GOP House Rejects Debt Relief for Poor Nations

Doug Henwood dhenwood at panix.com
Thu Jul 13 12:10:59 PDT 2000


[posted from unsub'd address]

From: Soren <Soren at afgj.org> Date: Thu, 13 Jul 2000 14:27:52 -0400

Nathan and others similarly tempted to get all in a lather when a group of Democratic members of Congress put out a press release would probably do well to institute a policy of counting to ten and checking the facts. I would think that the fact that Larry Summers is speaking in support of this would be sufficient to raise even the most naive LBO'ers' antennae. Apparently not.

I was at the press conference Wednesday morning where some of these statements were made. It was truly disgusting to hear Summers prattle on about how it's standard and wise policy for banks to write off debts that can never be repaid, or to accept a percentage of debts that can't be reasonably held to full face value. Indeed it is, but that's not what is happening here. If the IMF and World Bank and regional development banks were going to write off the debts or accept 10 cents on the dollar, they wouldn't need a Congressional appropriation. But they won't do that: they insist on being paid 100% of the face value of all the debts. The money we're talking about here -- the money the Democrats want to increase -- is for the IMF/World Bank Heavily Indebted Poor Countries (HIPC) Initiative. The money that Congress is being asked to appropriate would go into a fund that the IMF and World Bank (and the Inter-American, Asian, and African Development Banks) will, if all the conditions are met, agree to draw on in payment of the debts owed them. They will take 100% of that value from the funds and put it in their coffers -- money coming from taxpayers of Northern countries.

Can the IMF and World Bank afford to write off these debts? The WB makes about $1.5 billion a year in profits (er, sorry, "income"), and the IMF is sitting on $30 billion worth of gold. (We'll leave aside the less-solvent African Dev. Bank for the moment.) When Sonny Callahan, one of the Republicans Nathan so seems to despise, charges on the House floor that HIPC is just a way of "bailing out the banks," how wrong is he? (I'm not carrying water for Callahan here -- he's right on this, but his overall philosophy is that "third world" governments don't deserve debt cancellation because they're so corrupt.)

What is HIPC, in addition to a slush fund for the IMF and WB? It's a method of enforcing structural adjustment. Countries qualify for HIPC "benefits" (which means reducing debt payments to between 10-15% of a country's export earnings) by committing to six years of additional structural adjustment programs (none of the applicants haven't already gone through structural adjustment). As our colleagues in Tanzania have pointed out, the relief from some of the loans (those from the WB's "soft-loan" division) is phased over 20 years, so in fact they will have to adhere to SAPs for two more decades, since the relief can be postponed or cancelled if they fall out of compliance.

It was discouraging indeed to have Barney Frank defend this debt relief program by claiming that it doesn't add to the IMF's power. He did take steps to prevent the money from leaking out of the separate HIPC fund to other IMF accounts, which was good -- but claiming that the IMF's power is not enhanced, or at least institutionalized, by HIPC is hard to defend.

Given the fact that HIPC does increase the IMF's power, it's hard to simply agree with Nathan's assertion that denying funds for it means people are going to die. The stark fact is that in this perverse global economy people are dying by the thousands every day for the sake of Northern profits. There may indeed be a few deaths that could have been prevented by laundering a little more money through HIPC, but I would argue that strengthening the IMF puts many more people at risk of death and poverty over the medium and long terms.

I don't want to fully engage in the debate about how much difference one party can make versus the other. But from the narrow perspective of policy at the IMF and World Bank, it doesn't make any difference at all. Both parties have the same policies, and even a "better" candidate for President would probably have a hard time resisting using the institutions as handy proxies for waging U.S. economic policy, and probably not in the interest of those the institutions claim to be devoted to helping. As far as I can tell, the important thing is making sure that Congress and the White House are not controlled by the *same* party. Keeping the money-givers separate from the policy-makers makes it easier to create useful tensions at Treasury and in the IMF and WB.

Soren Ambrose 50 Years Is Enough Network



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