[stop-imf] Africa Action: Africa's & Iraq's Debt - Washington's Double Standard

[Robert Weissman]

April 21, 2004

FOR IMMEDIATE RELEASE
Contact: Ann-Louise Colgan 202-546 7961

Africa Action Protests 60th Anniversary of World Bank & IMF

Releases new Talking Points on Africa's debt & Iraq's debt;
Co-Sponsors "Unhappy Birthday Party" outside World Bank

Wednesday, April 21, 2004 (Washington, DC) - As the World Bank and IMF
begin their annual Spring meetings in Washington, DC, Africa Action today
co-sponsors an "Unhappy Birthday Party" to protest the harmful policies of
these institutions, which mark their 60th anniversary this year. Salih
Booker, Executive Director of Africa Action will be among the speakers at
the "unhappy birthday" rally to be held outside the World Bank from 12
Noon to 2:30pm this afternoon.

Also today, Africa Action releases a new set of talking points entitled,
"Africa's Debt & Iraq's Debt - Washington's Double Standard." This
document notes the refusal of the World Bank and IMF to put Africa's debt
crisis at the top of their meeting agenda this week and strongly condemns
the failure of the U.S. government to advocate for an urgent solution to
Africa's debt crisis, as it has been doing in the case of Iraq.

Salih Booker, Executive Director of Africa Action said today, "This week,
the U.S. and other rich countries who control the World Bank and IMF will
again refuse to address Africa's devastating debt burden. At the same
time, however, the Bush Administration has been actively pursuing the
cancellation of Iraq's foreign debt. This reveals a blatant double
standard in U.S. policy that should be rejected outright."

The talking points, included below, note the terrible human toll of
Africa's $300 billion debt burden, and the illegitimate and odious nature
of much of this debt. As African countries struggle to cope at ground-zero
of the HIV/AIDS pandemic, they are forced to spend more money each year
repaying old, illegitimate debts than they can spend on health care for
their own people.

Africa Action notes that the current international debt relief framework,
the Heavily Indebted Poor Countries (HIPC) Initiative is widely
acknowledged to have failed as a solution to the debt crisis. But the U.S.
government, the largest shareholder at the World Bank and IMF, refuses to
use its power to advocate for debt cancellation for Africa. Rather, since
December, the White House has been aggressively pursuing the cancellation
of Iraq's foreign debts.

According to Booker, "There are strong reasons to consider canceling
Iraq's debts, but these arguments must also apply in the case of African
countries. If Iraq's debts are considered 'odious', then much of African
countries' debts, also the product of corrupt and repressive leaders, must
similarly be considered odious."

Booker continued, "As the World Bank and IMF meet this week, the U.S.
should use this opportunity to call for the cancellation of Africa's
debts. These institutions can afford to do this from their own resources,
and this can be the only logical outcome of the Bush Administration's
policy on Iraq's debt."

Today's "unhappy birthday party" will bring activists from around the
country to Washington, DC to demand debt cancellation for poor countries
and to deliver thousands of "unhappy birthday cards" on the World Bank and
IMF's 60th anniversary. Africa Action joins Jubilee USA Network and other
sponsors in declaring, "It's no Time for a Party! It's time to Drop the
Debt!"

The full set of talking points follow, and are also available on Africa
Action's website at
http://www.africaaction.org/newsroom/docs/africairaq0404.pdf :

-MORE-

Africa's Debt & Iraq's Debt - Washington's Double Standard

Talking Points by Africa Action
April 2004

"When a despot falls, his debt should disappear with him. That is what the
White House has tasked former Secretary of State, James Baker, to convince
Iraq's major creditors to accept. But when it comes to Africa, Washington
practices a double standard..."

This week when the World Bank and International Monetary Fund (IMF) hold
their annual spring meetings in Washington, DC, Africa's debt crisis will
hardly appear on their agenda.

As these wealthy and powerful institutions mark their 60th anniversary,
the U.S. and other rich countries that control them will again this week
refuse to address the massive burden of illegitimate debt that African
countries face. At the same time, however, the Bush Administration has
been actively pursuing the cancellation of Iraq's $120 billion debt as a
means to support that country's supposed transition to democracy.

The following talking points explore the double standard in U.S. policy
that brings the White House to advocate for the cancellation of Iraq's
unsustainable debt burden but causes it to ignore the massive debt crisis
faced by African countries.


Africa's Debt Crisis

* Africa's external debt burden currently stands at more than $300
million, in a continent where most people subsist on less than $1 per day.
* Africa's debt crisis is the single biggest obstacle to the continent's
development and to the fight against HIV/AIDS. It represents a crippling
load that undermines economic and social progress.
* African countries spend almost $15 billion each year repaying debts to
the World Bank and International Monetary Fund (IMF) and other creditors.
* Servicing these debts diverts money directly from spending on health
care, education and other important needs. While African countries
struggle to cope with the devastating effects of the HIV/AIDS crisis, they
are currently forced to spend more money on debt repayments than on health
care for their people.
* This year almost 3 million Africans will die of AIDS. 500,000 African
children will die of malaria. These deaths could be prevented if African
governments could spend more money on health care than on debt repayments.
* It is estimated that African countries pay $1.51 in debt service for
every $1 they receive in aid.


