Date: Tue, 22 Jun 1999 13:57:31 -0400 From: <wb50years at igc.org> Importance: Normal MIME-Version: 1.0 Precedence: bulk Sender: owner-50-years at igc.apc.org Subject: Results of the Cologne G-7 Summit on Debt To: <50-years at igc.org> X-MSMail-Priority: Normal X-MimeOLE: Produced By Microsoft MimeOLE V4.72.2106.4 X-Priority: 3 (Normal)
50 Years Is Enough: U.S. Network for Global Economic Justice June 22, 1999
Network Director Njoki Njoroge Njehu has just arrived in London after attending numerous events, and protests with numerous (40,000!) people, at the G-7 Summit in Cologne, Germany.
She reports that the feeling among the dozens of leaders of international Jubilee 2000 campaigns gathered for the Summit is that it delivered precisely the disappointing news we had been bracing for.
While media reports are telling people that some $70 or $90 billion in debt will be forgiven under the new G-7 plan, in reality the plan announced is a minor revision of the already-existing HIPC Initiative of the IMF and World Bank.
The key points are these:
+ instead of reducing countries' debts so that they will be just under twice their annual exports earnings, the new plan would reduce them to one-and-a-half times annual exports earnings.
+ eligibility for HIPC benefits would be somewhat liberalized, meaning that seven more countries might get debt reduction than was previously the case.
+ the issue of the time a country must spend under structural adjustment has been finessed in a clever (some might say devious) way. Although the details are not yet available, from what we can gather, the G-7 is saying that countries will now be eligible to get reductions after satisfactory completion of one three-year structural adjustment program under the IMF's supervision. BUT, it appears the debt will be kept on the books until a second SAP is completed, meaning that if the government does not satisfy IMF requirements for that second 3-year period, the debt would be reinstated in full (possibly with interest figured in). So the important thing does not change: in exchange for debt relief countries will still have to commit to 6 years of structural adjustment. It is good that the actual reduction is moved up, but when it is acknowledged that it is the SAPs themselves that are causing the poverty, debt, and despair, that change is rather inconsequential. Nothing short of de-linking debt relief from structural adjustment -- and shutting down IMF/World Bank structural adjustment altogether -- will suffice.
+ the White House press release says that the IMF and World Bank will be asked to target the savings from debt relief on health, education, and consultation with the population on the design of economic programs. Nice rhetoric, but let us keep in mind that the institutions we're talking about doing this are those that view health spending as helping clinics design and implement fee schedules for services that used to be provided without charge, and that consultation for the World Bank usually means an hour-long meeting in which people are informed of what is in store for them (and the IMF has never ever consulted with anyone outside government officials).
As Njoki points out, the '80s and '90s have been filled with "first steps" to a more enlightened debt policy -- the G-7's Naples terms for bilateral debt relief, the G-7's Halifax declaration that the institutions should devise a debt program, the announcement of the HIPC program in 1996, etc. etc. This is one more small increment, and it hardly answers the demands of the international Jubilee 2000 movement. We still have much work to do.
In closing, let us reiterate our fundamental view of the HIPC Initiative, which applies just as fully to this revised HIPC. It is essentially a promise of debt relief that is used to bribe governments into rigid adherence to structural adjustment programs they might otherwise not agree to or feel less compunction about deviating from. Its results have fallen far short of the promises, as the experiences of Uganda, the first beneficiary (which is now eligible for HIPC again a year after receiving relief), Mozambique (which would get a reduction in annual debt payments from $110 million to $100 million in exchange for one last SAP demand: quintupling user fees at public health clinics), and Burkina Faso & Mali (which learned from a leaked memo in April that they would probably be paying more after HIPC than before). The revisions may soften those outrages a little bit, but not by much -- and more importantly, the structure has not changed at all. Structural adjustment, the most damaging systematic economic torture designed in the 20th century, is still the name of the game.
We will be sending out more information and alerts in the near future, as this issue remains a hot one in the U.S. and elsewhere around the world. The progress of the Jubilee 2000 campaign will continue.
