Forgive to forget

Lisa Peryman

April 8, 2005
On the eve of the first Pan African Forum on accountability and good governance in Kenya this week, an editorial published by the Nairobi-based newspaper, The Nation, called for the relief of Kenya’s foreign debt based in part on an odious debts argument.

The editorial follows a debate on debt repudiation for Nigeria sparked by the Nigerian Parliament’s passage of a non-binding resolution last month to halt payments on the country’s $35 billion external debt.

The Nation editorial, “Why Kenya Deserves Debt Relief,” draws inspiration from an opinion piece published by the UK’s The Economist, which outlined three reasons Nigeria should be granted debt relief.

Reason No. 1, the Economist argued, “is that much of Nigeria’s debt is ‘odious’; that is, it was accrued under military dictators. Since Nigerians did not choose these regimes, it seems unfair that they should have to repay the loans that foreigners were foolish enough to make to them.”

“Why Kenya Deserves Debt Relief” develops a similar argument and claims Kenya’s debt should be waived because it too is odious, or “debt accrued under a dictatorship.”

“Should it not matter that [the debt] was incurred under a leadership notorious for corruption and embezzlement ‚Äì something our lenders were fully aware of when they extended us such credit?” wrote The Nation, adding: “There are as many fingers as there is blame to go around on this one, further stressing that our ongoing debt problems are not of our making alone and that somewhere along the line, these loans have more enhanced than alleviated poverty.

“Just look at us!” the editorial blazed, “Rather than trust accounts, our children inherit debt. Instead of being children, they are saddled with adulthood, fetching firewood instead of doing homework and heading households when they should be schooling.

“We spend millions ‚Äì multiples of healthcare costs servicing debts while our sick languish at home with bare cupboards, dirty drinking water and no medicine. And yet, we are the norm ‚Äì an example of others slowly dying under debt incurred by governments, largely squandered by officials and then paid for by the masses ‚Äì the same individuals not consulted or allowed to benefit from such undertakings.”

Corrupt, oppressive regimes acting against public interest and unaccountable lenders who, in numerous cases, knew their funds were not being used for legitimate purposes, are two of the main reasons debt has become the burden it has for many nations in Africa. Despite a heightened global focus on debt reduction and poverty alleviation in Africa, the issue of odious debt is one unlikely to be taken up by donors, although debt cancellation is a strong possibility. Writing off or rescheduling debts provides lending nations with an out for dealing with tainted loans that should never have been granted.

Such was the case last November when the Paris Club cartel of creditors opted to write off 80 percent of the $120-billion debt Iraq owed it. The move deliberately circumvented the threat posed by a potential public review of debts accumulated under dictator Saddam Hussein; it also denied Iraqi citizens the opportunity to assess which loans granted were used for their benefit and which to prop up Saddam’s corrupt regime. Conveniently, the cancellation of debt makes that examination appear less compelling, particularly when cloaked in the rhetoric of benign forgiveness.

Patricia Adams, the executive director of the Canadian-based foreign aid watchdog Probe International, at the time suggested Paris Club members had rushed through their debt forgiveness program, prior to the establishment of a democratic Iraqi government, in order to head off an Iraqi investigation of who lent Saddam money and for what purposes. However, she noted, this tactic failed.

The Interim Iraqi National Assembly responded by tabling a recommendation to declare that the debts owed were “odious.” It further stated:

“This National Assembly has a responsibility to the Iraqi people to protect their current and future interests. . . . These interests are threatened by the Paris Club cartel of creditors which refuses to accept that any of the debts are illegitimate, and is attempting to get Iraq to sign, before the end of the year, an agreement to repay a significant portion of the odious debt. There is a strong basis in international legal principle and precedent to define these debts as being ‘odious’ and thus not legally enforceable.”

A team of Iraqi and international lawyers and arbitrators, in conjunction with Probe International and other debt NGOs, are currently working on the creation of an arbitral model which could be used to determine which of Iraq’s state loans under Saddam were used for corrupt purposes.

Currently, debt forgiveness of clearly odious debt, extended as an act of charity, works to conceal the complicity of western donors in the misuse of public funds by despotic rulers. While citizens are expected to be grateful for the writing off of debt they should not be on the hook to repay in the first place, lenders and the corrupt governments their loans financed get off scot free.

Perhaps African countries should raise a hue and cry about odious debt between now and the next meeting of the Group of Eight wealthy nations in Gleneagles, Scotland, this summer, where Africa will be a main focus of discussion.

Given the lending community’s strong dislike of the subject, who knows how much debt it may be prepared to “forgive” to contain the threat of an odious debts challenge.

However, the issue of accountability would not be resolved by forgiveness. The beauty of a successful odious debts challenge is that while it absolves citizens of having to pay for the crimes of their leaders, the debt remains outstanding: creditors can still chase payment from the dictator or regime they loaned to but the amount will no longer appear as a national debt.

Unchallenged, lenders treat all loans as legitimate and enforceable and decide among themselves which loans will be written off and which rescheduled. Under this system, the people will always be held to account for unrepresentative governments and their odious debts.

Categories: Africa, Debt Relief, Odious Debts

Tagged as:

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s