Some gory details about HIPC poster-child Mozambique, from a forthcoming paper:
With approximately $5.6 billion in foreign debt, in the wake of at least $20 billion in physical apartheid-caused damage, Mozambique found itself repaying more than $110 million a year in debt servicing during the late 1990s. Although this was a small fraction of what in fact should have been repaid (in a context in which the state budget was virtually entirely funded by foreign aid), it represented a huge drain on resources. In 1997, when the World Bank and IMF responded to debt relief pressure (largely from the Jubilee 2000 movement and progressive NGOs) with HIPC, Mozambique was a logical place to begin. But notwithstanding a write-down of approximately $1.4 billion in debt owed to the IMF and Bank, the actual repayment relief only amounted to $10 million a year, leaving debt servicing at $100 million annually, representing more than 20% of Mozambique's foreign exchange earnings. In mid-1999, another $28 million in annual payments were cancelled, but at more than $70 million in repayments, Mozambique still spent far more in debt servicing than people-servicing.
Most importantly, HIPC allowed merely a write-off of unserviceable debt, which no one ever expects Mozambique to repay. Worse, in return there were harsh conditions attached to the debt relief. Only in December 1998 did these begin to emerge as a matter for public debate, at an unprecedented foreign debt conference at the Assembleia da Republica, attended by 500 members of the parliament and civil society leaders. In order to comply with HIPC, parliamentarians learned, they would have to pass legislation effectively quintupling patient fees for public health services over a five-year period. The demand was part of a report accompanying a March 1998 letter by World Bank president James Wolfensohn, agreed to by government leaders and major donors, but not previously disclosed to either the parliament or civil society. According to the letter, the terms of HIPC also include the privatisation of municipal water. Already, acknowledged the Bank report, water "tariffs have been increased sharply in real terms over the past 18 months and are to be increased even further prior to the signing of management contracts." At that conference, Frelimo's parliamentary deputies were visibly angry about their leaders' capitulation to the HIPC deal, and warmly welcomed delegates from trade unions and the Mozambican Debt Group who reinforced the general demand for a total cancellation of the foreign debt. A special parliamentary commission to investigate the debt was established.
However, only more militant pressure would break the stranglehold Washington enjoys over Maputo. Without such pressure, the June 1999 IMF expansion of debt relief also entailed 71 brand new conditions, among which were that Mozambique must not resurrect its cashew processing industry using traditional industrial policy tools, and also must effectively end state attempts to provide water to the rural poor. Notwithstanding a national debate about the World Bank's mistaken 1994 decision to force both privatisation and trade liberalisation on the cashew processing industry, which led to the closure of ten major plants and the layoff of 10,000 workers (half women), the IMF prohibited Mozambique from imposing a 20% export tax on raw nuts that the parliament was on the verge of approving so as to save the processors from subsidised international competition. The IMF also encouraged the parliament to adjust the overall tax structure to make it more regressive (i.e., the rich will pay a decreasing share of their income). Yet more arrogantly, the IMF used new jargon in applying neoliberal conditionality to the rural water sector. The Enhanced Structural Adjustment Facility Framework Paper for April 1999-March 2002 insisted on the Mozambican government "transforming the planning and delivery of rural water and sanitation services from a supply-driven model to a sustained demand responsive model, characterised by community management, cost recovery, and the involvement of the private sector." The "demand-responsive approach" is an increasingly discredited development approach, having failed dramatically when applied to rural water projects in far-wealthier countries like South Africa.
Patrick Bond (Wits University Graduate School of Public and Development Management) home: 51 Somerset Road, Kensington 2094, Johannesburg office: 22 Gordon Building, Wits University Parktown Campus mailing address: PO Box 601 WITS 2050 phones: (h) (2711) 614-8088; (o) 488-5917; fax 484-2729 emails: (h) pbond at wn.apc.org; (o) bondp at zeus.mgmt.wits.ac.za