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Africa: Debt Action Date distributed (ymd): 001129 APIC Document
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Region: Continent-Wide Issue Areas: +economy/development+ +US policy focus+ Summary Contents: This posting contains (1) a letter from Salih Booker, as director of APIC, The Africa Fund, and the American Committee on Africa, to the U.S. representative to the International Monetary Fund, supporting Zambia's call for cancellation rather than rescheduling of its debts, and (2) an action alert from the Globalization Challenge Initiative and ISODEC (Ghana), calling for immediate messages to the World Bank in opposition to user fees being imposed in the latest structural adjustment agreement for Tanzania. APIC supports the action call, and asks our supporters to respond with their own messages to the World Bank director representing their country (phone, fax and e-mail contact information for U.S. is below; for other countries visit http://www.challengeglobalization.org/html/ta_menu6.shtml)
A posting also being sent out today contains an analysis and position statement against the user fees by the Tanzania Gender Networking Project.
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November 27, 2000
Tim Geithner Under Secretary of State for International Affairs Department of the Treasury 1500 Pennsylvania Ave., NW, Suite 3432 Washington, DC 20220
Dear Mr Geithner,
As the Board of the IMF prepares to meet to decide whether Zambia is eligible for debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative, we write to express our deep concerns about the clear ineffectiveness of this debt relief framework.
While the HIPC Initiative was designed to ease the debt burden of heavily indebted poor countries and reduce their debt to "sustainable levels", the case of Zambia only serves to underline the inadequacies of this scheme. Last year, Zambia paid $137 million in debt service to international creditors. Under the HIPC plan, it will actually be required to pay more in annual debt service in the short and medium term than it has to date. Because of IMF loans which come due in 2001, Zambia's yearly payments will rise by over 50%, to more than $200 million next year. Debt relief under the HIPC scheme is therefore not relief at all.
Zambia is one of the world's most impoverished countries, with over four-fifths of the population living on less than $1 a day. It is one of the countries most severely affected by the HIV/AIDS pandemic, with one in five adults infected with the disease. Yet debt service expenditure, at 10.3% of GDP, represents the single largest item in Zambia's budget. Over the past eight years, Zambia has followed World Bank and IMF structural adjustment policies, implementing reforms that have actually increased the poverty gap, in order to fulfil the criteria for HIPC debt relief. Even with the full application of this relief, Zambia's debt will not reach 'sustainable levels' until after 2005, according to the IMF's own analysis.
Throughout Africa, governments are being forced to sacrifice the health or education of their own populations in order to service massive foreign debt burdens. Neither the original HIPC Initiative, nor its 'enhanced' version, adopted at the 1999 G-7 Summit, has succeeded in easing the debt burden of impoverished countries. The existing debt relief framework has failed to address Africa's debt crisis, and Zambia's plight is a clear illustration of this. Rather than facilitating the reduction of the debt burden, the HIPC Initiative serves the interests of creditors, by squeezing the maximum in debt payments from the world's poorest countries. This seems to be the definition of 'sustainable'.
The proposals before the IMF to ease the payment 'spike' which Zambia faces next year will only restructure the debt burden and delay the upcoming increase in debt service. The Zambian government and civil society organizations there are calling for special consideration for Zambia's situation, highlighting the country's track record in meeting debt service obligations, and emphasizing its commitment to using freed up resources to fight the HIV/AIDS crisis. We join them in calling for the cancellation of Zambia's outstanding debts as the only adequate response to the obvious failure of the HIPC approach.
We respectfully urge you to support Zambia's appeal in your meetings with the IMF Board, and to work for the cancellation of Zambia's debt.
Sincerely,
Salih Booker
Director
Africa Policy Information Center The Africa Fund American Committee on Africa
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ACTION ALERT GLOBALIZATION CHALLENGE INITIATIVE
The IMF and World Bank are preparing to consider a structural adjustment package for Tanzania. The policy package was designed in consultation with foreign creditors rather than local citizens, despite Bank/IMF claims that their "new" structural adjustment policy will enhance civic participation.
The information that follows below lays out the problem in some detail. The summary is that the structural adjustment program is very harsh, and includes user fees for health care and education --something the United States is now obligated to oppose by law.
