UNIVERSITY OF PENNSYLVANIA - AFRICAN STUDIES CENTER
Africa: Debt Update
Date distributed (ymd): 000113
Document reposted by APIC
Issue Areas: +economy/development+
This posting contains several documents from late 1999 with updates and new links on the status of African debt after new actions by creditor countries and multilateral institutions. For additional background information and links to other sites consult http://www.africapolicy.org/action/debt.htm
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Update from Lydia Williams
Policy Advisor, Oxfam America
December 13, 1999
OUTCOME OF G-7 MEETING ON HIPC (Paris, December 10)
U.S. Treasury Secretary Larry Summers announced today at a press briefing that four countries - Uganda, Bolivia, Mozambique, and Mauritania - are on track for receiving debt relief in January under the "enhanced" Heavily Indebted Poor Country (HIPC) initiative of the World Bank/IMF program for the poorest countries.
Which countries and when?
Some eleven countries could receive relief by the Bank/Fund spring meetings. In addition to the first four countries, five more - Mali (April), Senegal (February), Benin (February), Burkina Faso (March), and Tanzania (March) - could begin receiving relief by the spring. The decision points, in parentheses, are based on Bank and Fund staff assessments about when the necessary documents should be ready. At the meeting, the United States representative said Burkina's poor track record on participation could be grounds for a delay. Cote d'Ivoire and Guyana were also identified as possible candidates for decision points in the first or second quarter of 2000, although the United States raised concerns about the former's governance record and "could be off track" on the IMF program and the Bank and Fund staff seemed to be closer to the US position than the rest of the G-7. While formal approval rests with boards of the World Bank and the IMF, the G-7 consensus, reached at a December 10 Group of Seven meeting held in Paris, carried a great deal of weight in the boards.
Uganda, Bolivia, and Mozambique have already begun to receive limited debt relief under the existing HIPC program launched in 1996. Widespread criticism of the program among religious and development groups led the Group of Seven at the June summit in Cologne to expand the program to provide deeper and faster relief to more countries. These countries will now receive additional relief to bring their debt stock down 150% of exports; Mauritania and the others will receive relief under the program for the first time.
Implementation of the PRSP
There was consensus among the G-7 that retroactive countries should move quickly to decision points where they would begin to receive interim debt service relief and exit from the program (i.e. receive unconditional debt stock reduction) when they have a Poverty Reduction Strategy Paper approved by the boards of the Bank and Fund, which may be a matter of months.
There was also consensus among the G-7 that new (non-retroactive) cases should have a PRSP in place by the decision point and reach the completion point when they have met targets outlined in the PRSP. Requiring a full PRSP at the decision point would give countries incentive to do a rush job on the PRSP and thus undermine participation and quality in order to get debt relief they desperately need, or it would result in undue delay in moving countries to decision points. Staff papers on how the PRSPs should be implemented have been produced for board decisions at the Bank and Fund later this month.
The United States was alone in arguing that countries should meet performance targets in the four areas (outlined in the Cologne agreement) before the decision point: governance, economic management, poverty reduction, and transparency / accountability / participation. The US argued for "enhanced relief for enhanced performance" but others made the case for "enhanced relief for commitment to poverty" and cautioned that the expectations of the US in these areas was too high.
Under the new program, countries that meet criteria related to governance, poverty reduction, and economic management, and agree to reinvest debt relief into schools, health care, and other basic needs will receive debt relief. Up to 33 countries, most of which are in Sub-Saharan Africa, are potentially eligible for relief worth a total of $27 billion net present value.
The meeting also addressed the financing gap. The European Union has approved a $700 million contribution to the HIPC Trust Fund for ACP countries. There appears to be sufficient funds for the early African cases since much of the $200 million in the Trust Fund is earmarked for Africa. But financing is still not secure for Bolivia as the IDB has yet to find financing either from its own resources (or from a US contribution to the Fund). The G-7 agreed that countries should move to decision points regardless of whether funding was secure as this would put pressure on the institutions (and presumably the US Congress) to find the needed funds.
During last month's budget agreement, President Clinton and Congressional leaders reached agreement to provide $110 million of the $320 million requested by the Administration as well as approval of a plan to enable the IMF to revalue some of its gold reserves to finance its portion of the initiative. The President lists the debt relief program among his foreign policy accomplishments of the last year. In the coming year, the White House is expected to ask Congress for roughly $600 million to cover the U.S. share of the international debt relief program. Failure of the Congress to provide full funding for the debt relief program has left a financing gap that debt relief advocates and other wealthy nations have urged the United States to move quickly to fill or risk shortchanging countries that have struggled to meet the debt program's conditions. Congress must also reauthorize the IMF gold revaluation plan.
