Africa: Debt Cancellation Testimony, 4/29/99

Africa: Debt Cancellation Testimony, 4/29/99

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Region: Continent-Wide Issue Areas: +economy/development+ +US policy focus+ Summary Contents: This posting contains a slighly abridged version of the testimony before the Africa Subcommittee of the U.S. House of Representatives by Njoki Njoroge Njehu, Director of the 50 Years is Enough Campaign, at hearings on debt relief for Africa. The full testimony can be found at:

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April 13, 1999 Testimony by: Njoki Njoroge Njehu, Director 50 Years Is Enough: U.S. Network for Global Economic Justice

Thank you, Mr. Chairman and members of the Africa Subcommittee. I'm very pleased and grateful that the question of the impact of external debt on Africa has become a subject of genuine concern for U.S. lawmakers.

My name is Njoki Njoroge Njehu, and I am here today as the Director of 50 Years Is Enough: U.S. Network for Global Economic Justice, a coalition of over 200 environmental, social justice, anti-poverty, development, solidarity, and religious organizations in the U.S. calling for the fundamental transformation of the policies of the International Monetary Fund -- the IMF -- and the World Bank. ...

We have called since our founding for the immediate cancellation of all debt owed the international financial institutions by the impoverished, most indebted countries, and for mechanisms to insure that citizens of borrowing countries are adequately consulted about future loans taken out in their names. When we call for debt cancellation, it is in support of the commitment of civil society organizations in indebted countries to ensure that the benefits of debt relief are reinvested in education, health, housing, food security, clean water, hospitals, and other basic needs of life and to implement mechanisms that guard against debt reoccurring.

I am also here as an activist and as an African woman, as someone who has seen her people ravaged by the effects of debt and the policies forced on indebted countries. I am a Kenyan, from a family of moderate means, a family, like most African families, whose well-being depends on agriculture and family-level production. My experience as an environmentalist in Kenya, my observations of how Kenya has changed for the worse over the last 20 years, and my understanding of the policies that continue to destroy lives, livelihoods, communities, countries, and entire continents led me to take up the cause of debt cancellation. The devastation, the experiences of millions of poor and working debt-ravaged peoples, and the desire for the basic needs of life (food security, shelter, water, education, health services) energized many people to fight for a change from the economic policies that the experts at places like the IMF and World Bank have designed for countries like Kenya and large parts of Asia, Latin America, and the Caribbean.

In addition to my position as director of the U.S. 50 Years Is Enough Network, I am very involved with the international Jubilee 2000 movement. Jubilee 2000, echoing the Biblical call for periodic renewal of the land, release of slaves, and forgiveness of debts, has over 40 national coalitions (over a dozen of them in African countries) calling for the cancellation of the unpayable debts of the impoverished countries by the millennium. I am an elected member of the Executive Committee and sit on the Steering Committee of Jubilee 2000/USA. I am also a member of the Jubilee 2000 Afrika Campaign in the U.S. ... I am heartened that we are here today addressing African debt -- a very significant component of the debt issue.

I believe that it is because of the momentum of the international Jubilee 2000 movement that Chancellor Schroeder of Germany and Prime Minister Blair of the U.K. led G-7 countries by putting forth initiatives for debt relief that go beyond what the international financial institutions have yet devised. President Clinton, in March during the African Trade Ministers meeting, announced a debt relief proposal. I hope that the U.S. Congress, recognizing this momentum, and the justice and necessity that underlie the call for debt cancellation, will urge President Clinton to take a more substantial debt initiative to the Summit of the G-7 heads of state this June in Cologne, where Mr. Schroeder has indicated that the issue will be a prominent part of the agenda.

Why do I believe that debt is the key to beginning to productively address the problem of global poverty and inequity? Why do I believe that the term "debt crisis" is fully applicable today to Africa and other parts of the world? And why do I believe that cancellation of those debts is the reasonable solution to the crisis?

