Civil society groups and anti-debt campaigners in Africa have cautiously welcomed a British proposal for the debt of Africa’s poorest states to be cancelled.
”It’s a good start for a G8 member like Britain,” said Charles Mutasa, a research and policy analysis programme officer at the Harare-based African Forum and Network on Debt and Development. (The G8, or Group of Eight, comprises the world’s eight leading industrialized nations: Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.)
But, notes Sanusha Naidu, a researcher at the Pretoria-based Human Sciences Research Council of South Africa, ”We need specifics.”
”For example, how much will Mozambique, where 54% of the population lives in poverty, benefit from the initiative?” she asked.
”In (some) countries the initiative may make a dent; in others it may not,” said Naidu.
The proposal on debt relief forms part of a three-pronged plan that Britain has put forward to address chronic poverty and under-development in Africa.
In addition to debt forgiveness, the plan calls for a doubling of aid to the continent from its current figure of $50-billion a year, and the dismantling of trade barriers that prevent African producers from competing effectively in wealthy countries.
Africa’s debt totals $330-billion, obliging it to spend $15-billion a year servicing its loans. ”This figure ($15-billion) is what the people in the health sector say they need every year to tackle the HIV/Aids pandemic in Africa,” Mutasa notes.
About 80% of Africa’s debt is reportedly owed to three multilateral institutions: the World Bank, the International Monetary Fund (IMF) and the African Development Bank.
British Finance Minister Gordon Brown has suggested that the IMF use its gold reserves to settle loan repayments from indebted countries, while rich member states of the World Bank would pay off funds that are owed to this institution by poor nations.
In a bid to put its money where its mouth is, Britain has pledged to take on its share of debt service owed to the World Bank until 2015 — an exercise which will cost London about $2-billion.
Brown has also challenged other G8 nations to match this pledge — a call echoed by British aid agency Oxfam.
”Currently, the poorest countries are being bled dry paying the rich world $100\-million a day. Seven finance ministers (excluding Russia) can change this,” Oxfam policy advisor Max Lawson said in a statement.
However, concerns remain about corruption in certain African states, along with fears that debt cancellation may end up rewarding those who have contributed to the financial plight of their countries.
Activist have also warned that making debt write-offs subject to conditionalities — such as giving wealthy countries preferential treatment in trade or investment — might not be in the best interests of poor states.
In addition, ”There is also the danger the initiative may undermine future aid contributions. It can affect the flow of aid, as the money meant for aid might be used for writing off the debts,” said Mutasa.
Britain has promised to use its presidency of the G8 and the European Union this year to promote its plan for Africa. In February 2004, Prime Minister Tony Blair also launched a Commission for Africa, which aims to spur creative thinking on how best to solve the problems facing the continent.
A two-day meeting was held in the South African port city of Cape Town earlier this week to discuss the economic chapter of a report being produced by the commission that will be handed to the G8 in Scotland, this July.
Fourteen African finance ministers attended the Cape Town conference along with Brown, who was at the end of a week-long trip to Africa that had already taken him to Kenya, Tanzania and Mozambique.
In a speech delivered at the gathering, South African Finance Minister Trevor Manuel noted that, where there was a will to push forward with debt relief, there was also a way.
”Recent experience suggests a renewed flexibility in the treatment of debt and the readiness of developed countries to write off its servicing and/or the stock,” he said, adding ”It is appropriate to recall (that with) a single decision by the Paris Club to write off Iraq’s debt — more debt relief has been provided for a single country in one day than in all of HIPC put together.”
The Paris Club groups a number of wealthy countries which have met under the chairmanship of the French Ministry of Finance since 1956, to discuss debt rescheduling.
HIPC, the Heavily Indebted Poor Countries initiative, was launched by the World Bank and IMF in 1996, in acknowledgement of the fact that excessive debt was undermining the development prospects of poor nations. Critics allege that countries which want to take advantage of HIPC have to satisfy too many requirements — and that too little debt forgiveness has occurred, as a result.
”Even in our lifetime, our children’s lifetime or in the next generation, it will be impossible to pay all these loans,” observes Naidu.
Under Britain’s proposals, money that African states might have used for servicing loans will be spent on poverty alleviation, and health and education programmes — this to help countries achieve the Millennium Development Goals (MDGs).
Eight MDGs were agreed on by world leaders at the United Nations Millennium Summit in 2000, to address the primary stumbling blocks to development. The goals focus on, amongst others, reducing extreme hunger and poverty, ensuring universal primary education — and cutting down on child and maternal mortality.
The deadline for reaching the goals has been set for 2015.
However, a report issued on Monday by the United Nations Millennium Project noted that sub-Saharan Africa had no hope of realizing the MDGs if global leaders continued to pursue existing policies. The Millennium Project was set up by UN Secretary-General Kofi Annan to formulate strategies for achieving the goals.
Manuel said African heads of state would review progress towards reaching the MDGs in September this year. ”Meeting the financial needs of the MDGs would require at least $25-billion annually,” he noted.
More than 350 million people, or over half of Africa’s population, live on less than a dollar a day, according to the World Bank.
On a more optimistic note, the IMF says the average growth rate in 2005 in sub-Saharan Africa will exceed five percent. Inflation is expected to average 9,9% in 2005, compared to 41% in 1994.
”The World Bank has estimated that many countries in Africa could make effective use of substantially higher resource flows. Investment inflows are improving, but we continue to capture only a marginal share of global FDI (foreign direct investment) flows and market access,” Manuel said. — IPS