What can you do? The Tanzanian package will be considered at the IMF and Bank later this week. Contact the executive directors (country representatives) to the IMF and Bank and urge them to oppose this brutal policy package. For those in the United States, remind the U.S. executive directors that they are obligated to oppose loans that are conditioned on user fees for health care and education.
The U.S Executive Director to the World Bank is Jan Piercy. Contact information: tel: 202-458-0110, fax: 202-477-2967, e-mail: jpiercy@worldbank.org.
The U.S. Executive Director to the IMF is Karin Lissakers, tel: 202-473-7759, e-mail: klissakers@imf.org.
For other countries, check http://www.challengeglobalization.org/html/ta_menu6.shtml
Calls and faxes are more effective than e-mails, but e-mails are MUCH better than nothing.
Thanks! And don't forget to act right away -- decision making begins Thursday.
BACKGROUND
STRUCTURAL ADJUSTMENT PROGRAM (SAP) ALERT ON IMF AND WORLD BANK LENDING TO TANZANIA
Executive Summary
By Globalization Challenge Initiative, A Project of the Tides Center, USA and the Integrated Social Development Programme, (ISODEC), Ghana [for the full 30-plus page text of the "Structural Adjustment Program (SAP) Information Alert for Tanzania" contact: global.challenge@juno.com]
In late November and early December, the Government of Tanzania (GOT) will seek endorsement of its Poverty Reduction Strategy Paper (PRSP) from the Boards of the IMF and World Bank. Preparation of an acceptable PRSP, which is a three-year national development strategy, is a new pre-condition for low-income governments seeking assistance from donors and creditors, especially the IMF and World Bank. Never before have the IMF and World Bank possessed the power to endorse a borrowering country's entire national plan. Ironically, the institutions have seized these powers in the name of enhancing "country ownership" of the development process.
The Government of Tanzania (GOT) prepared its PRSP with more input from foreign creditors and donors than from its own citizens. The government is dependent on donors and creditors for the majority of its development budget and, to survive, it must heed its creditors and donors. There are fewer incentives to heed the cries of citizens -- especially the poor and disadvantaged.
The PRSP lacks credibility because the process lacked the informed participation of citizens' groups. (See attached statement from Tanzanian organizations. also posted today) Citizen "participation for validation" of the PRSP arises when donors and creditors, especially the IMF and World Bank, negotiate with the GOT in secret and fail to disclose agreements and commitments to the public. This was the case in Tanzania.
Key macroeconomic and structural adjustment issues were addressed in secret negotiations, occuring in parallel to the PRSP consultations. These negotiation excluded citizen's groups. Citizens that buy and sell and pay taxes were excluded from key decisions about whether or how the economy of Tanzania will be liberalized, privatized and increasingly oriented to produce exports. Policies, such as those relating to the price of money and goods, taxation options, trade liberalization, and the privatization of key state-owned enterprises were not "on the table" for negotiation during the PRSP consultations. Beyond public view, a handful of government officials negotiated the following arrangements with the IMF and the World Bank during the first half of 2000:
1. IMF and World Bank Action in March 2000, which structured a debt relief operation for the GOT [through the Highly Indebted Poor Country (HIPC) Initiative] and set the terms and conditions of such relief.
2. IMF Action in April 2000, which extended a $181 million structural adjustment loan [through the IMF Poverty Reduction and Growth Facility (PRGF)] to the GOT. To secure the loan, the GOT agreed to execute a multitude of policies.
3. World Bank Action in June 2000, which extended a $290 million structural adjustment loan to the GOT. The World Bank's policy does not require disclosure of information about this loan.
4. Tanzania's macroeconomic and structural policy framework, which provides the basis for the PRSP. Although the PRSP will be disclosed to the public, the policy framework will not be.
Secrecy, especially secrecy about the role of powerful foreign creditors, undermines democratic processes and the rights of citizens. The daily lives of citizens are profoundly affected by the economic policies that the GOT is obligated to implement as conditions for securing loans and obtaining debt reduction. Tanzanian citizens have a right to participate in the formulation of public policies through open and democratic analysis, debate, and consensus-building. They have the right to hold their government accountable for its performance, including its commitments to foreign creditors and donors. Ultimately, citizens bear the burden of repaying debts to the IMF and World Bank. Currently, the citizens of Tanzania experience "taxation without representation" because they are denied participation in formulating critical IMF and World Bank-financed operations.
