- Yesterday's decision by the G8, the world's eight richest countries, to write off poor countries' debts of some US$ 40 billion has been met with mixed comments. Economic liberalisation, anti-corruption and privatisation conditions are also linked to this new debt relief, thus excluding poor economies such as Nigeria, Kenya and Guinea. Only 18 countries are automatically qualified.
The G8 summit in London produced an expected new commitment by the world's eight leading economies (the US, Japan, Germany, Canada, France, the UK, Italy and Russia) to enhance debt reduction efforts targeting the poorest countries. The pledge to eliminate 100 percent of the debt of certain countries to the World Bank, the International Monetary Fund (IMF) and the African Development Bank (AfDB).
This additional debt reduction is valued at between 40 and 55 billion US dollars, depending on how many countries will get access to the initiative. Some 18 countries are already eligible to the debt relief, being those that have already qualified for another - and more ample - debt relief through the conditional so-called enhanced Heavily Indebted Poor Countries (HIPC) initiative.
The countries are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia. All of them have had to introduce wide-ranging economic reforms as a pre-condition to achieve debt relief.
These conditions aim at fighting corruption, increasing economic growth and redirecting expenditures towards the poor. The prescribed "economic cure" however includes total market liberalisation, privatisation of state assets ranging from railways to water resources and health providers, removal of subsidies and reduction of public employees including in the health and education sectors. While often successful in increasing growth, these reforms mostly have not helped reducing poverty.
The "new" debt relief to be given from the World Bank, IMF and AfDB is based on the same conditions. According to the statement issued by the G8, poor countries need to "tackle corruption, boost private sector development and attract investment" and they must eliminate "impediments to private investment, both domestic and foreign."
To be considered for debt cancellation, poor countries thus again will need to agree to the economic reform prescriptions by the IMF. Only after being approved by the Fund, standard debt relief can be achieved, leading to an extra debt relief from the World Bank, IMF and AfDB. This means that most poor and heavily indebted African countries are still far from reaching a cancellation of their debt.
In Kenya, for example, the government's anti-corruption policy is going too slowly and the social reforms providing education and health services to a greater part of the population are seen as too expensive by the IMF. Large and unwanted reforms need to be implemented if Kenya is to get debt relief. Kenyan government officials this weekend thus were disappointed by the G8 initiative, saying the country was tired of being punished for being so faithful servicing its debts.
Nigeria, being Africa's most populous country and among the poorest and most indebted, also has no debt relief in sight. The government here has refused to implement a total liberalisation of its economy, seeing positive results after its efforts to rebuild its protected industry. The IMF further criticised Nigeria's slow implementation of its anti-corruption policies.
A large list of African countries is punished for not implementing IMF policy reforms. In Guinea and Zimbabwe, the inability to service foreign debts has only caused the Fund, the World Bank and Western countries to freeze all aid, causing the economic situation to deteriorate. Post-conflict countries such as Guinea-Bissau, the Central African Republic and Liberia are punished for their lack of government capacity to implement reforms.
Politicians from these countries and most activists calling for a total debt cancellation thus are disappointed by the limited progress made at the G8 summit. In the 18 countries qualified for immediate debt relief, however, the G8 decision was warmly welcomed and seen as a recognition of their great reform efforts.
The US$ 40-55 billion debt relief promised by the G8 will reach a rather small part of the world's population. Only in Africa, the debt owed to foreign entities amounts to an estimated US$ 250 billion. African state leaders such as Nigerian President Olusegun Obasanjo thus called on the industrialised nations to rather concentrate on reaching the UN's pronounced goals of development aid levels.
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