The World Bank
News Release No. 2000/121/S (excerpt) Contact: Andy Kircher (202) 473-6313
Joint Statistics Published on External Debt
Fourth in a Series of Quarterly Releases
Washington, December 1, 1999 -- The World Bank, the Bank for International Settlements (BIS), the International Monetary Fund (IMF), and the Organization for Economic Cooperation and Development (OECD) have jointly published the fourth in a new series of quarterly releases of statistics on the external debt of 176 developing and transition countries, together with data on international reserves.
The new series of releases, which launched in March 1999, is the outcome of a partnership of four international agencies that compile international debt information. The quarterly reports offer data from market, creditor, and debtor sources on various components of developing country debt. They cover debt due within a year, debt owed to banks, debt securities, debt flows, and international reserves, as available.
The publication is available on each agency's website, including the World Bank's at http://www.worldbank.org/data/jointdebt.html. Click on "Joint Site" to access the information. ... The coverage, definitions and limitations are explained in a methodological note on the website. The figures cover essentially all countries and territories on the list of aid recipients of the Development Assistance Committee of the OECD, including practically all non-OECD countries, as well as the Czech Republic, Hungary, Korea, Mexico, Poland and Turkey. Data for offshore financial centers are presented separately.
For a Debt Free Millennium: the South - South Summit
Gauteng, South Africa - November 18 - 21, 1999
>From the three continents of the South, leaders of social movements, political and religious organizations gathered at the First Jubilee South Summit held in Gauteng, South Africa from November 18th to 21st, 1999. 130 delegates from 33 countries, representing national and regional Jubilee debt cancellation campaigns as well as other popular movements, deliberated and acted to take forward a common analysis, vision and strategy to build, from the grass roots upwards, a new world characterized by economic and social justice in which the debt is addressed by governments North and South as a matter of restitution and reparation for the crimes committed against our peoples and environment.
Jubilee South (JS) is a movement of social movements in South countries. Delegates shared a secular understanding of the "New Beginning" symbolized by the principle of Jubilee, while referring to South as a political category encompassing the oppressed and their organizations around the world in their struggle to end the prevailing neoliberal paradigm of power and policy, symbolized by the odious political and ideological construct called debt.
Delegates came to a general agreement on principles, perspectives and a strategic framework for addressing the debt problem. On the level of principle, Jubilee South reiterated its call for total debt cancellation for all South countries taking into account that it is the North that is in debt-historically, ecologically, socially and morally-to the peoples of the South. The slogans "Don't Owe, Won't Pay" and "Who owes Whom?" sums it all up.
In this regard, JS proposes to work toward the goal of popular and governmental collective repudiation of the debt, and the formation of popular and governmental alliances. We envision a New Beginning with no room for immoral debt servicing at the expense of the poor. We build on struggles in the South that continue to prove the bankruptcy of the notion that there is no alternative and shameful integration into a global political economy characterized by submission to the United States of America and the other rich countries, to foreign and corporate capital, and to savage destruction of the environment.
Second in regard to perspectives, Jubilee South rejected all policies derived from the so-called Washington Consensus and neoliberal paradigm. Delegates demanded an end to Structural Adjustment Polices (SAPS), at the center of neoliberal imposition and co-option, and all the new versions of SAPS including those encompassed in the so-called HIPC initiative and IMF Poverty Reduction Facility, as well as the notion of external conditionality in all of its dimensions or forms. The IMF and the WTO have no moral authority to impose conditions and have no capacity to provide solutions to problems they have created and intend to perpetuate. They cannot be reformed. JS says "Shut them Down"!
The JS Summit strategic framework places primary attention on the need to change the policies and approaches toward debt and neoliberalism that characterizes most of our governments in the South. We challenge current debt policies and we raise the issue of governance and State responsibilities. Today most of our governments and parties are part of the problem, but we will work strenuously so that they can also be part of the solution; so that human welfare and equitable development are placed above debt servicing and irresponsible borrowing.
