UNIVERSITY OF PENNSYLVANIA - AFRICAN STUDIES CENTER
Africa: G-8 Debt Statement
Date distributed (ymd): 980519
Document reposted by APIC
Issue Areas: +economy/development+
This posting contains the statement by the Group of Eight (G-8) countries meeting in Birmingham, United Kingdom, in response to the international Jubilee 2000 demand for cancellation of unpayable debt by poor countries, particularly in Africa.It also contains a commentary on the failure of the G-8 to act more decisively, from the European Network on Debt and Development (Eurodad).Additional background and links can be found at the APIC debt action page (http://www.africapolicy.org/action/debt.htm).
Response by the Presidency on Behalf of the G8
To the Jubilee 2000 Petition
[This and other statements are available on the official site of the Birmingham G-8 summit (http://birmingham.g8summit.gov.uk).]
On behalf of the G8 Heads of State and Government gathered here in Birmingham, I welcome the commitment so many of you have shown today to help the poorest countries in the world. Your presence here is a truly impressive testimony to the solidarity of people in our own countries with those in the world's poorest and most indebted. It is also a public acknowledgement of the crucial importance of the question of debt.
I can assure you that all leaders here fully share your concern over the debt burden faced by many poor countries. More than that, we are all committed to helping heavily indebted poor countries free themselves from the burden of their unsustainable debts. This is why over the years we have, where possible, cancelled bilateral aid debt and in the context of the Paris Club rescheduled or cancelled substantial proportions of other bilateral debt. Aware that this still was not enough, we initiated in Lyon two years ago, the Heavily Indebted Poor Countries Initiative designed to ensure a sustainable exit from their debt burden for all the most affected countries. Over the last three years, official creditors in the Paris Club have forgiven in favour of the poorest countries US$ 8 billion with more than US$ 5 billion of that relief going to Africa.
Since then we have focused our attention on implementing the Initiative successfully. This requires a partnership between creditors and debtors and effort on both sides. Debt relief in itself is no magic solution; it can only be part of the answer to achieving sustainable development. Where a country shows a real will to pursue policies that will relieve poverty and build a sound economy, we will do our part and contribute the funds necessary to reduce their debt burden to a sustainable level. This will ensure that the resources freed up are put to good, productive use, generating growth and bringing real benefits -- in the form of better education, better health, and sound, honest government -- to the poorest people. We will continue to support such efforts through our development assistance programmes, through which G8 countries currently deliver some US$10 billion a year to heavily indebted poor countries.
So far six countries have qualified for debt relief from the HIPC initiative totalling around US$ 5.7 billion. Among those six countries, Uganda has been the first to complete the process, recently receiving additional debt relief of nearly US$ 650 million. In addition to these countries, two more countries have already benefited from preliminary positive indications regarding their possible eligibility under the HIPC Initiative.
Our ambition, reaffirmed by all G8 leaders today, is to ensure the speedy and determined implementation of the initiative and encourage all eligible countries to take the policy measures needed to embark on the process as soon as possible, so that all can be in the process by the year 2000. We will work with the others concerned to ensure that all eligible countries get the relief they need to secure a lasting exit from their debt problems. We are keenly aware of the importance of making progress. For the sake of our citizens in our own and all other countries, we must not fail.
European Network on Debt and Development (Eurodad)
Rue Dejoncker 46
B-1060 Brussels, Belgium
Germans block debt relief at Birmingham G8 Summit
(15-17 May 1998)
Arguments do not hold
Fifty to seventy thousand people from all parts of Britain and all continentsencircled the centre of Birmingham on Saturday 16 May. They called upon the the leaders of the Group of 8 richest economies convening for their annual summit to do more on debt relief for the world's poorest and most heavily indebted countries. In this otherwise auspicious setting, it was once again Germany which blocked substantial progress on debt relief, with the US and Japan following suit.
