APIC: Africa: Debt Relief and Development, 26 Sep 1998

APIC: Africa: Debt Relief and Development, 26 Sep 1998

Africa: Debt Relief and Development Date distributed (ymd): 980926 Document reposted by APIC

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Region: Continent-Wide Issue Areas: +economy/development+ Summary Contents: This posting contains (1) a press release and a declaration from the Southern and Eastern African Conference on HIPC and ESAF [debt and structural adjustment] in Maputo, Mozambique, from August 31 - September 2, and (2) two articles from Jubilee 2000 UK on (a) Mozambique President Chissano's statement on the inadequacy of current debt reduction efforts and (b) World Bank plans to review existing programs.

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Additional notes: (1) The Jubilee2000/USA campaign is holding its conference in Washington, DC from October 1 - 4, 1998. For more information check the Jubilee2000/USA web site ( or contact JUBILEE 2000/USA (e-mail:; tel: 202/783-3566). (2) For a wide variety of additional links on African debt, visit the Africa Policy Web Site (


Press Release

African civic associations sent a strong message to international creditors this week that existing debt alleviation initiatives will not solve Africa's debt crisis. >From 31 August to 2 September unions, religious bodies and non-governmental organizations came together at the Southern and Eastern Africa Conference on HIPC and ESAF in Maputo, Mozambique. The Conference focused on the Heavily Indebted Poor Country (HIPC) debt alleviation initiative as well as the policies associated with the International Monetary Fund's most concessional loan, the Enhanced Structural Adjustment Facility (ESAF). The final Conference Declaration (attached below) clearly states that ESAF schemes do not meet the needs of ordinary African citizens and that the HIPC initiative alone will not resolve Africa's debt crisis.

The Conference, which was attended by more than 90 participants from roughly 10 African countries, was organized by the Mozambican Debt Group in collaboration with the African Debt and Development Network (AFRODAD) and the European Debt and Development Network (EURODAD). Speakers at the meeting included Foundation for Community Development (FDC) President Mrs. Graca Machel, government officials from Mozambique and Uganda, the Mozambican Resident Representatives of both the World Bank and the IMF, and representatives from civic associations in Mozambique, Tanzania, Ethiopia, and Uganda.

In her opening remarks on behalf of the Mozambican Debt Group, Mrs. Graca Machel set the tone for the meeting when she said: "We need to accept that the debt crisis is a shared responsibility. Creditors, indebted governments and civic associations all have to live up to their responsibilities. The creditors need to realize that their contribution in this is the cancellation of the debt."

During the Conference representatives from both the Mozambican and Ugandan governments clearly articulated their willingness to translate debt reduction into poverty alleviation. For their part African civic associations spoke about the importance of ensuring Government transparency and in struggling to break the linkage between unproven IMF conditionality and debt alleviation.

Otilia Pacule, coordinator of the Mozambican Debt Group said: "A solution to the debt crisis is a prerequisite to poverty alleviation and sustainable growth on the continent. African governments are prepared to ensure that any freed resources from debt alleviation is directed at the social sectors and at enhancing the productive capacities of the most marginalised segments of society. African organizations are prepared to monitor the process to ensure that this occurs. If Northern governments could create the political will to provide the necessary level of debt cancelation we could be an important step closer to eliminating the unacceptable levels of poverty in countries such as Mozambique, Tanzania, Malawi, Uganda and Ethiopia. The HIPC initiative reduces unpayable debts but it will not free significant new resources in Mozambique. For that reason it is not the answer."

For more information contact:

Otilia Pacule, Coordinator Mozambican Debt Group Tel. (00258-1) 43 0486 Fax (00258-1) 42 3140 E-mail: Maputo, Mozambique

************************************************************ DECLARATION

Towards a solution of Africa's External Debt Crisis

The Conference was held in Maputo from August 31 to September 2, 1998. It brought together more than 90 participants representing African and Northern Civil Society Organisations (CSOs) and Government Representatives from Mozambique and Uganda. Represen tives of the World Bank, the International Monetary Fund, United Nations, Donor Agencies and inter-governmental organisations were also invited in order to enhance a multilateral dialogue. The principal objective of the Conference was to work towards finding a solution to Africa's External Debt Crisis.

The Conference identified the following:

A solution to Africa's Debt crisis is a political issue requiring political solutions. Donors do not have the political will to cancel Africa's Debt because where that will existed in the past they have cancelled Debt or bailed out countries and creditors.

However, the CSOs present here acknowledge and welcome the new tendency for Consultative Group Meetings to take place in Africa, as will occur later this month in Maputo. A call is made for other meetings such as the Paris Club to also take place in Africa in the future.