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Mailing-List: contact weisbrot-columns-owner at egroups.com X-Mailing-List: weisbrot-columns at egroups.com X-URL: http://www.egroups.com/list/weisbrot-columns/ Reply-To: weisbrot-columns at egroups.com Delivered-To: listsaver-egroups-weisbrot-columns at egroups.com X-Sender: weisbrot at 198.3.148.25 Date: Tue, 22 Jun 1999 14:00:45 -0400 To: weisbrot-columns at egroups.com From: Mark Weisbrot <weisbrot at preamble.org> Mime-Version: 1.0 Subject: [weisbrot-columns] World's Poorest Countries Are Still Waiting for Real Debt
Relief
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World's Poorest Countries Are Still Waiting for Real Debt Relief
New details are emerging each day about the G-7's latest debt relief initiative for poor countries, which was officially announced over the weekend. The leaders of the seven countries (the US, Japan, Germany, Britain, France, Italy and Canada) have presented the initiative as a bold step forward.
But one should always read the fine print in these matters, especially when dealing with loan sharks. Of the 36 countries that the G-7 claims will gain from the new debt relief, only about 16 will see their debt payments significantly reduced. And even these countries will still be spending more on debt service than on desperately needed health care and education.
The IMF and World Bank passed their Heavily Indebted Poor Countries (HIPC) initiative in 1996, but three years later, only two of the 41 HIPC countries have seen any reduction in their debt payments. The latest G-7 move constitutes a recognition, in response to continuing international protests by religious and anti- poverty groups, that the HIPC plan has failed.
Perhaps the worst feature of the new G-7 initiative is that it will actually increase the power of the International Monetary Fund over the indebted countries. Putting the IMF in charge of debt relief is like appointing Bill Gates to head up the anti-trust division at the Justice Department. To call it a conflict of interest is an understatement.
One of the IMF's most important functions for decades has been to act as a cartel organizer for the world's most powerful creditors, including not only international financial institutions like the Fund itself and the World Bank, but also private multinational banks. This was demonstrated most recently in the Asian economic crisis, where the IMF's major accomplishment was to force the governments of South Korea and Indonesia to guarantee the bad loans that foreign investors had made there.
In the poorest and most indebted countries, the IMF has been most concerned with shifting resources to the export sector, so these economies could earn the maximum foreign exchange with which to pay off their debts. The Fund has not been overly concerned when these policies have led to environmental destruction, reduced domestic investment, or cutbacks in desperately needed social services such as health care.
The IMF has used its enormous power to force impoverished and indebted countries to adopt its policies, which are written into "structural adjustment" agreements with the Fund. The G-7 initiative would allow the IMF to continue certifying which countries qualify for debt relief, on the basis of their adherence to the Fund's often destructive policies.
In order to qualify for debt relief under the new initiative, countries would have to undergo "structural adjustment" for three years; if they stray from IMF strictures during the following three years, the previous debt relief would be cancelled.
There are bi-partisan efforts underway in Congress to break the IMF's stranglehold over the world's poorest countries, and to promote real debt relief. The latest is a bill proposed by Congresswoman Cynthia McKinney, Democrat of Georgia, which would cancel the debts of the 41 HIPC countries (plus Haiti) to the United States. It would also deny U.S. funding to the IMF until it has cancelled the debts that these countries owe to the Fund, and until it stops making "structural adjustment" loans to poor countries.
It is worth noting that two of the countries that are not expected to see any debt service reduction from the latest G-7 initiative are Congo (Democratic Republic) and Nicaragua. Congo (formerly Zaire), a war-ravaged and desperately poor country, has an enormous $13 billion foreign debt. Most of this was borrowed by the late dictator Mobutu, who seized power in 1965 with the help of the US Central Intelligence Agency, and was backed by the United States for most of his 32-year rule. The money went right out of the country into Swiss bank accounts, yet Congo's poor are expected to shoulder the burden of this borrowing.
Nicaragua is one of the most indebted countries in Latin America, with a debt that is three and a half times its annual income. The United States government still owes Nicaragua more than $17 billion from a 1986 judgement by the World Court-- the same court we went to when American hostages were taken in Iran. The judgement was for part of the damages inflicted by illegal paramilitary actions, funded by the US government in Nicaragua during the 1980s.
Maybe it's time we looked at both sides of the ledger when we total up the poor countries' debt.
Mark Weisbrot is Research Director at the Preamble Center, in Washington, D.C.
Name: Mark Weisbrot E-mail: <weisbrot at preamble.org> Preamble Center 1737 21st Street NW Washington DC 20009 (202) 265-3263, ext.279 (offc) (202) 333-6141 (home) fax: (202)265-3647 <http://www.preamble.org/>www.preamble.org