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Note: This document is from the archive of the Africa Policy E-Journal, published
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Africa: IPS on Debt Plan Delay
Any links to other sites in this file from 1996 are not clickable,
given the difficulty in maintaining up-to-date links in old files.
However, we hope they may still provide leads for your research.
Africa: IPS on Debt Plan Delay
Date Distributed (ymd): 960430
Title: AFRICA/FINANCE: Firm Debt Plan Slips Target Date/UPDATE
by Rose Umoren
WASHINGTON, Apr 18 (IPS) - Contrary to expectations, both the
World Bank and International Monetary Fund (IMF) confirm that
there will be no firm multilateral debt plan for poor
countries at their three-day spring meetings which open here
this weekend.
At separate press conferences Tuesday and Thursday, the World
Bank and the IMF said they had produced a 'framework', but
that the plan was dogged by a raging debate among their most
influential members. These are the United States, Japan,
Germany, France, Italy, Britain, and Canada -- the Group of
Seven (G-7) leading industrialised countries.
''The G-7 objections are critical, and we must resolve them
first,'' said IMF managing director Michel Camdessus Thursday.
All that can be expected at the end of the meetings next
Tuesday are ''relative principles and clarity to both
organisations to get to work,'' the Bank's vice president for
external affairs Mark Malloch Brown said here Tuesday.
Many, including some rich countries, had expected the two
institutions to present a firm plan this weekend on reducing
the some 60 billion dollars owed the World Bank, the IMF and
regional banks by poor countries. African countries account
for about 35 billion dollars of the debt. But Camdessus only
said that ''hopefully, there will be a solution this year.''
IMF deputy managing director Allassane Ouattara sounded
slightly more upbeat, though. ''We expect to have a concrete
initiative by October,'' he said in an interview.
The G-7 has rifled through the 'framework' with strong
objections, which from what the IMF and Bank officials have
said, crystallise around three major issues. One issue is
whether the rich countries should contribute to the plan and
how much they should spend.
The 'framework' requires of the G-7 a two-fold direct
contribution. The first is that they amend the Naples terms on
bilateral debt by raising the maximum debt reduction from 67
percent to 90 percent. The other is that they contribute to an
eight-billion-dollar fund from which multilateral debt relief
would be financed.
''We have produced a framework,'' said Camdessus. ''We now
need to hear from countries how they will contribute to it.''
The first public reaction from the top G-7 country, however,
was not favourable. Asked about the plan Thursday afternoon,
U.S. Treasury Secretary Robert Rubin made clear that
Washington opposes anything that will require it to come up
with additional resources. ''What we do support is the World
Bank and the IMF doing this with their own resources, rather
than calling on the member countries to donate additional
resources for that purpose,'' he said.
A second issue is how to guarantee the availability of new
concessionary financing for the poor countries, lest they
return to insolvency after the relief. This is a point pushed
especially by the IMF whose enhanced structural adjustment
facility (ESAF) faces a five-year financing gap of about 1.5
billion dollars between 1999 and 2004.
Camdessus appears to be using this opportunity to push his
year-old proposal that the G7 members allow him to sell ''a
small fraction'' of the institution's huge gold reserves,
estimated at about 40 billion dollars, to bridge the gap.
Germany has been fingered by some as one of the members still
opposed to this, worrying that the sale could damage the IMF's
financial integrity.
Some other members prefer that the gold be pledged rather than
sold, said Camdessus who did not elaborate.
The gold debate does not end there. Some of those who agree to
the sale want the proceeds invested, with only the income from
such investments going into ESAF.
The Bank and the IMF also want a commitment from the G-7 that
they will stop cutting bilateral assistance, said Camdessus.
''The debate is still open,'' he said. ''But we are certain
that by the annual general meetings (in October), the ESAF
financing will be solved,'' he said.
The third major issue in the raging debate comprises the
eligibility criteria. According to the 'framework', a country
initially identified as eligible will have no debt relief
until it has completed five out of six years of fresh
structural adjustment and its performance consistently judged
good.