The lack of Debtor Coalitions weakens the bargaining power and negotiating capabilities of the individual African Governments in negotiations on Debt issues.

Peoples participation in policy matters such as Debt negotiations is a fundamental necessity for development (as enshrined in the African Charter for Popular Participation).

It is clear that there are differences in perceptions between the civil society organisations on the one hand and the Governments on the other, regarding development policies and the Debt crisis. But fundamental must be the position that Debt repayments should not undermine fulfilment of human needs and rights to food, shelter, clothing, health and education and a secure, safe and sustainable environment and not jeopardise human development and economic growth.

HIPC will fail to achieve genuine debt sustainability in Africa for many reasons, including:

First, the indicators of debt sustainability are designed to serve the purposes of the creditors by the use of formulas to deliberately reduce the eligibility of most African countries to qualify for HIPC. Furthermore, these formulas have been designed to ensure that countries that do qualify for HIPC, are obliged to continue servicing their debt at "sustainable" levels which go beyond their ability to safeguard their own development priorities and needs.

Second, many countries have not been taken into consideration; others have been unduly declared sustainable and out of 33 HIPC countries in Africa only three qualified for a questionable level of debt relief before the year 2000, turning them predominantl into "good" debtors.

Third, it is of great concern to note that human development indicators are not seriously considered in the debt sustainability analysis. The greatest irony of the HIPC initiative is that the debt service of countries that do qualify for HIPC is not significantly reduced.

Lastly, ESAF programmes do not meet the needs of ordinary African citizens. ESAF conditionality (which is tied to HIPC) does not address long term development priorities and problems of these countries. This threatens overall long term sustainable development, including balance of payments sustainability in these countries.




Developing countries should fight together on the issue of foreign debt, and seek "not a reduction, but the total scrapping of our debt", Mozambique's President Joaquim Chissano said in a speech in Kingston, Jamaica, Sunday 20 September. "It is abundantly clear that there is no way we can repay our debt and still make our economies remain competitive and viable."

Chissano's statement carries special weight because Mozambique has been cited as the biggest success of the present debt relief process -- the World Bank/IMF HIPC (Heavily Indebted Poor Countries) Initiative. It has already been promised all possible debt cancellation available under HIPC, yet annual debt service payments will only fall from $113 million per year before HIPC to $100 million after HIPC; Mozambique's government will still spend as much on debt service as on health and education.

Thus, Chissano is explicitly rejecting the HIPC as inadequate, and is calling for collective action by debtors to press for cancellation. He said "creditors should be made to accept this step [cancellation] immediately, and as a matter of urgency". External debt has proven to be one of the most serious hindrances to economic prosperity of our countries, Chissano said.

Chissano's attack on HIPC comes as Mozambican civil society is also attacking both HIPC and the perceived failure of IMF programmes in Mozambique, and when a confidential World Bank study also shows that HIPC is inadequate.


Chissano linked debt to globalisation, and called for debt cancellation as part of global restructuring. "There is no question of us seeking to survive outside the context of the global economy," he said. "It is within the Global Village that we must press for a more acceptable and fairer relationship between the developed countries of the north and the poor and underdeveloped countries of the south."

Globalisation is marginalising the poor countries. "Global economy should be made to mean global participation -- as things stand now, we run the risk of remaining just as globalised countries deprived of any expression," he said. Poor countries must act together, particularly over debt cancellation.

Globalisation is not new. During the colonial epoch "our economies and those of the north were already globalised," Chissano noted. There had always been "interdependence", but it was controlled from the north.

Interdependence between north and south "is like the interdependence between the cow and its owner", said Chissano. "The owner needs the cow because of its milk. The cow needs the owner because he provides it with hay. But when the cow ceases to produce milk, the owner may well decide to slaughter it. The cow cannot do the same to the owner".

No-one had asked African or Caribbean nations their opinion about the international division of labour, continued Chissano. Instead "circumstances have confined us to act as producers of raw materials and unprocessed goods for export to the rich countries of the north". But "we don't have much say in the establishment of commodity prices, either for our own raw materials or for the processed goods the we usually import."

"International political and economic imbalances, far from narrowing, have become greater", he said. "Old and unfair relationships are reproducing themselves in a much wider, faster and dramatic way".

"While we are pressed to open up our countries and streamline our methods of doing international business, so that the global economy may sink roots, invisible barriers are still making it difficult to for us to access resources and advanced technological know-how", Chissano accused. "Our manufactured goods can hardly find a place in the rich markets of the north."


