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Africa: Who Owes Whom?
AfricaFocus Bulletin
Feb 8, 2004 (040208)
(Reposted from sources cited below)
Editor's Note
Rich-country finance ministers meeting in Florida this weekend
focused on the sinking dollar and rising U.S. debt, cautioning
against excessive volatility in currency markets. They also called
for more reductions in the debt burdens of Iraq and Afghanistan,
and warned debt-strapped Argentina to comply with International
Monetary Fund policies. Africa's debt, estimated at more than $300
billion, was not on the agenda.
Nevertheless, debt cancellation campaigners are noting that
President Bush's rationale for cancelling Iraq's debt - with new
measures currently on the fast track - uses arguments that can be
easily applied to Africa as well. The legacy of debt Mobutu Sese
Seko left in the Congo, for example, is surely as dubious as the debt
Saddam Hussein left in Iraq. Yet the political will is lacking to
acknowledge African foreign debts as both unsustainable burdens and
in large part illegitimate.
This issue of AfricaFocus Bulletin contains (1) a brief excerpt
from a news report on the consequences of the debt crisis for
Zambia, and (2) recent material from the American Friends Service
Committee and the Jubilee USA Network, both engaged in campaigns
this year to bring the debt issue to wider public attention in the
US. Both groups stress that full cancellation is justified not only
because the debt overhang cripples African responses to HIV/AIDS
and other urgent demands, but also because much of the debt is
"odious debt." In fact, if the true balance of "who owes whom" were
to be acknowledged, payments would be flowing in the other
direction - as reparations and as the fair contribution of rich
countries to redress global inequalities.
Additional links to other sources on debt cancellation are included
at the end of the issue.
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Govt Fails to Deploy Over 9,000 Teachers
The Post (Lusaka), Jan 31, 2004
[Excerpts; for full report see:
http://allafrica.com/stories/200402010095.html]
The government has failed to deploy more than 9,000 trained
teachers to schools around the country because of World Bank and
International Monetary Fund (IMF) budget conditionalities.
Explaining the failure by the government to employ teachers trained
in 2002 and 2003, education minister Andrew Mulenga yesterday
disclosed that the problem was not about lack of resources but the
conditions given by the two institutions for the government not to
spend more than 8 per cent of Zambia's gross domestic product (GDP)
on wages in the budget.
"Those are the instructions given to government," he said.
Mulenga said of the required 58,000 teachers across the country,
there were only close to 50,000 at the moment.
He said because of the ceiling point put to the government by the
World Bank and the IMF, the government had failed to put on
government payroll the 9,000 trained teachers "who are currently
languishing".
Mulenga said to employ the 9,000 teachers, the government would
spend about K76 billion, which would go against the ceiling point
given by the World Bank and IMF. ...
On the logic for donors to keep rehabilitating schools and
purchasing desks for schools which had no teachers, Mulenga said it
was difficult because donors decide on what projects they want to
support.
He said he would equally prefer that more teachers are recruited as
opposed to have more desks in schools without teachers.
...
[In another news report last week, US Ambassador to Zambia Martin
Brennan said that the U.S. would write off $500 million of Zambia's
debt, but only after Zambia had satisfied IMF/World Bank conditions
for debt reduction which it failed to meet in 2003. See:
http://allafrica.com/stories/printable/200402050370.html]
Africa's Debt - Who Owes Whom?
American Friends Service Committee (Philadelphia)
February 5, 2004
[excerpts; for full text see
http://allafrica.com/stories/200402050793.html; For additional
information, contact the American Friends Service Committee (AFSC)
at (312) 427-2533, or visit http://www.afsc.org/africa-debt The
AFSC is organizing its Africa Peace Tour for the spring in
Virginia, Georgia, Louisiana, and Alabama. See
http://allafrica.com/stories/200402080003.html]
Africa is center stage in the struggle for human and economic
rights. It is home to the world's gravest health crises - including
the HIV/AIDS pandemic and chronic famine. Even though Africa has
only 5 percent of the developing world's income, it carries about
two thirds of the debt - over $300 billion. Because of this, the
average African country spends three times more of its scarce
resources on repaying debt than it does on providing basic
services. In addressing Africa's struggle for relief from its
onerous external debt, advocates of global justice have raised a
critical question: Who owes whom?
"It is unacceptable to spend more on debt servicing to wealthy
nations and institutions than on basic social services when
millions of people lack access to primary education, preventative
health care, adequate food and safe drinking water" Countess said.
