<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> <HTML> <A HREF="http://www.ahram.org.eg/weekly/1999/435/in1.htm">http://www.ahram.org.eg/weekly/1999/435/in1.htm</A> Cold comfort in Cologne      By Gamal Nkrumah      Is it possible to derive a moral, whether public or private,      from the tragi-comic saga of debt relief? Many would have us      believe so, not least the G-7 powers who, together with their      new friend Russia, itself currently holding out the begging      bowl, met in the German city of Cologne this week.      The seven major industrial powers -- the United States,      Britain, Canada, France, Germany, Italy and Japan -- made a      widely publicised gesture to placate the world's poorest and      most indebted nations, pledging to write off $90 billion in      Third World debts. But few were impressed, with many      critics arguing that the move was nothing but a cheap      publicity stunt, and certainly not a solution to a global      problem of such Herculean proportions.      "Despite flowery speeches and grand gestures, G-8 leaders      are offering only crumbs of comfort," explained Ann Pettifor,      director of Jubilee 2000, a London-based organisation that is      calling for all existing debt to be written off as a goodwill gesture for the millennium.      While the G-8 quibble over what crumbs they can afford to throw to those nations      on whose backs their own historic wealth has been built, they continue to perfect      their skills at robbing the poor -- an activity which they have raised over the      centuries to the level of a fine art -- thanks to the new and exacting regimen of the      World Trade Organisation. While the governments of the South clamour for      admission to this latest club, it is their people who will have to pay the price.      The poor, unfortunately, are scarcely in a position to subsidise their elites' need for      international recognition and imported goods. The 700 million people who make up      the poorest 40 nations, which are also the most indebted, have to get by on an      average of $4 a day, with the majority of them barely subsisting on less than $1 a day.      How then can anyone expect them to carry the extra burden of debt servicing?      Yet still, their creditors demand that payment be made in hard currency, and      indebted nations in Africa, Asia and Latin America find themselves obliged to export      their way out of debt, thus accelerating the exploitation -- soon, exhaustion -- of their      natural resources. Meanwhile, the debt is also busy, diverting scarce resources from      essential development needs such as health, education, housing, infrastructural      development and social welfare.      As if that was not bad enough, the supposed concessions offered by the rich often      turn out, on examination, to be worthless. At best, the G-8's present gesture might      make a minuscule dent in the Third World debt burden. But what is this token offer      worth? Currently, the African nations are unable to make more than half their      scheduled payments. Debt servicing consumes one-fifth of Africa's foreign exchange      earnings, acting as a deterrent to private investment, and provoking higher inflation      and increased taxation. In every case, it is the poorest who have to pay the most.      The G-8 summit kicked off with discussions as to how the $1 trillion which change      hands each day in currency trading and stock exchange transactions around the world      might best be controlled. This was followed by debates covering just about      everything, from the Indo-Pakistan dispute over Kashmir, to Russia's economic      collapse and the policing and reconstruction of Kosovo.                             With their grins of smug satisfaction and plastic smiles                             to the posse of cameramen, the G-8 leaders cut a                             nauseatingly self-congratulatory figure in the eyes of the                             rest of the world. "I believe this summit will mark                             probably the biggest step forward in debt relief and help                             to the poorest countries that we have seen in the                             international community for many years," said a gleeful                             British Prime Minister Tony Blair. What a                             disappointment to the Third World Blair has turned out                             to be. After having dealt with the likes of Margaret                             Thatcher, the prospects of working with a British Labour                             Party leader seemed at first like a breath of fresh air. But                             these hopes were soon dashed. British overseas                             development assistance has dwindled even further since                             Labour was elected from its already paltry levels. Worse,                             the new Labourite officials, mimicking their American                             Democratic counterparts, now incessantly chant about                             the need to link human rights and good governance with                             development assistance. Third World officials are made                             into bogeymen, while the representatives of corrupt                             regimes complain that these days one can hardly get a                             word in edgeways when confronted by a British                             diplomat. They have brought out their sermons even as                             they put away their cheque books.                             Uncharacteristically, it was Japan, the world's largest                             international lender, who took the lead in this week's                             debate on debt relief. With nearly $9 billion in                             outstanding loans to less-developed countries, the                             Japanese want to be sure they do not have to bear the                             brunt of any debt write-off, especially as they are                             presently struggling to keep their own government      deficits under control. Japanese development aid totalled $10.7 billion in 1998 -- up      14.2 per cent from 1997. Assistance to Asia alone stood at $5.3 billion, or 61 per      cent of Tokyo's total contribution. The US is the second-largest global donor at $8.1      billion, while France comes third with $5.9 billion.      