[stop-imf] IN AFRICA, DEBT RELIEF HAS TWO SIDES - The Los Angeles Times (fwd)

[Robert Weissman]

The Los Angeles Times=09=09=09=09Thursday, January 27, 2000
=20
IN AFRICA, DEBT RELIEF HAS TWO SIDES=20

=09Misery is being eased by the willingness of rich nations and big=20
=09lenders to cancel the financial obligations of poor countries. But=20
=09critics say the plans could perpetuate the shackles of=20
=09colonialism.=20
=20
=09By Dean E. Murphy, Times Staff Writer

BUGIRI, Uganda--Until recently, school here was conducted on a=20
patch of trampled earth beneath a giant berry tree. For the lucky=20
few, there was a pair of grass huts. Now, the children meet beneath=20
shiny metal roofs in brick classrooms at the Namayemba Primary=20
School, one of thousands of development projects across Africa.=20
=09But the Namayemba school is different in a potentially=20
momentous way: Construction money came from a new account=20
created when foreign lenders canceled some Ugandan government=20
debt. And because of strict controls, none of the newly freed-up=20
cash appears to have been stolen or misused.=20
=09The unusual approach to financing the school is at the center of=20
a contentious overhaul of the global creditor-debtor relationship. At=20
a time of unparalleled prosperity in the United States and Western=20
Europe, the world=92s most impoverished countries are poised to=20
benefit from billions of dollars in canceled debts owed to wealthy=20
countries and big international institutions.=20
=09In order to reap this reward, strapped governments, mostly in=20
Africa, have decided to play by the rules of the powerful lenders.=20
Uganda, an East African nation of 22 million, is the first to benefit=20
by redirecting money once earmarked for paying off debts to such=20
things as building schools and buying medicine.=20
=09Two dozen African countries are lined up for the unprecedented=20
debt assistance, but the write-offs have touched deep emotions. On=20
a continent where bad governance and corruption are endemic, and=20
Washington-based international institutions have patchy records,=20
the debt relief programs run by the International Monetary Fund=20
and the World Bank are being scrutinized through the prism of=20
Africa=92s tumultuous past.=20
=09At the center of the debate is a battle over what strings should=20
be attached to debt relief--and how much of the developing world=92s=20
estimated $2.3-trillion debt should qualify. Some critics complain=20
that the stringent structural adjustments required by international=20
lenders could perpetuate the paternalistic north-south dynamic that=20
has shackled the continent throughout its modern history. Others=20
counter that without such tough guidelines, inept African leaders=20
will squander the money they save.=20
=09=93Debt and debt relief are normally subjects for economists, but=20
there is nothing academic about them,=94 President Clinton said in=20
September. =93We have before us perhaps as great an opportunity as=20
the people of the world have ever seen.=94=20
=09Nearly half of all Africans live on less a year than the average=20
American family pays for a cable television subscription. The=20
Mozambican legislature recently calculated that Europeans spend=20
more annually on ice cream than would be needed to provide=20
primary education, clean water and sanitation for the tens of=20
millions of Africans without such basic services.=20
=09Meanwhile, Africa=92s poorest governments are spending up to=20
25% of total revenue on debt payments to foreign lenders.=20
=09Prodded by grass-roots anti-poverty movements worldwide,=20
Clinton, British Prime Minister Tony Blair and others say the=20
helping hand for indebted countries is long overdue. Clinton has=20
proposed a U.S. contribution of $800 million over the next four=20
years to help finance $50 billion in global write-offs, although=20
Congress in November refused to approve the first year=92s=20
allocation.=20
=09Separately, the United States has already forgiven more than=20
$1.2 billion in debt owed it by 20 African countries. Next year=92s=20
budget includes an additional $110 million to write off more debt as=20
part of the worldwide debt relief programs.=20
=09The world=92s poorest countries owe the bulk of the money to=20
private and public lenders in the United States, Europe and Asia as=20
well as to the IMF and the World Bank. The funds were borrowed=20
by post-colonial governments over the past few decades and in=20
most cases were mismanaged, stolen, squandered or lost on the=20
battlefield. Some of the lenders, flush with cash, clearly overreached=20
or were guilty of bad judgment.=20
=09The poor countries say they cannot possibly repay the loans. An=20
estimated 55% of poor-country debt is not being paid, according to=20
the Jubilee 2000 Coalition, a London-based group lobbying for debt=20
cancellation.=20
=09But the cancellation of Third World debt is much like the=20
refinancing of a personal loan: Borrowers don=92t save a penny unless=20
they agree to the fine print. And there is no guarantee that debtors=20
will like the conditions, be grateful or see anything but self-interest=20
on the part of those offering to help.=20
=09Powerful organizations such as the IMF say they want to make=20
sure that savings from canceled debts do not pad the Swiss bank=20
accounts of African autocrats or bankroll their wars. They intend to=20
direct debt relief to causes they deem worthy, by imposing=20
guidelines on who qualifies, when and how.=20
=09=93It is not that there is any resistance to debt relief, but we can=92t=
=20
just write a blank check that says you don=92t have to pay your bills,=94=
=20
said Robert L. Mallett, U.S. deputy secretary of commerce. =93We=20
cannot have Africa operating with a double standard.=94=20

