September 25, 2002

Africa Action Warns of Exploding Debt Crisis; Issues New Recommendations for Creditors.

Washington, DC (September 25, 2002) — Ahead of this
weekend’s Annual Meetings of the World Bank and
International Monetary Fund (IMF), Africa Action denounced
the failure of these institutions to respond to Africa’s
growing debt crisis, and issued the recommendations below
for immediate action from creditors.

Africa Action’s Executive Director, Salih Booker, said this
morning: ”African countries are paying more to the World
Bank and IMF than they can spend on the fight against
HIV/AIDS. The current debt relief plan is an outright
failure, and allows rich country creditors to continue to
bleed African countries dry.”
Booker cited this week’s report on the Heavily Indebted Poor
Countries (HIPC) Initiative, which once again revealed the
failure of this initiative to resolve the debt crisis in the
world’s poorest countries. In this report, the World Bank
and IMF concede that the HIPC program is working for less
than a quarter of those countries involved. UN Secretary
General Kofi Annan reached this conclusion two years ago,
when he called HIPC ”inadequate”, and urged a new approach
to debt cancellation.

Referring to the recent announcement by Nigeria, that it can
no longer afford to pay its massive foreign debts, Booker
said: ”Nigeria’s plight is the latest indicator of the
unsustainable nature of the continent’s debts. All African
countries need and deserve a fresh start, freed from the
shackles of debt bondage.”
While current debt relief efforts in Congress center around
amending the HIPC initiative, Africa Action today called for
a new approach that moves beyond this failed framework.
Since the U.S. is the single largest shareholder at the
World Bank and IMF, to whom most of Africa’s debt is owed,
Africa Action calls on Congress to take the following three
immediate steps to address Africa’s debt crisis:

(1) Authorize an inventory of the debts currently being
repaid by African countries, in order to determine the
legitimacy of creditor claims.
Examples of illegitimate debts would include: debts
contracted by repressive regimes, where the money was used
to strengthen the hold of these regimes; or debts contracted
by formally democratic but corrupt governments, where the
money was then stolen by senior officials for their own
enrichment. Lending of this nature was prevalent during the
Cold War, when geo-strategic interests often trumped
development concerns. Indeed, debts incurred by
dictatorships for the purposes of enforcing their rule may
be considered “odious” in international law. Under this
established legal principle, such debts are not considered
to be the responsibility of the oppressed population or of
subsequent governments. Odious debts may, according to
legal precedent, be cancelled on the basis of international
agreement. An inventory of African governments’ outstanding
debts should also include an investigation of those cases
where a country’s debt burden increased or was perpetuated
as a result of conditions unilaterally imposed by creditors.

(2) Authorize a study to ascertain what would be the cost to
creditors of the full cancellation of Africa’s debts.
Recent studies indicate that the World Bank and IMF hold
sufficient wealth on their own balance sheets to absorb the
full costs of multilateral debt cancellation from their
internal resources. Yet the World Bank and IMF continue to
maintain that outright debt cancellation is a financial
impossibility because it would critically undermine their
future operations. Congress should commission an
independent study to investigate the veracity of these
claims and to accurately assess how 100% cancellation of
Africa’s debts would affect the World Bank and IMF, and
other creditors. This study should include an analysis of
the full costs of debt cancellation, how these costs might
be borne, and by whom, and what the impact would be on
creditors and debtors, both immediately and in the future.

(3) Call for a moratorium on debt repayments by African
countries until a resolution to the continent’s debt crisis
has been found.
Until a credible and equitable new approach has been
determined to resolving Africa’s debt crisis, African
countries should not be required to continue diverting
desperately needed resources to servicing unsustainable
external debts. A moratorium should be declared until such
time as an inventory of these debts has been compiled and
the costs of 100% cancellation have been determined, these
two studies providing a foundation for moving towards a just
resolution to the continent’s debt crisis. In light of the
question of illegitimacy hovering over much of Africa’s
debt, it is appropriate that debt repayments be suspended
while the nature of the original debts and the validity of
creditor claims are investigated.