"It is not just morally wrong, it is also poor economics."
On the eve of Black history month, Wednesday, January 28 at 2:00 at
the Rayburn House Congressional Office in Washington DC, the
American Friends Service Committee, an international social justice
organization, launched its Life over Debt campaign to have Africa's
debt cancelled.
The Life over Debt campaign reaches out to local U.S. communities
- especially minority communities - to build understanding of the
dilemmas Africa faces and highlight shared experience and common
ground. Through building a caring and active constituency the
campaign sets out to increase Americans commitment to helping
address the Africa debt crisis.
That is why on the eve of, and during Black History Month we called
for not just reflecting on Africa in terms of the history for the
African Diaspora, but also for Africans in Africa today. Given the
potential for history to influence or control the perception of the
world, it is important to reflect on how the past injustices have
impacted the current debt crisis.
Current World Bank and International Monetary Fund debt relief
initiatives do not adequately address Africa's debt crisis. Not
only is relief insufficient for countries included, but also, there
are countries excluded from the program that have legitimate cases
for debt cancellation. To demonstrate this, the Life over Debt
campaign focuses on five Sub-Sahara African countries with very
different cases for debt cancellation.
[see case study below on the Democratic Republic of Congo. For
similar short fliers on Uganda, Mozambique, Angola, and South
Africa, and additional resources, see the AFSC website.]
...
American Friends Service Committee
http://www.afsc.org/africa-debt/congo.htm
The Democratic Republic of Congo and Debt
By William Minter, Editor, Africa Focus Bulletin
In 2003 the World Bank and the International Monetary Fund (IMF)
announced $10 billion in "debt relief" for the Democratic Republic
of Congo. According to their calculations, this would reduce the
country's foreign debt by approximately 80 percent. The offer came,
however, with a full set of complicated conditions and deadlines.
Even if all of the conditions are met, full relief would not be
delivered until sometime in 2006. After that, Congo would still owe
over $2 billion to foreign creditors. The largest creditors are the
Bank and Fund themselves, plus the U.S., France, and Belgium.
Yet the Congo, of all countries, has one of the strongest cases for
full cancellation of debt and indeed for reparations from the
lenders. This giant country of 55 million people at the heart of
Africa is emerging from a war featuring wholesale robbery of the
country's mineral wealth by a host of external as well as internal
culprits. The wealth of former dictator Mobutu Sese Seko,
subsidized for decades by Congo's creditors, has disappeared into
foreign banks with few traces. And those are only the most recent
phases in a century of predation.
No reckoning of who owes whom can rightly ignore this history. The
Congo is a classic case of "odious debt" and of historical crimes
still awaiting acknowledgment and reparations.
A Century of Predation
Before colonial conquest, the area now in the Congo was one of the
regions of Africa most devastated by the slave trade. In the
European scramble for Africa, the King of Belgium took the Congo as
his private property, with the full complicity of major powers
including the United States. The atrocities then, as recently
recalled in Adam Hochschild's book King Leopold's Ghost, were among
the worst of the nineteenth century. During the two decades of his
reign, millions of Congolese were slaughtered or mutilated for
failure to meet rubber production quotas. A worldwide campaign of
exposure ended Leopold's personal empire, but forced labor
continued under Belgian colonial rule.
After Congo's independence in 1960, the U.S. intervened to
orchestrate the murder of the country's first elected leader,
Patrice Lumumba-a crime never officially acknowledged by the U.S.
government. He was replaced with CIA client Joseph Mobutu (later
Mobutu Sese Seko), who ruled from 1965 until he fled into exile in
1997. Mobutu repeatedly played the Cold War card to gain more
Western support. He siphoned off billions in personal wealth while
the country's economy and social services decayed.
Odious Debt
Creditors often argue against debt cancellation by saying that if
this were done future borrowers would also expect not to pay. Of
course, we all agree that under normal circumstances everyone
should pay their debts. But why should Congo's people suffer for
cynical deals made between lenders and a former dictator? Nobody
should expect such loans to be repaid.
In fact, those debts were illegal to start with, under the legal
principle of odious debt. This doctrine regards debts as
illegitimate when the creditor is aware that loans to governments
are made without the consent of the people and not spent in their
interests. The U.S. was the first to use this doctrine. After
conquering Cuba in 1898, it repudiated Cuban debts to former
colonial power Spain because the loans never had the consent of the
people. More recently, the U.S. is now using the same argument for
Iraq.
