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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