* Because sub-Saharan Africa (excluding South Africa, with its anomalous history and unusual level of industrialization) owes $203 billion, which is three times the annual value of its exports.

* Because in sub-Saharan Africa the GNP per capita is $308 but the per capita external debt is higher, at $365.

* Because debt servicing accounts for about 20% of Africa's export income.

* Because our governments in sub-Saharan Africa spend four times more on interest payments than on health care.

* Because from 1990 to 1995, the 33 African countries officially classified as heavily-indebted and poor experienced forest loss 50% greater than that in better-off countries. Those 33 countries' forest loss was 140% greater than the world average during the same period. ...

* Because Zambia can spend $37 million on primary education in the same year that it devotes $1.3 billion to debt payments.

* Because the persisting huge debts are a major disincentive to productive investment in the region.

* Because in 1996 Africa paid $2.5 billion more in debt servicing than it got in new long- term loans and credits. So much for the idea that the North is pouring money into basket case, corrupt countries.

But diversion of resources is only one reason many people call this a crisis. Just as significant are the policies that African countries have to adopt because of their debts.

These debts accumulated for various reasons: interest rate hikes, borrowing sprees in the 1970s when loans were readily available and aggressively marketed by private banks, poor advice from Northern economists, corrupt and undemocratic governments that misdirected funds, failed infrastructure projects, economic mismanagement, war and famines. No matter who or what is to blame in any given country -- and who will argue that lenders giving money to dictators like Mobutu in the 1980s, banks pushing cheap loans with little attention to long-term repayment prospects, or financing from institutions like the World Bank that admit that over a third of their projects are "failures" should share in the blame? -- the answer has always been the same. Not annulment or debt reduction, but austerity programs. Austerity programs for the world's impoverished people. And make no mistake: in any given country, the people hit hardest by austerity programs adopted because of debt problems are the most vulnerable people -- the people who benefitted least from the original loans.

Surely the easy talk of taking responsibility for your decisions, of short-term pain for long-term gain, of tightening your belts a little bit more a little bit longer, should begin to sound suspicious after 20 years of the same economic prescriptions ... These austerity programs have not only hit the most impoverished people, but they have been failures in economic terms as well. Even the World Bank's optimistic projections suggest it will take until 2006 merely to return to 1982 (pre-structural adjustment) levels of per capita income in sub-Saharan Africa.

We're more than suspicious in Africa -- we're exhausted. We need someone in the North to recognize that these economist-emperors coming to our countries are arriving with no clothes on. Africans know it, but they're working 16 hours a day to scratch out a living. As Coumba Toure, a colleague from Mali said in a visit here a few weeks ago, we can learn and educate others, but at a certain point the power to change system just isn't ours. Today I'm talking to some people who do have some real power to start to make a change.

The austerity policies I'm talking about the IMF and World Bank economists imposing on Africa are called structural adjustment programs (SAPs), and SAPPED us they have. ... Since 1979 or so, as countries have fallen into such debt that they can't get loans from anywhere else, they have to turn to these multilateral public institutions, which demand adherence to the austerity programs in exchange for sending capital in. As Harvard economist Jeffrey Sachs explained at a Congressional briefing on the IMF last week, in sub-Saharan Africa, the IMF operates as a "proconsular force [...] it runs these countries. The sad part is it runs them very poorly." Debt and structural adjustment programs are really two sides of the same coin: debt brings on structural adjustment, which creates more debt, which brings on more structural adjustment, which creates more debt, . . . And the countries like Kenya which have had to get on this treadmill are many -- close to 90 countries, most of which have agreed to several programs. There have been some refinements over the decades, but the main ideas, and most of the details, have really changed very little: emphasize export production over food security, lay off public sector employees, slash public spending (such as health and education), raise taxes, raise interest rates (thus putting credit out of reach of small farmers and businesses), open up economies to foreign corporations, end subsidies, and end support of local manufacturers.