The IMF and World Bank, despite paying lip service to civil society, in fact paid no attention to proposals that came from within civil society. This "results in implementing policies that have been decided in advance and take no account of local realities," said Otilia Pacule, coordinator of the Mozambique Debt Group.

'"Important programmes such as the Country Assistance Strategy, the Policy Framework Paper, and the HIPC debt relief initiative are designed, approved and implemented without any open discussion with the target population," she added.

"Since 1987, Mozambique has been implementing structural adjustment programmes with the IMF, but 11 years later few people are feeling any benefits from such programmes," the Debt Group said in a message sent to the World Bank's Consultative Group on Mozambique, which met in Maputo 22-23 September.

Pacule criticised the IMF for its obsession with macro-economic indicators, which leads it to ignore the real conditions of people's lives. "In assessing its programmes, the IMF attributes the greatest importance to the development of the money supply, the exchange rate, and the government's budget deficit," she said. '"But the true sources of long term growth and of poverty reduction have been neglected."

Pacule cited agricultural marketing as an example. "In the countryside, where the main pillars of the national economy reside, the people produce, but they receive no clear incentives to market their crops. ... Without any prior consultation with rural people, price liberalisation is advocated, which leads to a deterioration in the terms of trade, and eliminates any mechanisms for guaranteeing the marketing of all surplus crops," she argued.


Meanwhile, a secret World Bank study shows that Mozambique cannot meet its education goals without further debt cancellation. The "Mozambique Education Sector Expenditure Review" estimates that Mozambique needs an extra $50 million per year if it is to meet internationally agreed education targets, including primary education for all.

This money must be met from domestic resources, the study says, because aid to Mozambique is falling. The confidential study was done earlier this year, before the HIPC decision in April, and it assumed that substantial new money would be released from debt service payments. This would cover both the fall in aid and at least some of the $50 million shortfall.

In the event, HIPC released only $13 million per year. Mozambique will still pay $100 million per year in debt service, which is similar to the government budget for health and education. The only way to fill the $50 million gap would be to cut debt service payments in half.

Other studies indicate that the funding gap in health is similar. Thus Mozambique would need total debt cancellation, as demanded by President Chissano, if it is to meet internationally recognised health and education targets.

By Joseph Hanlon, Jubilee 2000, 25 September 1998

[This article will appear on the upgraded Jubilee 2000 website on 28 September.]

Sources: Mozambique Information Agency (AIM), 22 September 1998; Daily Top News e-mail edition, Maputo, 22 September 1998; Panafrican News Agency, 24 September 1998; Jubilee 2000.



The World Bank board of executive directors has called for a "fundamental" review of the HIPC (Heavily Indebted Poor Countries) Initiative, the World Bank's Andrew Rogerson told a press conference in London on 22 September. The review would be completed in time for the World Bank annual meeting in October 1999.

The intention is to have a joint review with the IMF, but Rogerson said that the IMF has so far not agreed. He also admitted there are divisions between creditor countries as to just how "fundamental" it is to be.

The new review is intended to be much more thorough than the widely criticised HIPC review this year. The new review has been pushed by Britain, and Chancellor Gordon Brown told a meeting of aid agencies on 22 September that it would specifically include issues of debt sustainability and the impact of HIPC on poverty relief.

Aid agencies and Jubilee 2000 have been consistently arguing that HIPC "debt sustainability" calculations, which are now based only on export earnings, must include some consideration of essential spending on social services and poverty alleviation.

The new "fundamental" review was agreed without dissent by the World Bank board in mid-September, but by the time it came to the IMF board a few days later opposition had built, and a decision was deferred. Germany and France are known to the be leading the opposition to any reconsideration of HIPC.

Unexpectedly the Nordic and Dutch executive directors also expressed caution. They apparently fear that the United States will refuse to contribute to any deeper debt cancellation, and that their countries will be left to come up with the extra money.

The division over the fundamental review also reflects the traditional split between the Bank and the Fund. In general, Fund executive directors are appointed by central banks and are much more conservative, while Bank executive directors are appointed by government ministries (albeit often finance rather than development ministries) and take more account of development and poverty objectives.

There will be considerable lobbying over the new review during the World Bank and IMF annual meetings in Washington in October. The fear is that in order to get agreement of Germany and of the IMF board, there will be a watering down of just how "fundamental" the review will be.

Joseph Hanlon, 25 September 1998

[This article will appear on the upgraded Jubilee 2000 website on 28 September.]

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From: Message-Id: <> Date: Sat, 26 Sep 1998 08:25:51 -0500 Subject: Africa: Debt Relief and Development

Editor: Ali B. Ali-Dinar,