Economic Criteria to Qualify Are Exacting=20

=09Before qualifying for the kind of relief Uganda got last year,=20
most eligible African countries will have to meet exacting economic=20
criteria. They will be judged on everything from trade liberalization=20
to taxation policies to the selling of state-owned companies.=20
=09The IMF, the World Bank, the United States and others say that=20
African countries must open up to the global economy--and control=20
wasteful internal spending and inflation--if debt relief is to be put to=20
lasting use. African countries from Ghana in the west to Tanzania in=20
the east have concluded that IMF-mandated reforms are their best=20
option.=20
=09But in the past, reforms imposed from the outside have failed in=20
some countries, leaving the poor no better off. A growing=20
worldwide movement--which has attracted a following ranging=20
from Irish singer Bono to former heavyweight boxing champion=20
Muhammad Ali to Pope John Paul II--is demanding that debts=20
deemed unpayable be canceled outright. Adherents of this approach=20
insist only on bare-bones conditions--mainly, making sure that the=20
money is properly accounted for and is directed exclusively toward=20
helping the poor.=20
=09Some African leaders, moreover, want to ensure that debt=20
assistance does not further solidify the economic dominance of the=20
developed world. They would like to cut out the middlemen such as=20
the IMF and the World Bank.=20
=09=93For debt relief to work, let the conditions be set by civil=20
society in our countries, not by big world institutions using it as a=20
political tool,=94 said Kennedy Tumutegyereize of the Uganda Debt=20
Network, a coalition of advocacy groups. =93That way, we can=20
promote democracy and human rights with debt relief. Right now,=20
there is a general belief that no African government can survive=20
without a master in the north.=94=20
=09According to a survey cited by Oxfam International, a London-
based network of aid agencies, three-quarters of the African=20
countries undergoing IMF-mandated reforms in the 1980s and=20
1990s cut public spending on education.=20
=09An IMF study last year of 66 countries worldwide that have=20
followed IMF economic programs found that per capita spending=20
on education increased in Asia, Latin America and the Caribbean--
but fell in sub-Saharan Africa. Oxfam and other advocates for the=20
poor fear that IMF-guided debt assistance will only make things=20
worse, at least in the short term, as governments rein in social=20
spending to meet inflation and budget targets required for the write-
offs.=20
=09=93This is precisely the form of slavery that we . . . so roundly=20
condemn,=94 said Anglican Archbishop Njongonkulu Ndungane of=20
South Africa, a prominent proponent of cutting African debt with=20
few strings attached. =93Secretive, behind-closed-doors negotiations=20
between political elites in Africa and bureaucratic elites in=20
Washington foster corruption and undermine democratic=20
accountability in Africa.=94=20

