/ 26 July 2019

Why debt is a human rights issue

Government debt places a huge burden on taxpayers to fund service delivery.
Government debt places a huge burden on taxpayers to fund service delivery. (Adrien Barbier/ AFP)




The changing nature, profile and level of public debt in some of the Southern African Development Community (SADC) countries has reached alarming and unsustainable levels. As a result, essential services, such as public transport, water infrastructure, education and healthcare, as well as development projects, continue to be severely affected as governments have to use resources to pay off massive amounts of debt.

READ MORE: Double debt risk for African countries that turn to China

The situation became critical as far back as the 1990s, when most of the SADC countries experienced high levels of external debt, reaching a total high point of $62.12-billion in 2001. This was more than 100% of the combined gross domestic product of Angola, the Democratic Republic of Congo, Malawi, Mozambique, Tanzania and Zambia.

READ MORE: Fears of hidden debt in Zambia

It has not been easy for countries to use money intended to improve people’s lives to instead pay the high interest rates associated with these loans; as a result, many have defaulted on their repayments.

Some countries in SADC have benefited from the Heavily Indebted Poor Countries Initiative, a programme launched by the World Bank and International Monetary Fund (IMF) in 1996 to offer debt relief for nations with unsustainable debt burdens. Unfortunately, some of the countries that benefited, such as Zambia, are back in the jaws of unsustainable debt.

In response to the growing problem of indebtedness, SADC adopted a memorandum of understanding on macroeconomic governance in 2011, with the aim of reducing public debt. The memorandum also demanded that governments should be transparent about public resource management. But the results are far from offering confidence to tackle the debt conundrum.

Public debt is a human rights issue because many countries in Southern Africa that owe large amounts of money are failing to deliver on essential public goods and infrastructure. These public services are often captured in bills of rights, thus making them a constitutional obligation rather than a nice to have. Long-term development goals are, therefore, placed at severe risk.

For example, Zimbabwe, with a public debt of more than $18-billion, is in a precarious financial position. It is unable to meet many of its fundamental human rights obligations: people are being turned away from hospitals and essential basic supplies for treating cancer and other serious conditions are lacking.

The dire situation was made even worse when dozens of people died in a 2018 cholera outbreak 10 years after another outbreak killed more than 4 300 people. Such epidemics have been exacerbated by Zimbabwe’s failure to invest in and manage its basic water and sanitation infrastructure and its healthcare system, owing to servicing huge debts, as well as misappropriation of public funds.

Mozambique was plunged into a financial crisis in 2016 after the uncovering of almost $2-billion of “secret” loans, which it was suspected were part of an “illicit enrichment” scheme for politicians and international bankers. There is not much evidence that this money was used to enhance public services, and there are suspicions that a large chunk of it ended up in the pockets of highly connected individuals.

Today the country is broke and is failing to meet its obligations to the public. The government is continuing to borrow from creditors just to keep going. In addition, Cyclone Idai has meant that the country will have an added debt burden of $118.2-million through IMF and other loans.

In Malawi, a recent study found that the country signed more than 80 loan agreements, amounting to $2-billion, between 2007 and 2018. These loans, clouded in secrecy, were mostly taken with bilateral partners such as China and India and the money has not translated into advancements in education, public health and transport. Many Malawians remain desperately poor, surviving from hand to mouth.

Zambia says that its foreign debt stands at $9.4-billion, but analysts believe the number is considerably higher, at about $10.2-billion. Activists who questioned exorbitant levels of government spending have faced persecution.

In addition, Malawi, Mozambique and Zimbabwe were hit in March by Cyclone Idai, one of the most devastating natural disasters on record in the region. At least 1 200 people died and thousands were plunged further into poverty.

Government debt places a huge burden on taxpayers, who ultimately are liable for paying back the money. The concept of paying tax to achieve better public services is defeated when taxes are largely channelled towards servicing loans. At the same time, governments may be forced to cut expenditure on vital services, resulting in a double hit for citizens.

Given the changing nature of debt accumulation — where governments now access loans not only from non-traditional creditors, such as the Paris Club, and from countries such as China, which, according to estimates now holds more than 20% of the $417-billion collective African debt — there are also growing cases of governments accessing loans from commercial sources, further worsening the region’s debt burden. Reports of natural resources being used as collateral for loans have become a new are of concern, with fears that some countries, including Angola, will not maximise the potential of their natural resource wealth as the future is potentially mortgaged.

Governments in the region, together with lending states and international financial institutions, must ensure that the terms of any agreement on debt, including the financial burden of debt servicing, do not compromise states’ ability to allocate the necessary financial and other resources to guarantee economic, social and cultural rights for all their people. This begins with ensuring transparency on the terms and conditions of these loans, as enshrined in the SADC agreement so that we can hold governments, both in the region and beyond, to account.

Deprose Muchena is Amnesty International’s regional director for Southern Africa and spoke at the Southern Africa Debt Conundrum event, recently convened in Johannesburg by the Open Society Initiative for Southern Africa