This recipe has failed. Over 17 years, sub-Saharan Africa's total debt has risen 350% (from $58 billion to $203 billion over the period 1980-1996). Sub-Saharan African countries with ESAF programs experienced an average annual .3% decline in real per capita incomes over the period of IMF adjustment from 1991-1995. Poverty has increased to the point where half of Africa's people will fall below the official poverty line in 2000. Even when the statistics show short-term growth we have to ask what this growth is. The statistics don't reflect the distribution of the growth: when I look around Africa, around Kenya, it's clear that it's not the poor whose economy is growing, nor the middle class; it's the rich and the foreign corporations who get the benefits of any statistical growth.

I know that employees of the IMF and World Bank, the institutions that design these policies and are empowered by the international financial and political community to impose them in Africa and elsewhere around the world -- including in East Asia over the last two years, where the higher level of scrutiny has finally exposed them to the criticism and controversy they deserve -- will say that many governments haven't been diligent enough in applying their prescriptions, that they need to try a little harder, a little longer, and make sure their governments agree to the policies, take "ownership" of them and enforce them wholeheartedly. ...

Today I'm talking to legislators, and I'm glad to be doing so. I know you understand that there's no such thing as economic policy that stands apart from politics. Yet the economists at the IMF and World Bank insist they don't get involved in politics. But in Africa we live in societies, in worlds with politics, just like you. Our governments and politicians have just as hard a time selling mass layoffs, price increases for basic foods, high interest rates, loss of protection for industry, cuts in education and health spending, as you would here. But they do it -- the undemocratic governments more easily than the democratic ones -- they all have to do it. Because they can't get any capital any other way. Pressure from suffering populations means the application of these brutal austerity programs isn't always as wholehearted as the international financial institutions would like, but maybe they need to consider that asking even remotely democratic governments to constantly implement draconian economic policies is not feasible in a political world. These structural adjustment programs are killing children, denying opportunities to whole generations, and crippling democracy in Africa. ...

I know politics is the art of the possible, and I'm often told by colleagues here in Washington that I have to adjust my ideals to practical realities. But look at the practical realities my fellow Africans are dealing with every day of their lives, year in, year out. Cuts in health spending mean, says UNICEF, that 35,000 children around the world, nearly half of them African, continue to die every day from curable and preventable diseases. Cuts in food subsidies and turning fertile lands over to production of flowers or cotton or coffee for export mean millions more children suffering from malnutrition and dying from starvation.

When I was a young girl growing up near Nairobi, Kenyatta Hospital was the pride of East and Central Africa -- a sophisticated regional center of care like, say, the Washington Hospital Center. When I visited my aunt there in 1997, she was sharing a bed with another patient. Most wards have no beds because of lack of resources, and all the beds had two people in them. Guards used to check visitors to prevent them from bringing food in from the outside; now the guards are gone and if you don't bring food your relatives simply won't eat. My aunt was lucky that the dollars I brought with me could buy the medications she was prescribed, and which we had to purchase elsewhere and bring back to the hospital for the nurse to administer. Not everyone has relatives in the U.S., or can get to Kenyatta, the best public hospital in Kenya -- which is far from being one of the poorest African countries. In 1981, there were ten thousand people for every doctor in Kenya; by 1994 that ratio had gone up to nearly 22,000 people for every doctor. In Uganda, just to our west, there were 661 people for every hospital bed in 1981, while in 1994 there were 1,092 for every bed. In Ghana, a country often touted as an example of how structural adjustment can work, the percentage of infants with low birth weight has gone from 5% in 1988 to 17% in the period of 1992-1995.

On that same trip in 1997, I was saddened to read in one edition of the newspaper that people were starving to death in eastern Kenya from the effects of drought, while tons of cotton were rotting in storage in western Kenya due to lack of transportation. I was devastated by the irony of a nation that could not feed its most vulnerable, but was raising non-food cash crops in order to earn foreign currency to service its debt -- and even then couldn't maintain its transportation systems to get that cash.