Uganda Is Debt Relief=92s Poster Child=20

=09Even Uganda had its assistance delayed for more than a year=20
because of unhappiness among lenders. But those problems aside,=20
Uganda remains the poster child of international debt relief.=20
=09Last year, Uganda became the first country to qualify under a=20
recent IMF-World Bank debt initiative, with about $650 million in=20
loans wiped off the books. Uganda met the criteria well ahead of=20
other countries because President Yoweri Museveni had followed a=20
strict regimen of IMF and World Bank medicine since the late=20
1980s.=20
=09=93There must be some benchmark for the [debts] to be forgiven,=94=20
Museveni said in an interview. =93[One] must show signs that he is=20
managing his economy well, that he has made the necessary=20
reforms. There must be linkage between forgiveness and the policy=20
of reform.=94=20
=09After disastrous rule by Idi Amin and then Milton Obote, a=20
devastating civil war and a brief experiment with go-it-alone=20
economic policies, Museveni turned the country in 1987 irreversibly=20
toward Western-style fiscal and monetary conservatism.=20
=09The government cut public spending--including per capita=20
allowances for education--tackled inflation and promoted economic=20
growth. By the mid-1990s, with the economy in relatively good=20
order, it then shifted toward anti-poverty efforts--which included=20
big increases in health and education spending and strong appeals=20
for international debt relief.=20
=09=93A lot of countries are watching Uganda=92s experience,=94 said=20
Randolph Harris, the World Bank=92s representative in Kampala, the=20
Ugandan capital. =93A lot still needs to be done, but they are doing=20
things right.=94=20
=09In this muddy farming district 100 miles east of Kampala,=20
money from canceled debts has helped pay for antimalarial drugs,=20
new dirt roads to remote villages and, so far, enough bricks to build=20
29 classrooms, including two at the Namayemba school.=20
=09Pastor Edward Nikanori, who heads the PTA at Namayemba=20
and runs a nearby church, said the improvements may seem small to=20
outsiders. God knows, he said, a lot more is needed. At=20
Namayemba, pupils outnumber teachers by about 100 to 1. In first=20
grade, there are only 15 textbooks for 400 pupils. And despite the=20
new drugs, someone dies of malaria about every other day.=20
=09Even so, residents are so thrilled with the progress--any=20
progress--that theft and corruption have been nonexistent, the=20
pastor said. Normally, local government officials acknowledge, it is=20
a struggle to keep international donations and other funds from=20
going missing. Even bricks for public buildings walk.=20
=09=93Everyone is admiring this place when they pass on the road,=94=20
said Nikanori, proudly summoning the student body to pose for a=20
picture outside the newest classroom. =93Parents now have started=20
contributing to build three more classrooms of our own. There is=20
optimism like we never had before.=94=20
=09It is because of the excitement in Bugiri and a handful of similar=20
places in Uganda that many proponents of debt relief are urging=20
Africans to follow the Ugandan example.=20
=09Uganda=92s poverty reduction program is the sole beneficiary of=20
savings from its canceled debts. Every dollar not paid in debt=20
service is placed in a government =93poverty action fund.=94=20
=09All contributions to the poverty fund--including canceled debts,=20
international donations and Ugandan government money--can be=20
publicly tracked. Last year, most of the money came from debt=20
relief. The increasingly popular fund contains about $105 million=20
this year, of which $44 million came from debt relief.=20
=09The Ugandan government is also trying to tackle chronic=20
corruption by opening its books. The parliament invites=20
nongovernmental organizations to monitor its work, particularly the=20
anti-poverty programs. The media have also been given a free hand=20
to scrutinize government spending, something not tolerated in many=20
African countries.=20
=09=93We recognize we cannot move forward with more debt relief if=20
there is a lack of transparency and accountability,=94 said Damoni=20
Kitabire of Uganda=92s Ministry of Finance.=20
=09There have been mistakes and setbacks.=20
=09Uganda=92s costly military involvement in Congo, where many=20
Central African countries have intervened in a civil war, has raised=20
fears about the country=92s defense spending. Several high-profile=20
government officials have been ensnared in corruption scandals--an=20
indication that Uganda has far to go in conquering corruption. And=20
even with its newfound openness, the government has been accused=20
of cooking statistics; one top official was greeted with derisive=20
laughter last year when he announced in parliament that the=20
economy was growing at a rate higher than almost anyone believed.=20
=09Early last year, the Danish government decided not to increase=20
its aid to Uganda because of worries about how the money was=20
being handled. Uganda, which received $69.5 million from=20
Copenhagen last year, is the No. 1 recipient of Danish foreign=20
giving.=20
=09=93We have had several cases of funds being misused,=94 said Jens=20
Rasmussen of the Danish Embassy in Kampala. =93It is a general=20
problem in this part of the world.=94=20

