Relief for a price

Published : Jul 15, 2005 00:00 IST

Gordon Brown. - CARL DE SOUZA/AFP

Gordon Brown. - CARL DE SOUZA/AFP

The G-8's debt relief proposal for 18 poor countries comes with strings attached - they have to adhere to market reforms and pro-globalisation policies.

IN the second week of June, Finance Ministers of the Group of Eight (G-8) countries announced, with great fanfare, their plans to "write-off" the debts of the poorest countries, most of them situated in sub-Saharan Africa. Gordon Brown, United Kingdom's Chancellor of the Exchequer, who is credited with working out the debt relief initiative, said in London that the plan was "a major breakthrough" as it offers up to 100 per cent multilateral debt relief to the "vast bulk" of the debts owed by the Heavily Indebted Poor Countries (HIPC). "Debts that are simply unpayable in the real world are finally taken care of. It is the richest countries hearing the voices of the poor," Brown said.

Prime Minister Tony Blair has made the scrapping of multilateral debts of the poorest countries Britain's top priority as the country prepares to take over the G-8 presidency in July. The 18 countries that stand to benefit from the initiative are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.

However, the G-8 Ministers made it clear that the 18 countries would have to adhere to market reforms and pro-globalisation policies. They reaffirmed in a statement that "in order to make progress on social and economic development, it is essential that developing countries put in place the policies of economic growth". The statement specified that the private sector should be encouraged and "impediments" to foreign investments removed. The G-8 told the HIPCs that additional donor contribution would be based on economic "performance". It is evident from the G-8 statement that one of the primary goals of the new initiative is the breaking down of the barriers that still exist to free trade and corporate control of services and resources in the countries concerned. The World Bank, now under the "neo-conservative" leadership of former United States Deputy Defence Secretary Paul Wolfowitz, has been given the task of monitoring the HIPC's progress towards "good governance, accountability and transparency".

Importantly, several countries that need immediate debt relief have been left out. While ignoring Nigeria's case for debt forgiveness, the G-8 Finance Ministers praised the Nigerian government for implementing International Monitory Fund/World Bank policies and said it was an example for the rest of the African continent. The G-8 statement, without going into specifics, said that the group was prepared "to provide a fair and sustainable solution to Nigeria's debt problems in 2005". The debts of Nigeria, one of the most important players in sub-Saharan Africa, currently stand at $36 billion.

Also ignored was the plight of other African countries such as Angola, Congo and Sudan. Congo and Sudan are just emerging out of a civil war with their economies shattered. The long civil war in Angola ended a few years ago but the country, according to most Africa-watchers, is a deserving candidate for debt forgiveness. The civil war there lasted decades because of the West's backing for Jonas Savimbi and his notorious UNITA militia. To a great extent, the West is responsible for the civil war in Sudan. The rebels in southern Sudan - and now the rebels in Darfur - have looked to Western countries and organisations for support.

The implicit message is that international debt will only be forgiven if the countries stick to a strict programme of repayments and implement faithfully the IMF's structural adjustment programme. According to the United Nations Conference on Trade and Development (UNCTAD), between 1970 and 2002, Africa received more than $540 billion in loans. In the same period, the African countries paid back $550 billion in principal and interest. As of 2002, Africa's debt was estimated at $295 billion.

According to the G-8 Ministers, the debt write-offs announced in June total $40 billion. Although 18 African nations will benefit directly from this, the debts forgiven will amount to less than one-sixth of the continent's total debt. The George W. Bush administration has pledged $1.75 billion to be disbursed over a period of 10 years as part of its share of the $16.7 billion needed to cover the debt repayment burden of the 18 countries. However, Washington has distanced itself from the commitment of the European G-8 members to provide 0.7 per cent of their gross domestic product (GDP) towards aid and Gordon Brown's proposal to set up an International Finance Facility (IFF) which would use the sale of gold reserves to speed up aid.

Less than 1 per cent of the U.S.' aid budget is geared towards Africa though it is directly responsible for many of the bloody conflicts that the continent has witnessed since the late 1960s. The IMF has pledged $6 billion from its own resources. By 2008, the G-8 nations will have to rustle up billions of dollars to repay loans taken by HIPCs from the World Bank and the African Development Bank. They have pledged to cover "the full costs of the loan" though commitments by richer members such as Japan.

CRITICS of the debt relief plan said that the conditions impinge on the sovereignty of the countries and reflect the neo-colonial mindset of the G-8. "If we say half a loaf is better than nothing then it seems there is some progress. But half baked solutions have their own limitations," said Charles Mutasa, acting director of the African Network on Debt and Development. ActionAid said the G-8 initiative left out "millions in at least 40 other countries that also need 100 per cent debt relief". Demba Moussa Dembele of the Forum for African Alternatives in Senegal said the G-8's past announcements had not helped the continent. Referring to the debt cancellations, he said Africans had heard about such proposals in the past too. "Africa has already paid enough. We do not owe anything," he said. The general view on the African continent is that for the G-8 move to be really meaningful, it should be expanded to include all impoverished countries and that debt cancellation must come without imposing on the countries draconian conditions.

Although sub-Saharan Africa is the poorest part of the world, it continues to be a profitable investment destination. According to a 2003 World Bank report, Africa offers "the highest returns on foreign direct investments of any region in the world". Some critics of the G-8 say that the debt relief proposal is a masquerade to hide the "new scramble for Africa". The first scramble took place in the late 19th century when Britain, Germany and France tried to divide the continent among themselves. Rapacious Western companies are now exploiting the continent's huge and varied resources, with U.S. big business in the lead.

The U.S. African Growth and Opportunity Act, the multilateral trade agreement between the U.S. and Africa, forces African trade partners to withdraw subsidies given to their industries and insists on privatisation of social services even in countries that are prone to drought. Non-governmental organisations (NGOs) working on the African continent have described the policies of the U.S. as akin to colonial exploitation, which provides its companies with cheap labour and, most importantly, access to hydrocarbon resources. Evidence has surfaced that shows that millions of dollars was paid as bribes by U.S. and European oil companies to corrupt rulers such as the late Sani Abacha of Nigeria.

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