[stop-imf] Debt relief for poor countries held up by discord

[rob@essential.org]

Excerpt:

The US Treasury said it was concerned that countries would use increased
debt relief as an excuse to borrow more from the bank. "We are concerned
about the bank being in a position where it is in a continual cycle of
lending and forgiving," said a US Treasury official.

Full story:

                     Debt relief for poor countries held up by discord
                     By Alan Beattie in Washington
                     FT.com site; Feb 12, 2004

                     The initiative to write off debt owed by the world's
poorest countries to the International
                     Monetary Fund and World Bank has been held up by a
dispute among rich nations on
                     how much relief to grant.

                     The arguments centre around the effect of lower global
interest rates on the debt relief
                     calculations used by the heavily indebted poor
countries (HIPC) programme.

                     They mean that the value of future debt payments in
present value terms, discounted
                     back to the present day using interest rates, are
larger.

                     Officials familiar with the situation say that some
countries on the IMF and World Bank
                     boards, including the UK, France and Canada, have
argued that the amount of debt
                     relief on offer by the bank and fund should take
account of this. Others, who they say
                     include the US, Japan and Germany, have disagreed.

                     The US Treasury said it was concerned that countries
would use increased debt relief
                     as an excuse to borrow more from the bank. "We are
concerned about the bank being
                     in a position where it is in a continual cycle of
lending and forgiving," said a US
                     Treasury official.

                     This dispute has already arisen with the west African
country of Niger - made famous
                     by the dispute over whether Saddam Hussein, the former
president of Iraq, tried to buy
                     uranium from the country.

                     Niger has also been hit by falling world uranium
prices which have damaged its ability
                     to hit key debt-to-export ratios, a slide in the
volume of uranium exports slides and a
                     projected drying-up of aid from rich countries,
particularly the European Union.

                     IMF-World Bank staff calculations suggest Niger will
have a debt-to-export ratio of 200
                     per cent without "topping up", or increasing the
amount of relief halfway through the
                     process.

                     This would leave it well in excess of the 150 per cent
target set by the HIPC
                     programme, officials familiar with the study said.

                     Executive board meetings of the IMF and World Bank to
discuss debt relief for Niger
                     were postponed last month when it became clear that
agreement could not be
                     reached on the amount of topping-up necessary,
according to the officials.

                     The amount of topping-up under question, $142.5m
(?112m, =A377m) in net present
                     value terms, is sizeable in comparison with Niger's
overall $500m in promised debt
                     relief. The same issue will come up repeatedly with
each country finalising its debt
                     relief arrangements. Next in line is Ethiopia.

                     Campaigners complain that the fund and bank are
dragging their feet on granting debt
                     relief to Ethiopia. "By bending over backwards to
cancel Iraq's debt, and at the same
                     time wilfully flouting their own commitments to
Ethiopia, creditors are breaking
                     promises to their electorates, as well as undermining
progress in heavily indebted
                     countries," said Ann Pettifor, director of Jubilee
Research at the New Economics
                     Foundation in London.

                     The HIPC programme applies to around 40 of the world's
poorest countries, mainly in
                     sub-Saharan Africa. Development campaigners have
complained that criteria for
                     calculating relief were arbitrary and inadequate.


Aldo Caliari
Coordinator
Rethinking Bretton Woods Project
Center of Concern



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