The struggle for international democracy is predicated on the struggle for national democracy. We call on our movements and parties in the South to forcefully incorporate the call for debt repudiation in their platforms, and we call on movements and Jubilee campaigns in the North to press for the total debt cancellation for all South countries, not as a matter of charity or provision of credit relief, but as an elementary act of justice that lays a foundation for the construction of a new global order where the peoples of the Global South will live in dignity and in full enjoyment of their human rights in harmony with the environment, in consistency with the struggle of previous generations and the rights of the generation to come.
Jubilee South Summit - Gauteng, South Africa - November 21st, 1999
For comprehensive coverage of the Jubilee South Summit, visit our web site: www.jubileesouth.net/ [APIC Note: at the time of this posting -- mid-January 2000 -- this web site is not available for technical reasons. You may wish to try the link again at a future date.]
For more information or comment, contact Neville Gabriel, Tel 27-083-449-3934
Excerpts from Economist Christmas Day Editorial
The Economist (http://www.economist.com)
25th December 1999
Do you believe in fairies?
(excerpts only; for additional comment and links to the full text see http://www.jubilee2000uk.org/news)
At a time of year celebrated in much of the world as a season of goodwill--and one, moreover, capped by millennial fervour--politicians could be expected to come up with the odd grand gesture. Few come grander than that unveiled by the British government this week: "Britain ends third-world debt," blurted one newspaper headline. If only. Like so many Christmas presents, the content of this one does not live up to the wrapping. In that sense, Britain's latest offer is no different from the lavish promises made in recent months by other rich nations--notably America--about relieving the debts of the poorest countries. Such promises favour big, round numbers--in Britain's case a juicy 5 billion pounds ($8 billion)--and soft-focus millennial visions. Nothing wrong with that, of course, were it not for the devils lurking in the detail of an important debate about how to help the poor.
There are at least three reasons why such offers of debt relief often turn out to be less generous than they seem. First, they tend to be based on a flawed assumption: that, without "relief," the debt might one day be paid back. In fact, much of it is already hopelessly irretrievable. Hence the perverse effect in some cases of the Heavily Indebted Poor Countries (HIPC) debt-relief initiative, launched by the IMF, the World Bank and donor countries in 1996. Strictly applied, it would actually have increased some countries' annual debt-service payments (Mali's, for example). Instead of freeing resources in the debtor countries, the initiative reallocated them among its creditors. It offered relief, for the first time, on loans from the International Monetary Fund and the World Bank. Most of these were being serviced, because the IMF and the rest are preferred creditors, and to default on loans from those institutions is in effect to resign from the international system. But the HIPC scheme also covered bilateral debts to sovereign creditors--many of which the borrowers had long ceased paying. ...
Which is a second, related reason why so many debt-relief announcements mislead: they almost invariably use figures based on the face value of the debt, which bears little or no relation to a realistic expectation of how much might be repaid. Since rich-country lenders have tended not to write the debt off, the nominal value actually keeps on rising even without fresh lending. The magic of compound interest has cast such an evil spell that, in sub-Saharan Africa, for example, two-thirds of new sovereign debt since 1988 has been incurred to refinance arrears and capitalised interest. So the true cost of the HIPC package of relief for 41 of the poorest countries is a mere fraction of the headline figure of $100 billion.
Third, show-stealing politicians naturally like to talk up the importance of each new step in what has become a lengthy debt-relief process. They prefer to see headlines covering the cumulative effect, rather than yet another refinement of an existing scheme. Britain's latest offer, for instance, is in any event conditional on the proposed beneficiaries' meeting the criteria for the HIPC scheme. ...
Additional links to longer articles and analyses
Oxfam International Policy Paper, October 1999 Outcome of the IMF/World Bnak September 1999 Annual Meetings: Implications for poverty reduction and debt relief http://www.oxfam.org.uk/policy/papers/wbimf.htm
Alternative Information and Development Centre Dot Keet, "The International Anti-Debt Campaign: An Activist View from 'The South' to Activists in 'The North' ... and 'The South' http://aidc.org.za/archives/dot_keet_debt.html
"How is Aids related to Debt Burden?" Dr. Peter Henriot in Times of Zambia, November 2, 1999 reposted in AF-AIDS discussion http://www.hivnet.ch:8000/africa/af-aids/viewR?514
Message-Id: <200001131931.OAA07840@server.africapolicy.org> From: "APIC" <email@example.com> Date: Thu, 13 Jan 2000 14:22:17 -0500 Subject: Africa: Debt Update
Editor: Ali B. Ali-Dinar
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