By Salih Booker and Njoki Njoroge Njehu*
Seattle Post-IntelligencerApril 15, 2005
For African countries, in particular, the burden of illegitimate and unpayable debt has taken a devastating human toll over the past 25 years. The $300 billion that African countries owe to foreign creditors such as the World Bank and IMF represents a crippling burden that has severely undermined economic and social progress. Sub-Saharan Africa alone pays $13 billion to wealthy creditors, including the IMF and World Bank, each year -- roughly the amount the United Nations estimates is needed to effectively combat HIV/AIDS in that region. Meanwhile, dozens of African nations still spend more of their budget on debt service than on health care in the midst of the HIV/AIDS pandemic.
It has long been clear that previous efforts at debt relief, particularly the Heavily Indebted Poor Countries (HIPC) Initiative, have failed to resolve the debt crisis in the most impoverished countries. After years of activist pressure on the immorality of this outflow of resources, there is finally an acknowledgment on the part of creditors that this dynamic is unsustainable.
But the deal is not yet done. The G-7, World Bank and IMF are still discussing various options for dealing with the debt crisis, and it is not yet clear that the 100 percent cancellation that is so urgently needed will actually be realized. This is indeed a critical moment. The world's wealthiest countries must now agree on a plan that will go far beyond the HIPC framework to include 100 percent cancellation for all impoverished and deeply indebted countries, without imposing harmful conditions. The Bush administration has proposed to its G7 allies that the debts owed by about 40 of the most impoverished countries to the World Bank and IMF be completely written off. The list of countries is too short, but the U.S. proposal, uncharacteristically, is the most progressive on the table. The other G7 countries must resist the distraction of a U.K. plan that would accomplish far less, but which has gotten far more media attention.
Anything less than 100 percent debt cancellation will fail to resolve the debt crisis. Moreover, most of the debts claimed by the wealthy creditor nations and institutions are illegitimate to begin with. The vast majority of impoverished country debts are the result of irresponsible lending to dictators who stole the loans or used the money to oppress the very people who are now footing the bill.
Shortly after invading Iraq in 2003, the United States began actively pursuing the cancellation of Iraq's debt as a means to support the country's "transition to democracy." Earlier this year, after the tsunami wrought such devastation in the Indian Ocean, creditors offered to freeze bilateral debt repayments for some of the impoverished countries worst affected, to enable them to prioritize their own domestic needs. It is past time that African countries and other impoverished and deeply indebted countries receive the same consideration.
Independent studies show that 100 percent debt cancellation can be financed from the resources of the World Bank and IMF themselves, without negatively affecting their credit rating or their ability to continue their operations. This can be achieved primarily by closing down its Poverty Reduction and Growth Facility and through an easily designed market-neutral sale of the IMF's vast gold reserves, a point on which the U.S. must resist mining companies' unfounded concerns about gold market fluctuations. In addition, the World Bank can direct part of its ample annual surplus to a measure that should be its top development priority.
The British government, which will host the annual G8 summit in July, has declared that addressing Africa's poverty is a top priority, and has indicated it hopes a deal on debt may be reached at this summer's meeting. But time is of the essence. The World Bank and IMF meetings this month represent yet another opportunity for rich-country creditors to do the right thing on debt. Financing options for debt cancellation will be explored and discussed, and decisions should be made. Every further delay means African countries must continue starving their children to pay their debts.
About the Authors: Salih Booker is executive director of Africa Action (www.africaaction.org) and Njoki Njoroge Njehu is director of 50 Years is Enough: U.S. Network for Global Economic Justice (www.50years.org).
