[stop-imf] Reasons to Come to DC for A16 No. 2: IMF/World Bank Sham Debt Relief

Fri, 7 Apr 2000 14:07:48 -0400 (EDT)

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This is the second in a series of one pagers on "Reasons to Come to DC for
April 16."  A version formatted in MS Word is attached. Please spread
these widely, and feel free to lift from them for your own use.

For more on the demonstrations, go to www.a16.org

Robert Weissman
Essential Information			|   Internet:	rob@essential.org

Essential Action
P.O. Box 19405
Washington, D.C.  20036
TELEPHONE: 202-387-8030       o       FAX: 202-234-5176       o
E-MAIL: ACTION@ESSENTIAL.ORG

Reason No. 2 to Come to DC on April 16:
International Monetary Fund (IMF)/World Bank "debt relief" for 
poor and indebted countries is a sham

Many poor countries must devote huge portions of their national budgets to
paying back foreign creditors -- often for loans that were made to or for
dictators, wasteful military spending or boondoggle projects. The poor
countries of sub-Saharan Africa, for example, owe more than $200 billion
in foreign debt -- three times more than they earn annually in exports.
About 20 percent of sub-Saharan African countries' export income (not
counting South Africa) goes to service foreign debt.

A huge part of poor country economies must be devoted to producing goods
for export -- with the resultant income sent back out of the economy and
not available for domestic use, including for such important domestic
needs as healthcare, education and infrastructure. 

The IMF program for helping poor countries that are deeply in debt was,
until recently, called the Enhanced Structural Adjustment Facility (ESAF).
Last year, under fire for a program poorly run, the Fund changed the name
to Poverty Reduction and Growth Facility (PRGF). This program is operated
in conjunction with the World Bank's Heavily Indebted Poor Country (HIPC)
Initiative.

The purpose of PRGF/HIPC is to provide some debt relief  -- that is, to
cancel part of the debts -- for poor countries that have no hope of paying
back their foreign debt and for whom debt payments are draining their
economy.

However, the debt relief afforded by PRGF/HIPC is very modest, and will
leave most poor countries paying nearly as much as they currently do.
Under the plan, many countries find that while the absolute amount of
their debt may decline, only about 15 countries will see the amounts they
actually pay affected meaningfully.  

As Joe Hanlon, a Jubilee 2000 UK analyst, explains, "Of the $207 billion
HIPC country debt, approximately $100 billion is not being serviced --
mainly with the agreement of the IMF and World Bank  . This means the Bank
and Fund have already admitted that this money will never be paid. So the
$100 billion now on offer is only equivalent to the money that it is
already accepted will never be paid -- in effect this much debt can be
written off without real cost since it would never have been paid."

Compounding the problem, the price of receiving debt relief under the
PRGF/HIPC program is implementing a carefully supervised structural
adjustment program for three years -- even though structural adjustment
programs worsen poverty.

The IMF and the World Bank should use their existing resources to fully
cancel the debts owed them by the poorest countries -- without any
structural adjustment conditions attached. This is something they are
perfectly able to do, as Harvard Professor Jeffrey Sachs and many others
have shown.

FOR INFORMATION ON THE APRIL 16 PROTESTS IN DC, GO TO WWW.A16.ORG

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