Africa: Debt Issue Unresolved

AfricaFocus Bulletin
Jan 18, 2005 (050118)
(Reposted from sources cited below)

Editor's Note

The first test this year for rich countries' willingness to act on
world poverty is coming soon, as finance ministers from rich
countries meet in London on Feb. 4. A new report from the United
Nations has stressed the need for new investments in strategically
targeted new investments through doubling aid (see
http://unmp.forumone.com). But halting debt payments to
international financial institutions could have even quicker
effects, through freeing up resources for health, education, and
other urgent needs.

This AfricaFocus Bulletin contains two recent statements from debt
campaigners in Africa and the UK. Another AfricaFocus Bulletin sent
out today contains a more detailed analysis of the potential
advantages of multilateral debt cancellation. For related news on
debt, see http://allafrica.com/debt. For previous AfricaFocus Bulletins on the topic, see http://www.africafocus.org/debtexp.php.

For advocacy actions on debt in the U.S. and UK, targeted at the
February 4 meeting, visit http://www.jubileeusa.org and
http://www.jubileedebtcampaign.org.uk

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African Social Forum
Lusaka, Zambia

14 December 2004

[http://www.cadtm.org/article.php3?id_article=1011]

The following statement, in response to the news that the  U.K. and
the U.S. governments are offering different  proposals aimed at
100% multilateral debt cancellation,  was circulated at the African
Social Forum in Lusaka,  Zambia. The endorsements below were
gathered in a few  hours; more will undoubtedly be forthcoming as
the  statement's circulation broadens.

We Demand Full Multilateral Debt Cancellation for Africa  and the
Global South

Drop the Debt 100% -- All Impoverished Countries -- No  Economic
Conditions!

As civil society organizations from across the continent  of
Africa, we are confronted every day by the devastating  reality of
the crisis of debt. Debt payments to wealthy  institutions like the
IMF and World Bank rob our countries  of resources we desperately
need to provide health care,  fight HIV/AIDS, provide education,
and make available  clean water. Debt is a tool of domination used
by rich country governments and creditors like the  IMF and World
Bank. Conditions attached to debt relief and  loans are devastating
our economies and undermining our  choices as sovereign nations.

For impoverished nations, multilateral creditors -- in  particular
the IMF and World Bank -- are the largest  creditors. They are also
the most powerful: because of  their "preferred creditor" status,
countries must pay  their debts back first to these institutions.
If countries  do not pay, they are penalized and excluded from most
forms of aid and assistance.

The Heavily Indebted Poor Countries (HIPC) Initiative was  launched
by the World Bank in 1996 to provide a "robust  exit" to the crisis
of debt faced by impoverished nations.  Eight years on, the program
has failed to achieve this  goal. HIPC has provided too little
relief, to too few  countries, with devastating conditions. It is
time to move  beyond the failed HIPC Initiative towards another
approach: Full (100%) multilateral debt cancellation for  all
impoverished nations, without harmful conditions.

We are aware of discussions going on now within the G-7  (in
particular proposals by the UK and US governments),  the IMF and
World Bank, and other forums about  possibilities for 100% (full)
multilateral debt  cancellation. We are encouraged that after many
years of  half-measures, full cancellation is being discussed at
these levels. However, we must be clear about the principles for
such  discussions to meet the goals and aspirations of African
civil society.

First, 100% multilateral debt cancellation is critical.  Attempts
to determine a "sustainable" level of debt for  impoverished
nations desperately trying to address the  crises of HIV/AIDS and
economic injustice should be  rejected. For impoverished nations
struggling to meet the  human needs of their peoples, full 100%
multilateral debt  cancellation is the only option.

Second, this cancellation must come without any economic
conditionalities. The HIPC program and PRSPs are riddled  with
conditions such as privatization, indiscriminate  trade
liberalization, opening up markets, fiscal and  monetary targets.
These conditions have devastated our  economies long enough. Debt
cancellation must come without  any economic conditions attached.
Moreover, we reject and  find that the IMF's Poverty Reduction and
Growth Facility  (PRGF) must be dismantled and abolished. The PRGF
is not a  force for development in our countries; the conditions
attached to loans from this facility have devastated our
economies.  It is time to end the role of the IMF in poor
countries once and for all; closing the PRGF is a critical  first
step towards doing this.

