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Al-Ahram Weekly 24 - 30 June 1999 Issue No. 435 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 24 - 30 June 1999 Issue No. 435
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Profile Features Interview Travel Sports Time Out Chronicles People Cartoons Letters Cold comfort in Cologne
By Gamal NkrumahIs it possible to derive a moral, whether public or private, from the tragi-comic saga of debt relief? Many would have us believe so, not least the G-7 powers who, together with their new friend Russia, itself currently holding out the begging bowl, met in the German city of Cologne this week.
The seven major industrial powers -- the United States, Britain, Canada, France, Germany, Italy and Japan -- made a widely publicised gesture to placate the world's poorest and most indebted nations, pledging to write off $90 billion in Third World debts. But few were impressed, with many critics arguing that the move was nothing but a cheap publicity stunt, and certainly not a solution to a global problem of such Herculean proportions.
"Despite flowery speeches and grand gestures, G-8 leaders are offering only crumbs of comfort," explained Ann Pettifor, director of Jubilee 2000, a London-based organisation that is calling for all existing debt to be written off as a goodwill gesture for the millennium.
While the G-8 quibble over what crumbs they can afford to throw to those nations on whose backs their own historic wealth has been built, they continue to perfect their skills at robbing the poor -- an activity which they have raised over the centuries to the level of a fine art -- thanks to the new and exacting regimen of the World Trade Organisation. While the governments of the South clamour for admission to this latest club, it is their people who will have to pay the price.
The poor, unfortunately, are scarcely in a position to subsidise their elites' need for international recognition and imported goods. The 700 million people who make up the poorest 40 nations, which are also the most indebted, have to get by on an average of $4 a day, with the majority of them barely subsisting on less than $1 a day. How then can anyone expect them to carry the extra burden of debt servicing?
Yet still, their creditors demand that payment be made in hard currency, and indebted nations in Africa, Asia and Latin America find themselves obliged to export their way out of debt, thus accelerating the exploitation -- soon, exhaustion -- of their natural resources. Meanwhile, the debt is also busy, diverting scarce resources from essential development needs such as health, education, housing, infrastructural development and social welfare.
As if that was not bad enough, the supposed concessions offered by the rich often turn out, on examination, to be worthless. At best, the G-8's present gesture might make a minuscule dent in the Third World debt burden. But what is this token offer worth? Currently, the African nations are unable to make more than half their scheduled payments. Debt servicing consumes one-fifth of Africa's foreign exchange earnings, acting as a deterrent to private investment, and provoking higher inflation and increased taxation. In every case, it is the poorest who have to pay the most.
The G-8 summit kicked off with discussions as to how the $1 trillion which change hands each day in currency trading and stock exchange transactions around the world might best be controlled. This was followed by debates covering just about everything, from the Indo-Pakistan dispute over Kashmir, to Russia's economic collapse and the policing and reconstruction of Kosovo.
With their grins of smug satisfaction and plastic smiles to the posse of cameramen, the G-8 leaders cut a nauseatingly self-congratulatory figure in the eyes of the rest of the world. "I believe this summit will mark probably the biggest step forward in debt relief and help to the poorest countries that we have seen in the international community for many years," said a gleeful British Prime Minister Tony Blair. What a disappointment to the Third World Blair has turned out to be. After having dealt with the likes of Margaret Thatcher, the prospects of working with a British Labour Party leader seemed at first like a breath of fresh air. But these hopes were soon dashed. British overseas development assistance has dwindled even further since Labour was elected from its already paltry levels. Worse, the new Labourite officials, mimicking their American Democratic counterparts, now incessantly chant about the need to link human rights and good governance with development assistance. Third World officials are made into bogeymen, while the representatives of corrupt regimes complain that these days one can hardly get a word in edgeways when confronted by a British diplomat. They have brought out their sermons even as they put away their cheque books.
The rapidly deteriorating situation in Kosovo, with violence between Serbs and returning ethnic Albanians on the rise, dominated discussions at the G8 summit in Cologne, Germany. Only a day after pledging to warehouse their weapons and end their fight, Kosovo Liberation Army say they'll keep their weapons. Ethnic Albanian children returnees against the backdrop of ruins(photo: AFP)
Uncharacteristically, it was Japan, the world's largest international lender, who took the lead in this week's debate on debt relief. With nearly $9 billion in outstanding loans to less-developed countries, the Japanese want to be sure they do not have to bear the brunt of any debt write-off, especially as they are presently struggling to keep their own government deficits under control. Japanese development aid totalled $10.7 billion in 1998 -- up 14.2 per cent from 1997. Assistance to Asia alone stood at $5.3 billion, or 61 per cent of Tokyo's total contribution. The US is the second-largest global donor at $8.1 billion, while France comes third with $5.9 billion.
With the need to rebuild and keep order in Kosovo likely to take precedence over development assistance and debt relief on Western agendas for some time to come, the poor nations look like they are about to be marginalised even further.