Perhaps the answer is not as easy as western Kenya growing maize, millet, beans, and cassava so that people in eastern Kenya never starve to death. But perhaps it should be that easy. We know that structural adjustment programs have not worked in 18 years for over 80 countries, since poverty just continues to increase. And we know that the debt burden continues to crush the hopes and dreams of entire generations. We know that the more countries pay, the more they seem to owe. So perhaps Africa's march into the 21st century will not begin with hooking African villages to the Internet, as Mr. Clinton suggested in Uganda, but with the meeting of everyday needs -- food, water, health care, shelter, a clean environment, and basic education for all. ... That march to the future will only truly begin when the multilateral financial institutions and powerful countries like the U.S. get serious about debt relief. And that debt relief must be de-linked and disassociated from structural adjustment.

The unnecessary ironies like the one I found in the Kenyan newspaper, these tragic ironies, are a result of debts that have grown while the programs meant to remedy them have thrown countries deeper into debt, exposing them to more pressure to adopt the same sorts of policies and so acquire more debt. It is the impoverished people in the world's most impoverished continent who are paying the price, life by life and generation by generation. You have the power we in Africa don't -- to make the officials of the international financial institutions, and of your own Treasury Department, which has been complicit in designing these programs, explain why they insist on doing this to Africa. ...

Let me also address the ostensible debt relief program of the IMF and World Bank. It's called the HIPC Initiative -- the acronym stands for Heavily Indebted Poor Countries. To qualify for its meager rewards, a country must adhere to several years of IMF-approved structural adjustment programs. This means, essentially, that in order for these institutions to do anything to allow countries to devote more of their resources to their people, they must first prove that they're willing to starve those same people of credit, education, food security, health care, and the democratic right to have a voice in their governments' policies. As former Tanzanian President Mwalimu Julius Nyerere has said, African mothers and fathers are asked to starve their children to pay the debt. The 50 Years Is Enough Network believes that HIPC is less a debt relief program than a cynical scheme to entice countries to commit to more structural adjustment when they have few other incentives to do so. ...

This is not debt relief, but public relations for the World Bank and IMF, and more debt blackmail for Africa. And the debt proposals being offered by President Clinton and other G-7 leaders still rely on the HIPC framework - debt relief linked to structural adjustment. They may talk about reducing the time spent in IMF programs, but with rhetorical loopholes it looks like more of the same: countries are still on the debt treadmill. And now under the guise of debt relief the IMF is asking permission from its stockholder countries to sell a portion of its gold stocks. The majority of that money would actually go not to debt relief, but to allow the IMF's ESAF fund to become self-sustaining. This would put the IMF permanently in the development arena and remove this program from Congressional oversight that comes with periodic authorization.

A year ago, while in South Africa during his African tour, President Clinton said that he would be looking into debt because everyone was talking to him about it. I believe what happened was that Mr. Clinton, in visiting African countries, meeting and talking to Africans, got a real glimpse and somewhat understands the impact of debt in ordinary people's lives. No matter how hard or long they work, debt is strangling them, crushing them, and debilitating them. President Clinton got to experience a reality which could never have been conveyed by a policy briefing, a newspaper story, or a TV documentary. As he danced with schoolchildren in Uganda, he might have been touched by the great level of hope and determination and the realization that they don't stand a chance of achieving their dreams in the current circumstances. ...

Only cancellation can revive hope in Africa. We cannot see our future sold out to more sadistic IMF programs and debt reschedulings and manipulations. Together we can bring about a true new beginning in Africa by joining the momentum of the international Jubilee 2000 movement: a debt-free start for the millennium. As Members of the United States House of Representatives you have the power. Please support the cry of African peoples, end the suffering: "Cancel the Debt! Break the Chains of Debt!"

Njoki Njoroge Njehu Director, 50 Years Is Enough Network 1247 E Street, SE Washington, DC 20003 Phone: 202/IMF-BANK or 202/544-9355 Fax: 202/544-9359 Email: Webpage:


From: Subject: Africa: Debt Cancellation Testimony Date distributed (ymd): 990429


Editor: Ali B. Ali-Dinar

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