Chancellor Helmut Kohl said in reply to the criticisms that Germany was contributing "very constructively" to debt relief for the poorest countries. Germany had already cancelled D-Mark 12 billion in outstanding claims on developing countries, which placed it second after France among the G8 in terms of bilateral debt relief. Kohl furthermore emphasised that debt relief in itself was not enough but needed to be combined with structural reforms asthe basis for sound economic development.
Kohl made it clear that Germany also had other commitments: "there is also something like European solidarity". He said Germany was more active than anyother country on the development of Eastern Europe, in which it had invested D-Mark 160 billion since 1990. The German chancellor advocated "a fair sharing of the burden". He stressed that over the past years Germany had received 340 000 refugees from the former Yugoslavia. Germany moreover did not have a colonial heritage, and the world was more than only Africa: "Germany has done its share", he said to all those who criticised Germany forits minimalist efforts in respect to "the forgotten continent".
Faced with such a vociferous and eloquent defense, it is important not to forget certain facts, obviously not mentioned, in respect to the German position on debt.
First, Germany, it is true, has cancelled or rescheduled D-Mark 12 billion worth of debts (D-Mark 9 billion in concessional, aid-related claims, the remainder non-concessional claims). Germany likes to compare itself to other G8 governments, amongst which it indeed comes second after France on this issue. But compared to smaller nations, like the Netherlands, Sweden, Norway,Denmark and Switzerland, Germany has done proportionally much less on debt relief. Moreover, the figure of D-Mark 12 billion is the total German debt relief since 1978 (when UNCTAD passed a resolution calling on Western governments to cancel all aid-related debts), thus over a period of twenty years. Compare this to the rescue packages of tens of billions of dollars forMexico in 1995 or more recently for Thailand, Korea and Indonesia, which theWest puts together witihn a few days. Furthermore, while Germany scores higher on its volume of foreign aid than some of the G8 such as England, theUS or Italy, it lags far behind most of the other European countries, in particular those mentioned above.
Secondly, last month Germany was the only one of Mozambique's creditors that refused to contribute to special efforts to grant the extremely impoverished country the debt relief that was calculated necessary in order for the debt burden not to impinge on its future economic and social development. In 1996,all creditors, including bilateral governments such as Germany and multilateral institutions such as the IMF and World Bank, committed themselves to granting the poorest, most indebted developing countries the debt reduction required to reach a sustainable level of debt as defined by the World Bank and IMF. A sustainable level of debt means a level of debt which the country can afford to service in relation to its economy, in particular its export income. Debt relief according to the 1996 agreement, which became known as the Heavily Indebted Poor Countries (HIPC) Debt Initiative, is carried out on a case by case basis, after debtor countries have shown good policies on economic and social reform. Mozambique already fulfilled the requirements last year, but creditors such as Germany delayed first the negotiations and then their contributions. It took almost another year before others stepped in to pay a part of the German obligations. Thus,Germany itself failed on "fair burden sharing". On a related note, Germany still is the major shareholder in the IMF that refuses to let the IMF sell part of its gold reserves, which would generate proceeds to help finance debt relief the IMF has to grant.
Thirdly, Germany should be the last country blocking debt relief for the poorest countries, because it received the most generous debt relief treatment ever after the Second World War. Now in Birmingham it even refused to help a small group of countries that have just come out of armed conflict(e.g. Rwanda), and are therefore not in a position to show a track record ofgood economic policies. The London Agreement of 1953 determined that Germanyonly had to spend 5% of its annual export income on paying back its debts to the allied countries that defeated Hitler Germany. Germany now demands that a devastated and desperate country such as Mozambique spend four times that, namely 20% of its export earnings, on paying back its debts.
The originally grounbreaking HIPC debt initiative will fail unless it becomesmore far-reaching. Reforms, economic growth and human development are only possible if accompanied by sufficient debt relief. Germany's Wirtschaftswunder after the war is the best proof of this.
EURODAD/Ted van Hees 18 May 1998
From: firstname.lastname@example.org Message-Id: <199805200148.SAA05633@igce.igc.org> Date: Tue, 19 May 1998 21:47:48 -0500 Subject: Africa: G-8 Debt Statement
Editor: Ali B. Ali-Dinar
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