The Guardian (UK)
November 25, 2005
The Paris Club sounds like one of those shadowy organisations, such as the Skull & Bones or the Bilderberg group, which secretly plot to run the world. Sadly for conspiracy theorists, the Paris Club does not have any secret handshakes or rituals, but it does seem capable of black magic: this week it managed to get the US, Germany and France on the same side over Iraq. Under the aegis of the Paris Club – an informal confederation of creditor countries, including Britain and Japan – several of Iraq’s largest lenders agreed to cancel up to 80% of the outstanding debts owed to them. This was hailed as good news for the interim government, although it still leaves Iraq with huge debts from others, as well as reparations from the first Gulf war.
Given the severe difficulties Iraq faces, including the threat of civil war, a breakdown of society and rising child malnutrition, it would be perverse to punish it with a millstone of debt, especially one left over from the odious regime of Saddam Hussain. In fact, the world should applaud the commonwealth of industrialised economies for acting so swiftly in tackling Iraq’s debt burden, to allow the country to get back on its feet. In that spirit, here is a brief list of countries that would also benefit from a substantial write-off similar to Iraq’s debt cancellation: Zambia, Cambodia, Nicaragua, Mali, Tanzania, Rwanda, Angola, Cameroon, Haiti, Georgia, Sierra Leone . . . and many, many more.
There is a stark contrast between the US-led dash to relieve Iraq’s burden, and the interminable foot-dragging over similar deals for the world’s poorest countries. The economist Jeffrey Sachs is right to say that it would be “unconscionable” for the Paris Club to grant a large debt write-off to Iraq without extending the same relief to countries such as Nigeria. The parallels between Iraq and Nigeria are obvious: both are heavily indebted emerging democracies. In many respects, such as life expectancy, the impact of HIV-Aids, and the proportion of its population living in poverty, Nigeria is a more deserving case than Iraq, especially as Nigeria’s oil revenues per head are only a fraction of Iraq’s.
What is particularly frustrating about the debate over debt relief for the world’s poorest countries is that there is no longer any debate. The issue has moved a long way in the last decade: now even the World Bank, the International Monetary Fund and practically every industrialised economy accepts the need for debt forgiveness. The only argument is over how to achieve it. In most cases the IMF and World Bank attach strict conditions on debt relief, yet Iraq appears to have few conditions attached compared with those of Zambia, for example, which for many years has been cajoled into following programmes of micro-management in order to qualify for support.
But Iraq is not the only nation to be in line for a generous debt deal. Argentina, which suffered a spectacular economic collapse at the end of 2001, has been playing tough with its creditors since then, while attempting to restructure its debts of more than $100 billion. It is currently offering around 30 cents for each dollar in repayment. But Argentina, by virtue of its size, and Iraq, thanks to its US backing, have advantages that other countries cannot match. Merely winning the argument on debt relief has not proved to be enough: Britain’s presidency of the G8 next year, and the Africa Commission optimistically launched by Tony Blair, must come up with concrete plans that forgive debt and that channel its foregone repayments towards health, education and poverty reduction. The weakness of the US dollar may offer a window of opportunity, since much developing world debt is denominated in greenbacks, making its repayment marginally cheaper. What’s good for Iraq must surely be good for Nigeria too.