Third, multilateral debt cancellation must apply to all
impoverished nations, not just the 42 HIPC nations. We  reject
proposals which only address countries that have  reached HIPC
"completion point." Many countries would be  excluded from this
approach. Moreover, non-HIPC countries  must be included in efforts
towards 100% debt  cancellation. Countries including Haiti,
Jamaica, and  Nigeria are not part of HIPC, despite their extreme
indebtedness.

Finally, we think that the multilateral financial  institutions
should do their fair share, and should  contribute the bulk of the
resources to finance debt  cancellation. The IMF and World Bank are
two of the  richest financial institutions in the world. The IMF
sits  atop more than $30 billion in gold which currently serves  no
productive purpose. The IMF could sell this gold and  use proceeds
to cover debt owed to the World Bank and  other multilaterals. The
IBRD could easily mobilize more  than $10 billion in accumulated
profits and reserves and  could commit a share of its annual
multi-billion dollar  profit to debt cancellation. The IMF should
close down the  PRGF facility and use its resources to cancel IMF
debt.  These are wealthy institutions; it is high time for them  to
do their fair share and by paying for debt  cancellation, begin to
acknowledge their role and  responsibility in the debt crisis.

We do not believe that concerns about the "additionality"  of debt
cancellation should be allowed to postpone the  full cancellation
of the multilateral debt. Cancellation  is significantly more
valuable to our peoples than  additional aid. Aid comes with its
own conditions, and  often creates more debt. The resources
realized from debt  cancellation can be used as governments -- with
ample  interventions from civil society -- see fit. Aid is a
promise we have seen broken far too often; cancellation's  benefits
would be lasting.

Endorsed by the following debt campaigners:

Tafadzwa Muropa - Zimbabwe
Sy Koumbo S. Gale - Chad
Constancia de Pina - Cape Verde
James Kashiki - Zambia
Godfrey Mfiti - Malawi
Rev. Lumu Shabani Democratic Republic of Congo  (Kinshasa)
Benoit Essiga - CGT Liberte - Cameroon
Hassan Sayouty - Espace Associatif Maroc - Morocco
Demba Moussa Dembele - Forum for African Alternatives -  Senegal
Taoufik BenAbdallah - ENDA - Senegal
Engudat Bekele - PAC - Ethiopia
Bakary Fofana - CECIDE - Guinea
Archinson Mhlata - PCO - South Africa
Pat Dooms - Orange Farm Vision - South Africa
Dao Dounantie - Jubile 2000 / CAD - Mali
Kone Solange - FNDP/ASAPSU - Cote d'Ivoire
Ouattar Diakalia - FNDP - Cote d'Ivoire
Dieng Amady Aly - Forum de Tiers Monde - Senegal
Seydou Ndiaye - ACAPES Senegal
Abubacar Ndiaye, RADI - Senegal

**********************************************************

If not now, when?

Urgent recommendations on debt cancellation for a strong and
prosperous Africa

A report by the UK All Party Parliamentary Group on Heavily
Indebted Poor Countries for the Commission for Africa, based on
Parliamentary hearings from African parliamentarians and civil
society, from NGOs and academics, and from the Secretary of State
for International Development, Rt. Hon. Hilary Benn, MP.

This paper contains the executive summary of the report, and some
of the detailed recommendations contained in it.

[Source: Submission to the Commission for Africa. See submissions
on the Commission site at http://www.commissionforafrica.org]

Executive Summary

The facts are clear:

* Debt relief has already made a difference to millions of people
who are poor.

* Finance released by debt relief has overwhelmingly been used for
poverty reduction.

But

* The HIPC Initiative has failed to provide an exit from
unsustainable debt for the world's poorest countries.

* It will be impossible for the Millennium Development Goals to be
met without an immediate 100 per cent debt cancellation for
Africa's heavily indebted countries.

* Impoverished African countries with unsustainable debt are not
being considered within the current HIPC initiative.

* Conflict, corruption and undemocratic processes are barriers to
debt cancellation for effective poverty reduction

Therefore, in summary:

* The unpayable debts of Africa's impoverished countries should be
cancelled immediately, in full, releasing funds for poverty
reduction.

* The current HIPC Initiative should be urgently and radically
reformed so that debt cancellation for all heavily indebted African
countries can proceed rapidly under a fair and transparent process
that reinforces the positive and active involvement of African
national parliaments, other democratic institutions and processes,
particularly in Africa, and the broadest definition of African
civil society. This process should be established in consultation
with democratic African institutions, build on the best practice
for the application and monitoring of debt relief for poverty
reduction and take into account the processes already initiated by
NEPAD to counteract corruption.