But some G-7 members see no reason why past years of
satisfactory performance should not be counted for a country
like Uganda.
What is finally agreed ''will impact on how many countries
will be eligible,'' said Brown.
This may already be happening. By Wednesday two of the three
countries mentioned by Bank and IMF officials as ''generally
known'' candidates were different from the eight identified as
eligible in the early proposal.
''It is generally known that the two countries that will
probably be eligible are Uganda and Bolivia,'' said Brown. A
top IMF official, however, named Nicaragua as the second
country.
But, ''it is too soon to say how many countries will be
eligible,'' said Brown.
The direction of the debt proposal since it became public last
month worries non-governmental organisations (NGOs) which had
looked to these meetings as the culmination of their five-year
campaign for multilateral debt solution.
''We are very worried that at the end, the proposal will
become so watered down that it is meaningless,'' said Veena
Siddharth, Oxfam International's economic and social advocacy
officer here.
She told IPS that this weekend is critical, because pressure
has to be mounted on the G-7 and the IMF especially, to map
out concrete impartial criteria for relief.
''The eligibility criteria are very important,'' said
Siddharth. ''If these are not properly defined, they will end
up granting relief to a few favoured countries and close the
case.''
Multilateral debt servicing by poor countries has steadily
grown in the last decade, in part because by statute, the
multilateral financial institutions do not grant debt
relief.At the same time, as preferred creditors, they must be
paid when due, no matter what. The result is that many poor
countries such as Rwanda, Zambia, and Uganda have been
borrowing from other sources to pay notably the IMF.
(END/IPS/RU/YJC/96)
Title: AFRICA-FINANCE: World Bank/IMF Meet Leaves Poor
Countries Hanging
by Rose Umoren
WASHINGTON, Apr 23 (IPS) - This year's spring meetings of the
World Bank and its sister International Monetary Fund (IMF)
have ended here, leaving in their trail more questions about
Africa's financial future than they have answered.
The three key African issues -- debt, new money, and
structural adjustment policies -- were either not discussed or
remain unresolved at the end of the Apr. 20-23 sessions.
The adjustment policies, which an increasing number of
economic experts and non-governmental organisations (NGOs)
have questioned in the absence of any sustained success, were
not discussed, IMF Interim Committee chairman, Philippe
Maystadt of Belgium, admitted.
But the failure of the meetings was clearest on the issue of
reducing the multilateral debt of poor countriesm most of
which are in Africa. The United States, Canada, Britain and
other rich countries had claimed that there would be a
concrete initiative this April. And poor countries had come to
expect a solution.
But the meetings concluded with only hopes and requests by
rich and poor members that there would be a concrete plan by
October, when the World Bank and the IMF hold their annual
meetings.
The Interim Committee and the Development Committee -- the
policy- making bodies of the IMF and the Bank, respectively --
issued face-saving communiques, describing the joint debt
proposal as an ''appropriate framework''. But both rich and
poor countries said they found the proposal lacking.
The final communique, issued Tuesday by the Development
Committee, says that ministers had ''requested that the Bank
and Fund -- in close consultation with concerned bilateral
creditors/donors/debtors, the Paris Club, and other
multilateral institutions -- move swiftly to produce a
programme of action.''
The ministers, however, endorsed what the communique described
as ''six principles to guide further action.''
For one, ''the objective should target overall debt
sustainability on a case-by-case basis'', the communique says.
Action is ''envisaged only when the debtor has shown through
a track record ability to put to good use whatever exceptional
support is provided''. And ''new measures will build, as much
as possible, on existing mechanisms.''
The other principles require that ''additional action'' be
coordinated among creditors, ''with broad equitable
participation''; actions by multilateral creditors ''will
preserve their financial integrity and preferred status; and
''new external finance for the countries concerned will be on
appropriately concessional terms.''
The lack of a concrete debt initiative was a defeat for World
Bank President James Wolfensohn, who Saturday told journalists
that he was confident the meetings would produce a firm
deadline for adoption.