Fifteen years of structural adjustment programs (SAPs) have not improved the quality of life for Tanzanian citizens. The IMF and the World Bank have financed structural adjustment policies in Tanzania for about 15 years. Per capita income and basic human welfare indicators have fallen during this time period. For example, per capita GDP has fallen to the 1960 level and primary school enrollment rates plunged below 50 percent from an average of 80 percent during the 1980s. (further details in full Tanzania SAP Alert, box 6.)
The excessive number of policy prescriptions, or conditions, attached to the new loans and debt relief amount to micromanagement of the GOT. Tanzania's Policy Matrix, 2000-2002," which was appended to the Interim PRSP by the IMF and World Bank lists approximately 157 policies that the Government of Tanzania will be pressured to implement during this time period. In addition, there are more than 20 policy conditions linked to debt relief, ten policy conditions linked to the World Bank's Country Assistance Strategy (CAS), and additional conditions linked to IMF and World Bank-financed structural adjustment loans.
Policy prescriptions will have various impacts on the citizens of Tanzania; some will be negative. Some policy conditions may principally benefit foreign creditors and investors. Others may support or undermine the objectives of sustainable development and poverty reduction in Tanzania. The "SAP Alert" elaborates on problematic policy prescriptions, including those which:
* Set fiscal and monetary targets that may continue to undercut public services, reduce internal demand, aggravate unemployment, and handicap efforts to boost investment in infrastructure and human development.
* Impose cost-sharing (i.e. new fees for services) in schools, health care centers and hospitals, which will continue to rob vulnerable communities of essential health and education services. The U.S. Government is now bound by law to oppose loans involving cost-sharing provisions. On October 25, 2000, the U.S. Congress passed a bill that requires the United States Executive Directors at the IMF, the World Bank and the regional development banks to oppose any loan that imposes user fees or service charges on poor people for primary education and health care. The legislation was subsequently signed into law.
* Further reduce import tariffs. Such tariff reductions often result in a flood of imports that can undermine domestic industrial and agricultural producers.
* Require capital account liberalization to attract foreign investment. However, speculative transactions provide profits to foreign investors while offering few, if any, benefits to the poor majority of Tanzania.
* Require privatization of public companies, which can increase unemployment, lower wages, increase the cost of goods and services, and decrease access to poor populations.
* Require the privatization of agricultural enterprises. Already, privatization has increased the prices of fertilizer and other inputs, and reduced access to credit. While large farmers and private traders have benefited from liberalization and privatization, small farmers, who constitute the majority of Tanzania's population, have not.
* Require the GOT to remain current on debt service payments. This is a standard condition of IMF loans. However, nearly a quarter of the government's 2001 budget is devoted to servicing external debt. In fact, even after debt relief, the level of Tanzania's external debt service rises. (Debt servicing requirement in 2001 will be higher than requirements in 1996-2000.)
It is important to assess whether such policy conditions will hurt or help Tanzanians, especially poor and marginalized groups and women. However, the main issue relates to how these policy conditions are formulated. Behind closed doors, the IMF and World Bank push these policies on a government which is "on its knees" and desperate for foreign exchange. Negotiations relating to PRSPs and adjustment conditions should never undermine domestic consensus-building processes.
How to Convey Your Views to the Executive Directors of the IMF and World Bank
Tanzanian citizens are conveying their views of the PRSP and adjustment processes to their government and to their representatives on the Executive Boards of the IMF and World Bank. To convey your views, locate the names, addresses, phone, fax and e-mail contacts of the World Bank and IMF Executive Directors that represent your country at: http://www.challengeglobalization.org. In designing the PRSP process, the Executive Directors committed their institutions to open and transparent processes that would reconcile structural adjustment conditions with poverty reduction goals. Their promises are unfulfilled. Macroeconomic and structural policies cannot be designed in a participatory fashion to serve poverty reduction goals because, for the most part, they are formulated in secret. [For the full text of the Tanzania SAP Alert contact: global.challenge@juno.com]
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Message-Id: <200011291605.LAA27567@server.africapolicy.org> From: "APIC" <apic@igc.org> Date: Wed, 29 Nov 2000 10:55:42 -0500 Subject: Africa: Debt Action
Editor: Ali B. Ali-Dinar
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