* IMF gold should be sold immediately to maximise its contribution
to rapid debt cancellation, using a process that protects the
legitimate interests of the gold-producing countries and avoids
significant impact on the price of gold.

* Special attention should be given to urgently dealing with debt
owed to non-OECD bilateral and commercial creditors which are not
participating in the HIPC Initiative, including establishing a
rapid response legal technical assistance facility, independent of
the IMF and World Bank, to protect African nations from predatory
lawsuits.

* While it is legitimate to insist that money released by debt
cancellation is spent for agreed purposes of poverty reduction and
national development, and to advise national governments on the
economic implications of different policy options, the
international financial institutions must stop imposing economic
policies on poor countries as a condition for debt cancellation,
and be made more accountable to African nations for their behaviour
in Africa as a whole and in individual nations.

* Each impoverished African country should be empowered and enabled
to develop, own and monitor its own unique and comprehensive
development programme that will meet the 2015 Millennium
Development Goals and which includes a comprehensive financing plan
- encompassing all issues of grants, loans, debt (both
international and domestic, private and commercial and including
export credit debt), taxation and international trade.

* These national development programmes should receive guaranteed
and sustained funding from the world's richest nations, with a
strong bias towards grants. Grants should target poverty, without
compromising environmental and human rights standards, and be free
of undemocratic and economically damaging conditionalities.

* These guaranteed and sustained funding agreements, including debt
relief proposals, must be able to adapt rapidly so that commodity
price variations and other external shocks do not destroy their
effectiveness and cause more poverty.

* Each African government has its own opportunities and
responsibilities in ensuring debt cancellation results in effective
poverty reduction. The Commission for Africa should highlight
principles and best practice in this area, indicating how the donor
institutions and governments can support rather than hinder this
process.

* African countries own efforts to fight corruption should be
backed by a coherent and concerted effort to repatriate 'stolen
assets', money siphoned off from national finances into private
bank accounts, much of it from loans now being repaid by national
governments. This should draw on the legislation and experience
gained from the measures taken to combat the laundering of income
from the illegal drugs trade and the financing of terrorism.

* Any further loans made to impoverished African countries should
only be made in an open and democratically accountable manner, with
clear targets of poverty reduction, without economically damaging
conditionalities, and subject to an agreed insolvency process as
described below. Calculations of debt sustainability must be based
on human development factors, rather than on economic growth and
export earnings.

* A fair, transparent and comprehensive international insolvency
process should be created to allow creditor and debtor countries to
resolve future debt crises without compromising the ability of poor
countries to meet the basic social needs of their peoples, and
without forcing poor countries to repay what the insolvency process
determines to be odious debts.

These recommendations to the Commission for Africa will also be the
basis for continuing political activity within the UK Parliament,
the European Union, the countries of the G8 and the International
Financial Institutions.

Recommendations from the report:

1. Drop the Debt

100 per cent cancellation

* The unpayable debts of Africa's impoverished countries should be
cancelled immediately, in full, releasing funds for poverty
reduction.

* Countries that have already demonstrated their ability to
effectively use debt relief for poverty reduction should
immediately receive full debt cancellation; in countries where
issues of conflict, governance or commitment to poverty reduction
call into question the likelihood of debt relief immediately having
a positive impact on poverty, debt service payments should be
placed in a trust fund so that finance can be released for poverty
reduction as soon as appropriate.

* Debt cancellation should not be limited to those countries
currently defined as qualifying for HIPC debt relief. Debt
cancellation proposals should be extended to all African nations
where debt cancellation is a prerequisite for their ability to meet
the Millennium Development Goals.

* Debt cancellation should be matched by appropriate financing
being made available to those African nations that have relatively
low levels of debt but lack the resources to meet the Millennium
Development Goals.

* The Commission for Africa, and the UK government, should
encourage other creditor nations to follow the UK proposal to
cancel its share of multilateral debt in order to achieve 100 per
cent cancellation of multilateral debt.

* While debt cancellation is a highly effective form of transfer of
resources to indebted countries for poverty reduction, and should
therefore be a priority for financing to help those countries meet
their Millennium Development Goals, it should not be financed at
the expense of either existing aid commitments or instead of grants
that will also be necessary if the MDGs are to be met. Debt
cancellation should therefore generate additional funds for poverty
reduction: for example, it should be matched by refunding of the
African Development Bank and Fund.

