Africa's Debt Who Owes Whom?

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Africa's Debt: Who Owes Whom?

February 26, 2004 - Foreign Policy Forum

by Salih Booker

It has become fashionable for rich countries to promote new initiatives aimed at reducing poverty in Africa. The U.S. and its European allies have, in recent years, discussed meager increases in development assistance and AIDS funding, and the possible conversion of some World Bank loans to grants for poor countries. Sadly, these pronouncements of renewed commitment to tackling Africa's underdevelopment cannot be taken seriously, for they fail to address the most obvious determinant of Africa's impoverishment -- the continent's continued debt bondage.

African countries are trapped beneath a crushing debt burden of some $300 billion. Each year, they are forced to spend nearly $15 billion repaying this debt to wealthy foreign creditors. In a continent where many subsist on less than $1 per day, African governments are required to divert huge portions of their national budgets away from addressing their critical domestic needs in order to line the pockets of rich Northern governments and financial institutions. The devastating debt burden of African countries has become the single largest impediment to Africa's development and to its economic independence. The All Africa Conference of Churches has called it "a new form of slavery as vicious as the slave trade."

Africa's debt is not only unsustainable, it is fundamentally illegitimate. During the 1970s, when Western banks were flush with oil money, loans were pushed on African governments with little thought to their purpose or to their recipients' capacity to repay the debt. Many loans were given for strategic purposes, to prop up repressive and corrupt regimes in the context of the Cold War. Now, Africa's people are expected to repay huge debts which were mainly incurred before their time and which did not benefit them.

Newly democratic African countries are required to repay loans borrowed by their previously autocratic regimes. Victims of repressive governments are forced to pay back loans incurred by the very regime that repressed them. African governments are being held liable for the cost of failed development projects imposed by creditors such as the World Bank. They are expected to foot the bill for a debt crisis that has been worsened and prolonged by the harmful policies prescribed by international creditors. These debts are fundamentally illegitimate. They should be repudiated by African governments, and their outright cancellation should be demanded from the international creditors to whom they are owed.

The toll of Africa's debt is devastating. Each year, African governments pay out more money to rich creditors than they receive in development assistance or new loans. Resources are literally being drained away off from spending on poverty reduction and basic social services in African countries. As Africa struggles to cope with the impact of the HIV/AIDS crisis, the burden of its foreign debt undermines its capacity to address this health emergency. Throughout Africa, governments are spending more money on debt repayment than on health care for their own people. Meanwhile, half of Africa's population lives without access to safe water, and a growing number of African children receive neither basic health care nor primary education. As Julius Nyerere, former President of Tanzania, once asked: "Must we starve our children to pay our debts?"

The Heavily Indebted Poor Countries (HIPC) Initiative was designed to provide a lasting solution to the debt crisis of the world's poorest countries. Created by the World Bank and IMF in 1996, and "enhanced" in 1999, it aims to enable selected African countries to achieve some measure of debt relief by complying with rigid economic reforms imposed by creditors. The HIPC Initiative has failed utterly as a response to the debt crisis. Of the twenty six developing countries that have qualified to receive some form of debt relief, all face continued high levels of debt and most are still required to spend more money in debt repayments than on the health of their own people. On average, countries have seen a reduction of less than one-third in their annual debt repayments.

The reality is that the HIPC Initiative is designed to serve creditors, by squeezing the maximum possible in debt repayments from the world's poorest economies. Even measured against its own criteria, it is failing to provide adequate debt relief to eligible countries, according to the World Bank's own data from new reports. The debt of African countries remains a crippling burden that the current debt relief framework cannot resolve. New legislative vehicles, recently introduced in Congress, that seek to further enhance the HIPC scheme are operating from a flawed premise. Trying to wring the most benefit from a failed initiative is not a sound approach to solving the debt crisis. Moreover, when debts are illegitimate, their cancellation should not be tied to conditions determined by creditors. Indeed, these conditions only permit rich country creditors to retain inappropriate and deleterious control over African economies.

After five centuries of foreign powers plundering Africa's human and natural resources with neither accountability nor compensation, the very notion that Africa owes to them a debt is an outrage. Who really owes whom? The cancellation of Africa's illegitimate debt is both a moral imperative and an economic precondition to development. Just as Germany's debts were written off by the U.S. after World War II, in order to promote growth and stability, Africa must free itself from debt bondage as a first step to poverty reduction. At a time when the U.S. is promoting the cancellation of Iraq's illegitimate debts, the refusal to support the cancellation of Africa's debt reveals a blatant double standard in international relations.

When the "Group of 7" richest countries gather for their annual meeting in the U.S. this June, they will discuss the global challenge of poverty and the plight of Africa in particular. They must face up to Africa's debt crisis. Either the G-7 continues a system where money continues to be drained out of Africa far more quickly than it is trickling in, or they acknowledge its illegitimacy and its immorality and cancel the debt unconditionally. Until this happens, the war on AIDS in Africa -- which is more important than the war on terrorism -- will be lost.

reprinted from Africa Action

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