Madeleine Wackernagel
Oxfam, the British-based charity, is calling on the World Bank and International Monetary Fund (IMF) to reconsider their debt-rescheduling plan for Mozambique. A decision on the extent of the relief to be offered to one of the world’s poorest countries will be made on Tuesday.
Much has been made of the great economic strides made by Mozambique since the conflict ended but, says Oxfam’s Graham Saul, the country is still only just getting back to where it was in 1983. Almost half the population of 16- to 18- million has no access to healthcare; 10- million have no safe drinking water; and 190000 children die annually before the age of five.
The World Bank is committed to poverty alleviation while the IMF’s ambit is strict financial controls. But the options recommended for Mozambique under their highly indebted poor country (HIPC) initiative do not go far enough, according to Oxfam.
Says Saul: “If the institutions were to take the extreme poverty into consideration, they would set the debt servicing to export ratio below 20%. We expect them to aim for about 19%, while 12% to 15% is more feasible, and would allow the country to free up resources for vital social spending.”
The levels envisaged by the World Bank and IMF are based on Latin America’s experience in the 1980s but that precedent does not apply to a country such as Mozambique. “Compared to the HIPC countries, the indebted Latin American countries had diversified exports, strong manufacturing bases and more skilled work forces. There is no evidence that their experience is relevant for poor, war-torn economies,” states Oxfam in its report, Debt Relief for Mozambique: Investing in Peace.
Furthermore, the country is already in arrears to the tune of $1,1-billion, and a significant portion of current debt obligations are not met. A 15% ceiling, as opposed to the suggested 20% to 25%, would “result in substantial savings and could greatly enhance the government’s capacity to invest in economic infrastructure and the social sectors”.
Actual debt payments this year will equal about $100-million, rising to roughly $130- million next year and levelling off at around $200-million from 1999 to 2005. But, these numbers have to be seen in the context of an annual budget of only $25- million for health – or about $1,50 a person. In addition, says Saul, these figures assume massive debt reduction from bilateral creditors that has yet to take place.