It was a triumph for the IMF, at whose insistence, according
to NGOs and some Bank officials, the most damaging stud was
inserted in the proposal: the insistence that modalities for
multilateral debt relief be preceded by three actions by the
rich countries.
These include the requirement that the Paris Club of creditor
nations raise its ceiling on bilateral debt reduction from 67
percent to 90 percent.
Another calls on rich countries to contribute substantially to
a trust fund of eight to 11 billion dollars, from which the
multilateral debt reduction would be financed.
The third requirement -- exclusive to the Fund -- is that rich
countries must approve and partly finance a plan to maintain
its enhanced structural adjustment facility (ESAF) between
1999 and 2004 when it claims the facility would become
self-sustaining.
Rich countries have rejected virtually all three conditions.
''We expect the IMF and World Bank, in cooperation with the
regional banks to offer more specific proposals which the G-7
believes should involve the fullest use of their own resources
to finance debt reduction,'' the Group of Seven most
industrialised countries' (G-7) ministers say in their
communique issued Sunday.
''Further action by the Paris Club (should) not be a
prerequisite for multilateral action,'' added their chairman,
U.S. Treasury Secretary Robert Rubin.
Of the four points in the IMF's ESAF plan aimed at raising
some seven billion dollars for the bridge financing, none
seemed near agreement among its dominant shareholders as the
meeting ended.
Germany, in particular, is opposed to Camdessus' proposal to
sell five percent of the Fund's gold reserves to raise some
1.5 billion dollars. Canada and Britain support this. The
United States only said it would ''consider carefully'' the
proposal.
Even more contentious are the three other points in the
proposal: direct borrowing from such members as Japan, France,
Italy, and the United States; direct bilateral donations of
about 1.5 billion dollars; and a position that creditors to
ESAF market funds do not take back their loans when due.
''At a time of serious budget constraints in many countries,
including my own, this responsibility will inevitably have to
fall primarily to the IMF, in particular through more
efficient use of resources available to the IMF,'' said Rubin
of the ESAF plan. He cautioned ''against a plan the viability
of which depends on sizable bilateral contributions.''
Beyond rejecting the financial responsibilty the debt proposal
thrust on them, the rich countries also shared the concerns
expressed by developing countries under the Group of 24 (G-24)
about the technical soundness of the proposal.
Britain, Canada and the United States, in particular, faulted
the estimated time frame for debt reduction, a period the G-24
placed at nine to 10 years.
''We would urge the institutions ... to assure that the time
frame for multilateral action is both reasonable and flexible,
and that mechanisms are developed for co-ordination among the
multilateral institutions and with the Paris Club,'' said
Rubin.
''While a track record of commitment to reform must be
established, I firmly believe that multilateral assistance
needs to be provided as early as possible if we are to break
these countries out of their unsustainable debt
trajectories,'' agreed his Canadian counterpart Paul Martin.
The G-24 Sunday rejected the proposal, describing the periods
for establishing a track record as ''excessively long and
rigid.''
Future funding of the International Development Association
(IDA), the concessionary arm of the World Bank, is also up in
the air. The final communique says ministers agreed that ''the
prospects for IDA funding be a key issue for discussion by the
committee in a year's time.'' (END/IPS/RU/YJC/96)
Origin: Washington/U.S.-NIGERIA/[c] 1996, InterPress Third
World News Agency (IPS) All rights reserved
These articles reposted with permission by the Africa Policy
Electronic Distribution List. IPS Africa coverage, including
reports from Washington-based Rose Umoren, is regularly
available in the conference africa.news on the APC networks,
and by subscription from PeaceNet World News (for information,
send a message to pwn-info@igc.org). For information about
cross-posting, send a message to ips-info@igc.org. For
more information about access to and reproduction of IPS
Africa coverage, contact Peter da Costa in Harare
(ipspdc@gn.apc.org).
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This material is being reposted for wider distribution by the
Africa Policy Information Center (APIC). APIC's primary
objective is to widen the policy debate in the United States
around African issues and the U.S. role in Africa, by
concentrating on providing accessible policy-relevant
information and analysis usable by a wide range of groups and
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