For people with little collateral, a poor credit history and hardly a cheque guarantee card to share between them, the world's poor have managed to run up a pretty impressive slate. They currently owe in excess of $400 billion to the West. Sub-Saharan Africa alone owes $224 billion, equivalent to 80 per cent of the continent's GNP, and forks out more in debt repayments a year than it receives in aid. That's nice work, if you can get it, for the banks who lent the money in the first place. Yet for those who have to live with it, the social and environmental consequences of this reverse liquidity flow are terrifying. Angola's infant mortality rate stands at 125 per thousand live births. Less than a third of the country's 11 million people have access to potable water and consumption per capita has been dropping by eight per cent a year since 1980. Angola is no exception. Tanzania spends one-third of its budget on debt payments, four times the amount allocated to primary education, while over half its people go illiterate. Life expectancy in impoverished Niger is a mere 47 years, but the government spends more on debt payments than it does on health and education combined.
In September 1996, the US championed the so-called Highly Indebted Poor Country Initiative (HIPC). This programme aims to reduce the debt of some of the poorest countries in the world to sustainable levels through bilateral and multilateral action by creditors such as the World Bank and the IMF acting together.
The proposal was met with applause. Yet what sounded good on paper lost much of its virtue when translated into action. In sharp contrast to their reaction following the economic crisis in East Asia, when the US and its allies managed to mobilise $100 billion and bend IMF rules to salvage the economies of a number of vital trading partners, the process of raising only $7 billion needed to grant relief to roughly 20 countries under HIPC has been fraught with internal squabbles, disputes over eligibility, and outright opposition from some creditors. At the current pace, only three African countries -- Burkina Faso, Mozambique and Uganda -- will receive any HIPC relief before the year 2000.
Yet such failures are not enough to dampen the imaginative powers of development officials. One proposal currently being promoted by the IMF, with the support of the US Treasury Department, is to sell off a portion of the IMF's huge gold reserves -- worth $29.25 billion -- to finance the debt relief programme. The G-8 this week endorsed a plan to sell 10 per cent of the IMF gold for just this purpose.
On the face of it, this is another good and generous idea. But, as with all IMF and World Bank plans, there is a sting in the tail. While the IMF is ostensibly asking permission to fund debt relief, only a small portion of the proceeds of any gold sale would actually be used to reduce debt. Most of the money raised would actually go to enlarge even further the IMF's infamous Enhanced Structural Adjustment Facility (ESAF), which has already caused unspeakable suffering and heartache throughout the Third World, and in Africa in particular.
ESAF provides low-interest loans to poor countries. The catch is that in order to access these funds, debtor nations have first to implement debilitating austerity programmes such as those which have ruined the economies of countries as diverse as Russia and Indonesia. Washington argues that using IMF gold sales to fund ESAF would make the programme self-financing, and remove it from congressional scrutiny, thereby eliminating leverage. In other words, the IMF and the US Treasury Department are holding debt relief hostage to a permanent ESAF.
If there are any moral imperatives left in this brave new world at all, then surely it is vital that debt relief to the poor must not be hijacked by the very institutions whose policies perpetuate poverty, widen disparities in income and precipitate social unrest and political instability.
Moreover, if anyone should doubt the case against, there are well documented precedents for the international agencies' perfidy. In 1996 the World Bank and the IMF announced a debt-relief initiative. Yet three years later, only three countries -- Bolivia, Uganda and Guyana -- have actually received any relief under the scheme. The programme stipulates that countries which have undergone structural adjustment programmes, radical economic reform, economic deregulation and a rapid privatisation programme -- all of this under IMF supervision, of course -- would qualify after six years for enough relief to reduce the ratio of outstanding debt to export revenue to between 200 per cent and 250 per cent. Not only are the conditions draconian, but the pay-back is hardly a ticket to financial nirvana.
It was hardly a surprise, then, when a recently leaked report by the Bretton Wood institutions themselves revealed that this much-vaunted plan may actually be increasing the amount of some countries' debt payments, rather than reducing them.
US President Bill Clinton's proposal to cut the debt of the impoverished nations by $70 billion more than planned under the current IMF-World Bank programme has run into much resistance. Yet the World Bank could easily afford to write off these unsubsidised loans. According to Jeffrey Sachs, director of the Harvard Institute for International Development, the estimated cost to the US would be infinitesimal. Sachs estimates that while the book value of US loans to the worst-off countries is recorded as $6 billion, their actual economic value is in fact only about $600 million.
Faced with such an analysis, one is bound to wonder whether the charade of dramatic gestures, rubber smiles and perfectly meaningless figures that passes for development politics in the world today is not simply the modern mask of an ancient, unavowable, yet still widespread conviction: that the poor -- especially when they are black or brown, and do not vote for Congress -- are somehow less than human.