Many Lenders Stopped Expecting Repayment=20

=09Despite such obstacles here and in other developing countries,=20
leaders of the big industrialized nations concede that more must be=20
done to help the world=92s worst off. But with little interest in=20
spending a lot of money, they have turned to old debts to plug the=20
hole. Many lenders had given up on getting the money back=20
anyway.=20
=09Three years ago, the IMF and the World Bank launched the=20
program intended to reduce repayments for the world=92s poorest 41=20
countries. The so-called Highly Indebted Poor Countries initiative,=20
or HIPC, is the centerpiece of international debt-relief efforts,=20
though it falls far short of total cancellation.=20
=09So far, only Uganda and a handful of other countries have=20
qualified. Leaders of the big industrialized countries who met in=20
Cologne, Germany, last spring decided to ease the qualifications,=20
but they were hazy about how to pay for the greater generosity.=20
The cost of the expanded program, according to the IMF, will=20
increase from $12.5 billion to $27.5 billion.=20
=09In contrast, a comprehensive write-off would mean erasing=20
between $130 billion and $370 billion from the books, according to=20
various calculations.=20
=09=93If the developed countries are serious about human equality=20
and equity, they should give Africa this chance,=94 said Ndungane,=20
the South African archbishop. =93Germany was flattened during=20
World War II but given a lease on life with the Marshall Plan and a=20
transfer of technology. Let=92s give the developing nations the=20
wherewithal to help themselves.=94=20
=09The governments that are keeping up with payments say the=20
burden is so great that they have little left for education, health care=20
and other essential services. The IMF counters that poor=20
governments, on average, receive twice as much money in foreign=20
aid as they pay in debt service, but many governments say that is=20
small comfort when poverty is so pervasive and aid worldwide is=20
decreasing.=20
=09=93Our debt service equals 25% of the total revenue of the=20
government,=94 said Gabriel Fabiao Mambo of the Ministry of=20
Planning and Finance in Mozambique, until recently the world=92s=20
poorest country. =93That means we are left fighting poverty with just=20
three-quarters of our resources.=94=20
=09Mozambique is one of the most recent beneficiaries, and the=20
biggest, of the IMF-World Bank program. In June, the former=20
Portuguese colony became the fourth country to get relief. Uganda=20
was the first, in April 1998, followed by Bolivia and Guyana in=20
South America.=20
=09The Mozambican package is worth about $3.7 billion and, over=20
the next five years, will cut the country=92s external public debt by=20
almost two-thirds. But Mozambican President Joaquim Chissano=20
says it is not enough for the former Marxist economy to get firmly=20
on its feet.=20
=09In the vicious circle of down-and-out economies, Chissano and=20
others say, poor countries will never attract the foreign investment=20
they need so long as their debt burdens remain so high; the massive=20
obligations scare away investors and rob governments of money=20
they could use to attract business.=20
=09Even with the new write-offs, Mozambique must pay an=20
estimated $73 million a year in debt service for the next five years--
about 10% of government revenue. Chissano says it is too much,=20
and he is already pushing for total cancellation.=20
=09Mozambique will probably get more relief under the beefed-up=20
HIPC program. But that too will probably not be enough. Mallett,=20
the U.S. commerce official, recently warned Africans that they must=20
root out corruption, stop killing one another and foster more=20
regional cooperation to win the lasting confidence, goodwill and=20
financial commitment of developed nations.=20
=09=93The global economy is here, and unlike Europe [after World=20
War II], you don=92t have 40 years to get your act together,=94 he said.