September 28, 2000
When all's said and done, there's a lot more said than done. At least that is how it looks to campaign groups at the annual meetings of the International Monetary Fund and World Bank calling for a massive write-off of the debts of the world's poorest countries to free up money to fight poverty instead. Despite much talk from the two institutions and the world's rich countries about how they hear what the protesters said and are taking steps to relieve many countries of their crippling debts, campaigners say the action does not match the words.
Even officials from leading creditor countries admit as much. "There's been a lot of talk about HIPC. Probably too much talk," one U.S. delegate admitted, referring to the Heavily Indebted Poor Countries (HIPC) initiative. The World Bank and IMF launched HIPC in 1996, promising large-scale debt write-offs for countries that reformed their economies and drew up plans to reduce poverty.
The scheme was aimed at 40 countries, mostly in sub-Saharan Africa. Since then, that number has fallen to 32, as countries involved in war or civil war were excluded. The amount of relief foreseen for those 32 is $29 billion in net present value terms. But the scheme has been slow to deliver any meaningful debt cancellation. It was overhauled last year to speed it up and the international community pledged to get 20 countries into the scheme by the end of this year.
Ten countries - Benin, Bolivia, Burkina Faso, Honduras, Mali, Mauritania, Mozambique, Senegal, Tanzania and Uganda - have now reached the so-called "decision point," meaning to start to get some debt relief. Only one, Uganda, has reached the so-called "completion point," where countries are supposed to receive a final big debt write-off from both multilateral leaders such as the World Bank and bilateral creditor countries. But Ugandan Finance Minister, Gerald Sendaula told Reuters last week that several countries had simply not written off debts they had agreed to and that the country had only seen its debt payments fall by half, to $80 million a year.
And the nine others who entered the scheme this year have only seen their payments fall by a third. They will now have to wait years and meet lots of conditions before they get any more. "Last year has revealed more than ever about HIPC. It is clear from the countries coming through that there is not enough cancellation and it is not going fast enough," said a spokeswoman for Jubilee 2000, a coalition of debt campaigners which has forced the issue right up the international agenda. "Debt service payments are still way too high and are eating up precious funds that could be spent on health and education."
The HIPC countries owe about half their debt to multilateral lenders and half to creditor countries, with only a fraction owed to private sector banks. A key IMF committee on Sunday approved reforms agreed by the IMF and World Bank this month, relaxing some of the onerous conditions of the HIPC scheme. World Bank chief James Wolfensohn and his counterpart at the IMF, Horst Koehler, stressed repeatedly at the meetings that HIPC was working and they were doing all they could to get a total to 20 into the process by the end of the year. The additional 10 are Cameroon, Chad, the Gambia, Guinea, Guyana, Guinea-Bissau, Malawi, Nicaragua, Rwanda and Zambia.
Wolfensohn and Koehler say they cannot write off more debts without significant extra funding from their shareholders. That is blocked, at least in part, by the U.S. Congress, which has ideological objections to coughing up more money for the two institutions. But Jubilee 2000 released a study last week arguing that the World Bank, in particular, could do far more than it was doing on debt relief by drawing on large, untapped reserves.
Campaigners also criticise G-7 countries which loudly proclaim they will write off 100 per cent of the debts owed to them, giving the impression that debt write-off will be huge, in reality debts are only being reduced to what the IMF and World Bank consider "sustainable" levels. Reknowned U.S economist, Jeffrey Sachs on Tuesday condemned this idea of sustainable debt as a "charade."
"These analyses have nothing to do with debt sustainability in any real sense, since they ignore the needless deaths of millions of people for want of access to basic medicines and nutrition," he wrote in the Financial Times. "Money that could be directed towards public health is instead siphoned off to pay debts owed to western governments and to the IMF and World Bank."
The case of Zambia is instructive. Even if it enters the process this year, its debt service payments will rise to $222 million next year from $147 million. This is because some old loans fall due for repayment. Debt payments will swallow 40 per cent of the government's budget next year. Debt campaigners say a statement by British Finance Minister Gordon Brown who chairs a key IMF committee, that Zambia's case would have to be looked at again was a tacit admission that HIPC was not delivering enough debt relief, as they have long argued.
"They will find this with an increasing number of countries coming through. Indeed, they are starting to say HIPC always did have a provision in it to reconsider a country's debts when they finish HIPC," said a representative of a charity, Christian Aid. Canada, another G-7 country, proposed during the meetings this weekend that countries slap an immediate moratorium on debt collection from the eligible HIPC countries. While in reality this was little different to what HIPC already involved, Canadian officials said they wanted to signal that HIPC was going too slowly.
The pressure was also piled on Monday by rock star Bono, a key supporter of Jubilee 2000's drive to shame the world's rich governments, as well as the IMF and World Bank, into much deeper debt relief. He called for a "historic act" of debt forgiveness this year to remember the millennium year by.
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