IMF gold

* If this matter has not been resolved and acted upon when the
Commission for Africa reports, then it should press for immediate
action; the UK government should use all its influence to ensure
there is no further procrastination. While it is vital that the
detailed mechanisms proposed take into account the interests of
gold-producing nations in Africa, there is no justification for any
delay: the creditors should take the responsibility of using their
own resources to cancel this debt in pursuit of poverty reduction,
especially as it has been shown that this can be achieved without
jeopardising the financial stability of the IFIs or disturbing the
equilibrium of the gold market.

* Our evidence showed that a managed sale of gold offers the most
effective and equitable method of releasing this resource for debt
cancellation.

* The UK government has stated that any further debt relief from
the internal resources of the International Development Association
(IDA) and African Development Bank (AfDB) will 'inevitably result
in a dollar-for-dollar reduction in new disbursements to low-income
countries' That is why the UK government has announced that it will
pay its share of debt service from eligible countries to the World
Bank and AfDB from 2005 until 2015. The objective is to put the
World Bank and the AfDB in a position to provide 100% cancellation
on outstanding loans. But it is not inappropriate for the sale of
IMF gold to be used to partially fund the cancellation of debt owed
to the World Bank and other development banks, and the Commission
for Africa should urge an immediate examination of this option.

2. Reinforcing democracy, fighting corruption

Conditionality

The Commission for Africa should demand a commitment from all
bilateral donors and the international financial institutions that
they will end all economic policy conditions for debt cancellation
- and future grants and loans.

Reforming the World Bank and IMF

IFI Governance: The Commission for Africa should recommend reforms
to the governance structure of the Bank and Fund towards a more
equitable representation of developing countries through reforms to
the BWI Leadership selection process, the Board structure and
voting weights, and urge the UK Government to take a lead on this
process.

We recommend the renegotiation of the Relationship Agreements
between the IMF, World Bank and the UN to clarify the
responsibilities of the IMF and World Bank to the UN, and enhance
the ability of the UN to ensure that international financial
institutions fully respect the jurisdiction of other agencies,
funds and bodies. The IMF's responsibilities should be defined so
as to include working for poverty reduction.

Parliamentary scrutiny of IFIs:

We recommend mechanisms for strengthening the capacity for
effective parliamentary oversight of national economic
policy-making and interaction with the IFIs.

* Ensure that the democratically elected representatives of
recipient nations are the final arbiters of all economic policies
in their countries. National parliaments have the right and
obligation to be fully involved in the development and scrutiny of
all measures associated with BWI activities within their borders,
and should hold the final power of ratification. Approval of the
PRSP must be shifted from boards of Bank/Fund to the national
parliaments of recipient countries.

* The IFIs should withdraw conditions attached to loans if these
are rejected by democratically elected parliaments.  Donors must
provide financial and technical support to increase the capacity of
parliaments to analyse and formulate policy alternatives and
scrutinise multilateral agreements.

* The UK parliament must play a greater role in scrutinising and
overseeing the government's involvement in the Bank and Fund.
Parliamentarians in the UK have a responsibility to oversee the
activities of the Bank and Fund which their contributions support.
Therefore they must be informed of the government's actions in the
institutions.

* Welcome best practice examples such as the annual report on the
Fund and the forthcoming reports on Bank.

Debt relief and defining Official Development Assistance

* Debt cancellation will not in itself be sufficient to enable the
Millennium Development Goals to be met, and our recommendations for
debt relief are therefore in addition to recommendations for
increases in grants for development assistance.

* For the sake of transparency, the Commission for Africa should
press for a new agreement on the reporting of ODA which categorises
expenditure designated for poverty reduction, and separately
identifies both debt relief and grants.

* Cancellation of export credit debt should not be reported as ODA
but as additional non-ODA expenses.

Stolen Assets

* Urgent action should be taken to establish judicial and
legislative measures to lay down processes and procedures for the
repatriation of stolen assets and to prevent further looting of
finance for development.

* Public funds recovered should be used for poverty reduction

* The Commission for Africa should endorse and encourage the stolen
assets campaign within Africa and in Europe and the USA, and call
on the European Parliament to pass a resolution calling on all
banks in Europe to cooperate in the investigation into stolen
assets. This should draw on the legislation and experience gained
from the measures taken to combat the laundering of income from the
illegal drugs trade and the financing of terrorism.

3. Future lending

A fair and transparent arbitration process (FTAP)

The Commission for Africa should endorse the need for the
establishment of a fair and transparent arbitration process, and
request the United Nations as a matter of urgency to begin a formal
consultative process that would result in proposals by the end of
2005.

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