ocean’
Ann Eveleth
The sale of up to 10-million ounces of International Monetary Fund (IMF) gold reserves will do little to break the 30-year cycle of debt that has trapped Africa in poverty for decades. The R9-billion to R18- billion such a sale could generate is a mere drop in the ocean of developing-world debt.
Sub-Saharan Africa alone owed the world’s rich nations, the IMF and the World Bank R1 362-billion in 1996, and that year paid back R90-billion in partial debt interest payments – without beginning to reduce its debt burden.
The spring meeting of the World Bank and the IMF focused the debt debate on the proposed IMF gold sale as a means of financing part of the R75-billion needed for the highly indebted poor countries (HIPC) debt relief initiative. The two bodies also approved a review of HIPC.
But the meeting appears to have sidestepped the main issues, according to South African anti-debt campaigners. “There is progress, but we are a long way from victory on debt relief,” said Jubilee 2000 South Africa representative George Dor.
When HIPC was introduced in 1996, the world’s 41 poorest countries – with a combined debt of R900-billion to R1 200-billion – had to negotiate a six-year economic obstacle course before they could qualify for relief that would reduce their debt burden to only twice their export earnings. So far, only two countries, Uganda and Bolivia, have reached HIPC’s “completion point” which allows them to access debt relief. Five other countries – Burkina Faso, Guyana, Cte d’Ivoire, Mozambique and Mali – are expected to reach this point by 2001.
Experiences so far suggest debt relief packages will have little impact on the amount each country actually pays in debt service each year. University of the Witswatersrand political economist Patrick Bond points out Mozambique’s relief package will reduce the country’s annual debt repayments only from R110-million to R100- million.
World Bank president James Wolfensohn said the review would look at reducing the waiting period and eligibility criteria for HIPC, but added the “sound policy and reform” basis of HIPC would not be compromised.
The world financial crisis all but shattered the credibility of the “sound policy” framework punted by leaders of the so-called Washington Consensus, forcing world market gurus to call for a revision of the rules. This “post-Washington Consensus” suggested measures to protect countries from the vagaries of financial speculation. The IMF’s answer came on April 25 when it approved US President Bill Clinton’s R540-billion anti- contagion proposal allowing vulnerable countries to purchase more debt in advance when the next crisis looms.
At least part of the motivation for the IMF gold sale proposal lies in the fact that it spent more than R600-billion bailing out Russia, Brazil and South-East Asia in the wake of last year’s financial crisis. This has depleted the IMF’s cash reserves, forcing it to choose between selling off reserve stock or raising the funds for debt relief from shareholder countries – including South Africa, which is a 1% shareholder and may have to contribute to the anti-contagion fund.
Anti-debt campaigners are calling for HIPC to be scrapped in favour of full debt cancellation. The IMF and the World Bank admit that 80% of this debt cannot be repaid. Sub-Saharan Africa could only pay 57% of its debt interest in 1995. Yet developing countries are still required to meet stringent criteria before they can access debt relief.
Dor says these conditionalities form the heart of HIPC’s problems. “Debt has always been a mechanism … to control the economies of the Third World to pave the way for [rich countries’] own economic interests and the interests of transnational corporations,” argues Dor.
Creditor countries argue conditionalities are necessary to ensure money is not handed over to dictators who will waste it. Dor says Jubilee 2000 recognises the need to ensure that dictators are not allowed to fritter away the proceeds of debt relief. But “the issue is how to ensure that the money does go through to development. Some countries could be influenced to do this already. In other countries, the key to this is to grow civil society.”
Bond also points out that “Mozambique didn’t waste its money … but it was in a state of war.”
Both the HIPC review and the IMF gold sale sidestep the question of creditor liability for loans given to corrupt governments. Dor cites the example of the world’s failure to address the question of “Southern Africa’s apartheid debt” – estimated at R280-billion.
Precedents for full cancellation can be found: many European countries have still to repay money loaned to them by the US during World War I. The UK’s debt stands at more than R87-million – roughly what developing countries now owe the UK.