With the need to rebuild and keep order in Kosovo likely to take precedence over      development assistance and debt relief on Western agendas for some time to come,      the poor nations look like they are about to be marginalised even further.      For people with little collateral, a poor credit history and hardly a cheque guarantee      card to share between them, the world's poor have managed to run up a pretty      impressive slate. They currently owe in excess of $400 billion to the West.      Sub-Saharan Africa alone owes $224 billion, equivalent to 80 per cent of the      continent's GNP, and forks out more in debt repayments a year than it receives in      aid. That's nice work, if you can get it, for the banks who lent the money in the first      place. Yet for those who have to live with it, the social and environmental      consequences of this reverse liquidity flow are terrifying. Angola's infant mortality      rate stands at 125 per thousand live births. Less than a third of the country's 11      million people have access to potable water and consumption per capita has been      dropping by eight per cent a year since 1980. Angola is no exception. Tanzania      spends one-third of its budget on debt payments, four times the amount allocated to      primary education, while over half its people go illiterate. Life expectancy in      impoverished Niger is a mere 47 years, but the government spends more on debt      payments than it does on health and education combined.      In September 1996, the US championed the so-called Highly Indebted Poor Country      Initiative (HIPC). This programme aims to reduce the debt of some of the poorest      countries in the world to sustainable levels through bilateral and multilateral action      by creditors such as the World Bank and the IMF acting together.      The proposal was met with applause. Yet what sounded good on paper lost much of      its virtue when translated into action. In sharp contrast to their reaction following      the economic crisis in East Asia, when the US and its allies managed to mobilise      $100 billion and bend IMF rules to salvage the economies of a number of vital      trading partners, the process of raising only $7 billion needed to grant relief to      roughly 20 countries under HIPC has been fraught with internal squabbles, disputes      over eligibility, and outright opposition from some creditors. At the current pace,      only three African countries -- Burkina Faso, Mozambique and Uganda -- will receive      any HIPC relief before the year 2000.      Yet such failures are not enough to dampen the imaginative powers of development      officials. One proposal currently being promoted by the IMF, with the support of the      US Treasury Department, is to sell off a portion of the IMF's huge gold reserves --      worth $29.25 billion -- to finance the debt relief programme. The G-8 this week      endorsed a plan to sell 10 per cent of the IMF gold for just this purpose.      On the face of it, this is another good and generous idea. But, as with all IMF and      World Bank plans, there is a sting in the tail. While the IMF is ostensibly asking      permission to fund debt relief, only a small portion of the proceeds of any gold sale      would actually be used to reduce debt. Most of the money raised would actually go      to enlarge even further the IMF's infamous Enhanced Structural Adjustment Facility      (ESAF), which has already caused unspeakable suffering and heartache throughout      the Third World, and in Africa in particular.      ESAF provides low-interest loans to poor countries. The catch is that in order to      access these funds, debtor nations have first to implement debilitating austerity      programmes such as those which have ruined the economies of countries as diverse      as Russia and Indonesia. Washington argues that using IMF gold sales to fund ESAF      would make the programme self-financing, and remove it from congressional      scrutiny, thereby eliminating leverage. In other words, the IMF and the US Treasury      Department are holding debt relief hostage to a permanent ESAF.      If there are any moral imperatives left in this brave new world at all, then surely it is      vital that debt relief to the poor must not be hijacked by the very institutions whose      policies perpetuate poverty, widen disparities in income and precipitate social unrest      and political instability.      Moreover, if anyone should doubt the case against, there are well documented      precedents for the international agencies' perfidy. In 1996 the World Bank and the      IMF announced a debt-relief initiative. Yet three years later, only three countries --      Bolivia, Uganda and Guyana -- have actually received any relief under the scheme.      The programme stipulates that countries which have undergone structural      adjustment programmes, radical economic reform, economic deregulation and a rapid      privatisation programme -- all of this under IMF supervision, of course -- would      qualify after six years for enough relief to reduce the ratio of outstanding debt to      export revenue to between 200 per cent and 250 per cent. Not only are the      conditions draconian, but the pay-back is hardly a ticket to financial nirvana.      It was hardly a surprise, then, when a recently leaked report by the Bretton Wood      institutions themselves revealed that this much-vaunted plan may actually be      increasing the amount of some countries' debt payments, rather than reducing them.      US President Bill Clinton's proposal to cut the debt of the impoverished nations by      $70 billion more than planned under the current IMF-World Bank programme has      run into much resistance. Yet the World Bank could easily afford to write off these      unsubsidised loans. According to Jeffrey Sachs, director of the Harvard Institute for      International Development, the estimated cost to the US would be infinitesimal.      Sachs estimates that while the book value of US loans to the worst-off countries is      recorded as $6 billion, their actual economic value is in fact only about $600 million.      Faced with such an analysis, one is bound to wonder whether the charade of      dramatic gestures, rubber smiles and perfectly meaningless figures that passes for      development politics in the world today is not simply the modern mask of an      ancient, unavowable, yet still widespread conviction: that the poor -- especially when      they are black or brown, and do not vote for Congress -- are somehow less than      human.</HTML>