The U.S. and other lenders knew full well that their loans were
personal bribes to Mobutu. They knew the Congolese people never
consented or received benefits. Indeed, in 1978 the IMF appointed
its own man-German banker Erwin Blumenthal-to run Congo's central
bank. After two years he resigned with a scathing report, saying
there was "no chance, I repeat no chance, that [Congo's] creditors
will ever recover their loans."
Congo's foreign debt then stood at $5 billion. In the 1980s, after
Blumenthal left, the World Bank, IMF, and Western governments lent
Mobutu almost $5 billion more. In a case like this, it is the
creditors, not the people, who should take the losses.
Who Owes Whom: A Balance Sheet
Business as Usual
"Most Congolese lack basic social services. High morbidity,
mortality, and HIV rates combined with low access to education and
services, attest to a catastrophic humanitarian crisis." That's how
the UN summarizes its humanitarian appeal for Congo for 2004. The
World Bank itself notes that at least one million Congolese are
living with HIV/AIDS. Meanwhile, thirty-seven percent of the
population have no access at all to formal health care.
Jubilee Research estimates spending needed to meet minimum
development goals in the Congo at about $2.4 billion a year. Yet
the government's projected revenues (including "aid") are less than
$500 million a year. It is in this context that the World Bank uses
the carrot of partial debt relief to enforce its control over the
country's economic policies.
The Bottom Line
Congo's people both need and deserve support to consolidate peace,
construct democracy, save lives, and rebuild their country.
Creditors like the World Bank and the U.S. government should not be
using old and illegitimate debts to drain more money from the
country and impose outside control on economic policy.
Instead, these creditors should be compensating Congo for past
damages and contributing their fair share to build a world free of
poverty. The need and the obligation are clear. What is lacking is
the political will.
Jubilee USA Network
Status of Debt in Africa: 2004
http://www.jubileeusa.org/learn_more/africadebt_2004.pdf
In a world where AIDS is claiming more than 8,000 lives a day, and
literacy rates are falling, the most impoverished nations are
siphoning desperately needed resources for health care and
education to continue to pay the wealthiest nations and
institutions service on a debt that they have already paid three
times over. African nations are at the epicenter of both the debt
and the AIDS crises, facing drought and famine and recovering from
regional conflict. Despite this reality, African nations are paying
more in debt service to the United States and other creditors than
they receive in aid, new loans, or investment. The President's AIDS
initiative provides a perfect example of this reality. The fourteen
countries eligible for funding to fight AIDS, mostly African, will
receive $2.4 billion dollars in 2004; the same fourteen nations
will pay and estimated $9.1 billion in debt service this year.
Jubilee USA Network calls for debt cancellation for impoverished
nations as one means for our government to more cooperatively
engage with developing nations. Debt cancellation can be a tool
towards right relationships between nations, setting a precedent
for more collaborative and responsible U.S. foreign and economic
policy towards developing nations.
When a nation has more access to its resources as a result of
initial debt relief won by the international Jubilee movement,
there have been dramatic results. Health and education spending in
eligible countries increased by 40-90%. However, debt relief under
the Heavily Indebted Poor Country (HIPC) initiative has been
partial, heavily conditioned and for only a select number of
countries. Without full debt cancellation for all African nations,
we risk continuing alienation of the most impoverished countries
from the global economic community breaking down international
relations.
The Debt Crisis in Africa
- Today Africa s external debt stands at $333 billion. African
nations pay $1.51 in debt service for every $1 received in aid.
- African nations have paid their debt three times over in the past
ten years alone, yet African nations are three times as indebted as
they were ten years ago.
- All African countries are paying more on debt service than on
health care for their people, regardless of initial and
insufficient debt relief. The average spending per person on debt
service is $14 per person while the average spending on health is
less than $5 per person.
- If governments invested in human development rather than debt
payments, an estimated three million children would live beyond
their fifth birthday and a million cases of malnutrition would be
avoided.
How much debt was supposed to be canceled?
- At the G7 summit in Cologne, G7 leaders committed themselves to
canceling $100 billion of the debts of the 42 poor countries
included within HIPC. Of this total, $50 billion was to be provided
through the HIPC initiative itself; $30 billion from traditional
debt relief such as that provided through the Paris Club; and $20
billion from cancellation of aid debts by bilateral creditor
countries.
