Lifting Africa’s debt sentence

Doug Sanders
The Globe and Mail
June 13, 2005

London: Even though the world’s richest countries, including Canada, pledged on Saturday to eliminate the staggering debts of the world’s 18 poorest countries, much more needs to be done to break the patterns of economic and political isolation that created the debt crisis.

The decision, announced at a London summit of finance ministers of the G8 countries, will have an immediate effect on the prospects of the beneficiary nations, all but four of them in sub-Saharan Africa.

By immediately freeing them from the burden of paying off more than $40-billion (U.S.) in debt to foreign governments and international agencies, the deal will free up resources for these poor countries, many of which have had to devote more than a third of their annual budgets to debt-service costs.

“We greatly appreciate the initiative,” said James Nsaba Buturo, the Information Minister of Uganda, which currently has $4.5-billion in debt, equivalent to 74 per cent of its annual production. “It is a challenge for us to use the money we have been paying [in] debts to . . . better the lives of our people.”

The deal, in which the rich countries will assume the debt-payment costs for as long as 50 years into the future, will cost Canadians between $150-million and $200-million over the next five years, Finance Minister Ralph Goodale said. Those funds were already included in the most recent federal budget.

But observers said yesterday that debt repayment alone could do little more than set some African nations back on a track to dependency and isolation.

On one hand, they worried that the debt relief benefits only 18 countries, while about 40 countries, some of them deeply impoverished, are not immediately eligible for debt relief.

Nigeria, the most indebted of West African countries, does not qualify for immediate debt relief because it has not fulfilled the strict anti-corruption and economic liberalization conditions of the World Bank’s Heavily Indebted Poor Country initiative.

The G8 plan carries an option of expanding the debt relief to 20 other countries, including Nigeria, if they are able to meet the HIPC conditions.

Gary Barr, head of the Canadian Council for International Co-Operation, said “We have a lot of countries that now have really competent governments, that would be able to use debt relief to save millions of lives, that just aren’t eligible for it because they don’t meet these conditions that are excessively strict, and that could actually damage their economies if they were implemented.”

On the other hand, African observers pointed out that the conditions that created the debt crisis are often still in place in Africa, and the lack of proper economic infrastructure or export markets could simply lead to further debt.

African observers pointed out yesterday that the political corruption that caused the debt crisis was itself a product of the extreme forms of capitalism and socialism imposed on Africa during the 1970s as part of the deals that guaranteed the loans.

“Remember the West had a hand in promoting some of those leaders because it suited them at the time,” Desmond Tutu, the former Anglican primate of South Africa, said in a television interview yesterday.

So while many activists were pushing to have the deal expanded to more countries yesterday, others were worrying that even the 18 countries include some that are not committed to economic equality and prosperity.

“Africa really needs to show a commitment to democracy and accountability. Otherwise, we’ll be crying for debt relief again in a few years’ time,” Sipho Seepe, a South African activist and journalist, told reporters yesterday.

Most sub-Saharan countries face an impossible dilemma: They have staggering fiscal costs to keep AIDS and other diseases at bay, and they also find their exports met with steep Western trade barriers, or the revenues from their natural resources flow into corrupt government or private-sector hands.

Canada’s policies have hampered improvement on both sides of that ledger. Canada’s foreign-aid spending, at less than 0.3 per cent of its GDP, falls far below the target of 0.7 per cent set by former prime minister Lester Pearson in the 1960s. And about half of that aid is “tied,” that is, it must be spent by the recipient countries on Canadian goods and services.

On the other side of the ledger, Canada is among the Western nations that sell taxpayer-subsidized exports to Africa at low cost while placing steep tariffs on the import of African products.

Both practices are changing. The Canadian International Development Agency has pledged to rid itself of tied aid, and Mr. Goodale said that he is counting on the current World Trade Organization talks to bring an end to the trade injustice aimed at Africa.

“I’d like to think that we are one of the better nations in terms of facing up to the flaws in our foreign aid and improving things looking ahead,” he said. “We are genuinely committed to making this work.”

World debt relief

The Group of Eight rich nations agreed on Saturday to write off 100 per cent of debt owed by 18 of the world’s poorest nations with a further nine nations set to benefit from the deal soon.

18 nations reached the completion point of the IMF and World Bank initiative for Highly Indebted Poor Countries (HIPC). More than $40 billion U.S. debt was written off.

Honduras; Nicaragua; Bolivia; Guyana; Mauritania; Senegal; Mali; Niger; Burkina Faso; Ghana; Benin; Ethiopia; Uganda; Rwanda; Tanzania; Madagascar; Mozambique; Zambia.

Nine nations set to reach HIPC completion point soon. Brings total debt relief to $51-billion.

Guinea Bissau; Sierra Leone; Guinea; Dem. Rep. Congo; Chad; Cameroon; Malawi; Gambia; Sao Tome and Principe

Categories: Africa, Debt Relief, Odious Debts

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