-based lender that lends to Latin nations. It also ignores "odious and illegitimate" debts that were incurred and then squandered by dictators and military regimes, activists argue. "The next step is for the IMF to cancel the debts of over 60 countries that urgently need the funds to help end poverty," said Oxfam policy advisor Max Lawson.




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