- *According to the initial schedule, 19 out of the 38 countries
deemed to need debt relief under the HIPC initiative should have
received initial debt relief by the end of 2002. Total debt relief
for these countries, and traditional relief for other countries,
should by now have amounted to $68 billion.
- In 2003, the Presidents 2004 budget request included a request
for $375 million for bilateral debt cancellation for the Democratic
Republic of Congo (DRC) and to meet remaining commitments to the
HIPC Trust Fund. The final appropriations for debt relief totaled
$95 million, $75 million of which was allocated to the HIPC trust
fund.
- Also in 2003, the President of the United States signed into law
a debt relief provision as a part of the Global AIDS bill. If
implemented this legislation would double the amount of debt relief
provided to date. According to the provision, debt relief under
this initiative must not be conditioned on structural adjustment
programs that would require nations to charge user fees for health
and education, privatize water, or any condition that would
negatively impact the environment or workers rights. This
legislation has yet to be implemented.
- In 2004, the President s 2005 budget request includes $200
million for debt relief initiatives, $75 million to go towards the
pledge of $150 million to cover the shortfall in financing HIPC,
$105 million to pay for part of the bi-lateral reduction of the DRC
debt and $20 million for a debt to nature swap that will benefit
six countries (Bangladesh, Belize, El Salvador, Peru, the
Philippines and Panama).
How much has actually been cancelled?
- In 2000 and 2001, Congress provided $769 million to leverage $40
billion of debt cancellation for the HIPC countries. The money from
the US and other bilateral donors and creditors is deposited into
the HIPC Trust Fund, which is administered by the IMF and World
Bank.
- To date, the average debt service for 27 HIPC countries as a
whole has fallen by almost $1 billion a year since 2000, reducing
payments by about 1/3.
- 8 countries, which have reached Completion Point, have received
partial cancellation in their stock of debts under the enhanced
HIPC initiative, receiving total relief of over $17 billion. A
further $17 billion has been cancelled through so-called
traditional mechanisms for debt cancellation, while approximately
$1.5 billion has been cancelled under the original HIPC initiative
(HIPC I 1996- 1999)
How has debt relief money been spent in 10 African HIPC countries?
- Education spending had risen from only $929 million in 1998 to
$1306 million in 2002
- Health spending had risen from $466 million to $796 million
- Over the same period there had been no increase in spending on
the military
- In Mozambique, savings from reduced debt service payments had
been used to increase education spending from 12% to 20 h of the
recurrent budget which has resulted in an improvement in
educational indicators, such as literacy rates
- In Uganda, debt relief played a key role in the government s
success in reducing HIV infection rates by 40%
What more needs to be done?
- Only 34 countries in Africa will see some of their debts reduced.
Countries like Namibia, Botswana, Nigeria, Morocco and Kenya will
not see any debt relief at all. No African nation has been offered
full debt cancellation.
- The debt relief promised to date is partial and the HIPC
initiative has failed to bring countries to sustainable levels of
debt. All of these efforts fall far short of the definitive debt
cancellation that is so urgently needed.
- Many countries have yet to see the debt relief promised as they
struggle to implement World Bank and IMF economic austerity
measures like privatization of water and further budget cuts.
In 2004, Jubilee USA Network calls for 100% cancellation of the
external debt of deeply indebted and impoverished African nations
without harmful structural adjustment programs.
In addition and while legislation for full debt cancellation is
pending, Jubilee USA Network calls on the US to implement the debt
relief provision signed into law in 2003 that would double the
amount of debt relief awarded to date and make strides to address
harmful structural adjustment programs.
Additional Sources on Debt Cancellation
(1) Recent Issues of AfricaFocus Bulletin
Senegal: Debt and Destruction (Nov 4, 2003)
http://www.africafocus.org/docs03/sen0311.php
Africa: Debt and Deception (Nov 4, 2003)
http://www.africafocus.org/docs03/hipc0311.php
Africa: Debt Meeting Consensus (Nov 25, 2003)
http://www.africafocus.org/docs03/debt0311.php
(2) Odious Debts
http://www.jubileeiraq.org and
http://www.odiousdebts.org
(3) Jubilee Debt Campaign
http://www.jubileedebtcampaign.org.uk
(4) Jubilee Research (UK)
http://www.jubileeresearch.org
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.
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