Financial Times: Debt relief scheme missing targets, says IMF By Alan Beattie in Washington Published: September 5 2002 22:07
A flagship international debt relief scheme for the world's poorest countries is failing to free many countries from debt as it becomes clear that its forecasts were too optimistic, the IMF and World Bank have admitted.
In a study for the joint ministerial steering committee linking the two institutions, which meets at the end of this month, fund and bank staff say that half of the 20 countries going through the process are likely to exceed their sustainable debt targets. But the bank's governing board, which met earlier this week, showed no enthusiasm for making the scheme more generous despite pressure from non-governmental organisations, bank officials said.
The staff study - a copy of which has been seen by the Financial Times - asserts: "Earlier projections often contained overly optimistic macroeconomic assumptions, reflecting. . . inadequate analysis of the likely sources of growth and the expected impact of planned policies."
Falling commodity prices have pushed several of the highly indebted countries, which are heavily dependent on agricultural exports, off track in hitting debt-to-export targets.
The report considers various proposals from NGOs and a bill currently in the US Congress to deepen the relief available, but concludes that they would be too expensive and an inefficient way of delivering extra money to poor countries.
Jacob Kolster, a senior bank official, said the bank's governing board, representing its shareholder countries, had met earlier in the week and backed this conclusion.
"There was no general sentiment in the bank's board to modify the heavily indebted poor countries (HIPC) initiative," he said. The IMF's board meets on Friday to consider the report.
Some rich nations, including Nordic countries and the UK, have proposed minor modifications to the scheme which would increase slightly the amount of debt relief on offer. But bank officials say even these have been opposed by the US and Japan.
The report also warns that litigation against debt-ridden poor countries from some governments and commercial creditors is jeopardising their development. Iraq, for example, is suing Uganda for non-payment of sovereign debt, while the private military company Executive Outcomes, which was involved in the civil war in Sierra Leone, is suing the government there for $30m in unpaid fees.
A spokesman for Executive Outcomes defended the litigation, saying that the government "owe us the money rightfully".
NGOs reacted with anger to the report, saying it proved the scheme was insufficiently generous. "The knowledge that life-saving debt cancellation is being held up while creditors tinker with a failed programme is enough to bring thousands of people to the streets of Washington," said Mara Vanderslice, at Jubilee USA Network.