The Millstone
of African Debt Must Be Lifted
At the Annual World Bank/IMF Meeting
About to Begin in Washington
By JONATHAN POWER
WASHINGTON--As the international economic crisis heats up
attention swivels to the financiers who are in danger of
losing their fancy pants. It would be more appropriate, if
admittedly not so politically pressing, if we reserved
rather more leeway for action not just to aid the financiers
and their billions, necessary though that may be "to save
the system", nor just to aid the new poor now being created
in abundance, but to be able to give a lift to the old poor
still weighted down under the debt accumulated from past
financial crises. One United Nations estimate suggests that
20 million African children will die before the end of the
millenium as a consequence of old albatrosses, unless the
continent's long-standing debt crisis is resolved.
Africa has attracted too little private capital for the
crisis now besieging emerging markets in Asia, Russia and
Latin America to have much direct effect on it. In fact the
creditors in Africa are not footloose banks and investors
but staid western government aid ministries and multilateral
agencies such as the World Bank.
Years of African government mismanagement, wars, disease
(malaria and AIDS in particular), and falling commodity
prices have made the paupers of Africa deeply indebted.
Ethiopia alone will pay $1 billion in debt service over the
next four years. It has been said that every baby born in
Mozambique owes $350 before it leaves its mother's womb. The
number of those dying as a result of debt-induced cutbacks
exceeds by a magnitude of at least 15 the number of slaves
who died during the passage to the Americas.
The International Monetary Fund and the World Bank have
long had in place a plan to help 40 of the world's poorest
and most indebted countries. (This includes Asian countries
like flood-ridden Bangladesh and Latin American backwaters,
such as Bolivia, too.) The idea is to lift part of the debt,
but only as countries satisfy some quite tough
criteria--nothing less than six years of good economic and
fiscal performance.
But six years is a long time to wait--and far longer, for
example, than would-be members of the European single
currency had to prove their credentials. Very few countries
have become eligible. Of course, there is an imperative to
make sure that once again aid is not wasted, but the human
cost of waiting this long time is excessive.
Yet there are still many voices speaking for one slow
step at a time--in Germany, Britain and the U.S. in
particular, but also within the World Bank and the IMF.
The development economist Professor Michael Lipton argues
that they are right to be cautious. More occasional help for
Africa, he says, means less for relatively well-managed
economies such as India and China which already get less
support per head than Africa yet remain, in total numbers,
the heartlands of poverty. However, he could have added that
these two countries have been growing relatively handsomely
and thus have the wherewithal to do more for the very poor
themselves.
Others, such as Martin Wolf, the ex World Bank official
and Financial Times columnist argues that debt relief gives
most "to the countries that have wasted their money most
completely". Since they so grossly misspent their resources
in the past, six years, he suggests, is probably not a day
too long to wait. Then we'll know if they are reformed
characters.
Mr Wolf believes that the big challenge "is not debt, it
is performance, or rather the lack of it". There is truth in
this. We do lack proof that these most highly indebted
countries use debt relief resources specifically for
alleviating poverty, sickness and illiteracy. There is
evidence that it does get diverted to arms, public
buildings, diplomatic representation and the pay-roll of
over-bloated bureaucracies.
But what these doubters downplay is that many countries
in Africa ARE changing for the better. The real question is
how to use debt relief as a carrot to lead countries in the
right direction. The human cost of waiting for
copper-bottomed proof perfect by handing in a six year
time-sheet is too high. As Oxfam has suggested those
countries that will immediately commit the proceeds of debt
relief to tackling poverty should get it.
Uganda, a pioneering country in so many ways since the
overthrow of the dictators, Idi Amin and Milton Obote, has
shown the way. One of the few countries to satisfy the six
year criteria, it has ring-fenced debt relief so that other
government interests have no access to it. The money
released has to go on primary education and health care. And
the government books are open for those who wish to track
its performance. This is no small achievement when we know
that less than 20% of traditional rich countries' aid goes
for such programmes (and a good deal less than 20% of most
Third World government budgets).
Unfortunately, despite success in Uganda, the steam has
gone out of debt relief in Africa. The fires need to be
re-stoked. Finance ministers meeting in Washington this week
at the IMF/World Bank annual meeting must use the occasion
to look at the arguments with a fresh eye and act--the old
poor must not be forgotten in the all-consuming debate on
the world's present debilitating economic crisis.
September 30,
1998, WASHINGTON
Copyright © 1998 By JONATHAN POWER
Note: I can be reached by phone +44 385 351172
and e-mail: JonatPower@aol.com
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