Illegitimate Debt

* Most of Africa's foreign debt is illegitimate in nature because of the
circumstances under which it was incurred, as well as the harmful effects
it now has on the continent's development.
* Much of Africa's debt was incurred by unrepresentative regimes during
the era of Cold War patronage, when loans were made to corrupt leaders who
used the money for their own personal gain, often with the full knowledge
and support of lenders like the U.S. government and the World Bank and
IMF. [For example, in the Democratic Republic of the Congo (DRC), formerly
Zaire, dictator Mobutu Sese-Seko received more U.S. aid than the rest of
Sub-Saharan Africa combined during much of the Cold War, even though it
was well known that this money was being diverted into his Swiss bank
accounts. The people of the DRC should not now have to pay back loans from
which they saw no benefit.]
* In many African countries, debts were contracted by repressive or
despotic regimes and used to strengthen the hold of that regime, contrary
to the interests of the nation and its people. These are considered
illegitimate "odious debts", and this is an established legal principle.
[For example, in South Africa, the apartheid regime took out more than $18
billion in foreign debt in its last 15 years in power. The people of South
Africa, the victims of the apartheid regime, should not now be forced to
pay the cost of their own previous repression.]
* In many African countries, debts have swelled over time because of high
interest rates and other conditions imposed by creditor governments and
banks. These debts are illegitimate, since the original debt has already
been repaid many times over.
* Many African activists and advocacy groups question the notion of an
African "debt" to the U.S. and European countries after centuries of
exploitation and plunder. They consider all of Africa's debts illegitimate
and ask, "Who really owes whom?"


U.S. Policy on Africa's Debt

* The U.S., other G8 leaders and the World Bank and IMF established the
Heavily Indebted Poor Countries (HIPC) Initiative in 1996 to address the
debt crisis in Africa and other poor regions. HIPC remains the dominant
international debt relief plan integrating all bilateral, multilateral and
private creditors in one framework for select countries.
* Of the 42 countries selected by the World Bank and IMF as potential
recipients of HIPC relief, 34 are in sub-Saharan Africa. These countries
are eligible for some debt relief, but no African country has been offered
complete debt cancellation, and many get no relief whatsoever.
* Over the past eight years, the HIPC initiative has fundamentally failed
to resolve Africa's debt crisis. It has not reduced the debts of African
countries to sustainable levels. In fact, it serves the interests of
creditors by continuing to extract the maximum possible in debt repayments
from the world's poorest countries.
* Recent World Bank and IMF reports have admitted that HIPC is not
succeeding in addressing the debt crisis in Africa and other poor regions.
But the U.S. refuses to encourage Africa's creditors to move beyond this
framework.
* President Bush and the U.S. Congress have acknowledged that Africa's
debt crisis represents a real obstacle to the continent's efforts to
combat HIV/AIDS and poverty.
* Although the U.S. is a relatively minor bilateral creditor of African
countries, it is the single largest shareholder in the World Bank and the
IMF, to whom most of Africa's debts are owed. As such, it holds major
influence over the international response to Africa's debt crisis. * The
U.S. continues to refuse to use its power to promote the cancellation of
Africa's illegitimate foreign debts, even though the World Bank and IMF
can afford to write off this debt from their own books using their own
existing resources.


Iraq's Debt

* U.S. Treasury officials estimate that Iraq's debt amounts to $100-$120
billion.
* Of this total debt stock, some $40 billion is owed to Paris Club
creditors (G8 countries, including the U.S.), and the remaining $80
billion is owed to Arab nations and others outside the Paris club.
* Jubilee Iraq estimates that an additional $50 billion is owed by Iraq in
war reparations to countries like Kuwait and to individuals who claim
damages from Iraq.
* Much of Iraq's debt can be considered "odious", as it was contracted by
Saddam Hussein's regime and used for the repressive purposes of this
dictatorship, with the full knowledge of creditor countries and
institutions. This money was not spent on the needs or interests of the
Iraqi people.
* Comparing Iraq's debt burden with the size of its economy and export
earnings, it is clear that Iraq is a very heavily indebted country. * In
addition, Iraq has urgent relief and reconstruction needs as it enters
into a period of important transition.


U.S. Policy on Iraq's Debt

* In December 2003, President Bush appointed James Baker III, a long-time
friend and advisor to the Bush family and former Secretary of State under
George H. Bush, as Special Envoy for Iraqi debt reduction. He is tasked
with seeking an international deal to reduce and restructure Iraq's
massive foreign debt in order to promote peace and reconstruction in Iraq.
* Baker traveled to Europe in December 2003, to meet with some of Iraq's
creditor nations. He secured pledges from Britain, France, Germany, Italy
and Russia to relieve much of the $40 billion owed to them by Iraq. *
Baker traveled to the Gulf region in the beginning of 2004 and negotiated
commitments to waive much of the $50 billion Iraq owes to countries in
that region.
* Early in 2004, reports indicated that the Bush Administration's goal was
to relieve Iraq of two-thirds of its debt burden so that future oil
earnings could be spent on reconstruction rather than on debt repayments.
* Speaking in April, Baker called Iraq's debt "simply unsustainable", and
referred to it as a major obstacle to rebuilding the economy and
government of that country.
* Baker insists that debt relief for Iraq must be achieved quickly, in
order to allow Iraq to find its feet. He has stated that efforts to
enforce the debt could sink the Iraqi economy and dash hopes for a solid
transition in Iraq.


The Double Standard

* There are many compelling reasons to reduce Iraq's debt burden, but
these arguments are not being applied equally by the U.S. in the case of
African countries' debt crisis.
* The U.S. is supporting debt relief for Iraq because it considers that it
has vital interests in Iraq and the larger Middle East region. U.S.
corporations also have major economic interests in Iraq, which the Bush
Administration wishes to promote.
* The U.S. does not consider it has such vital interests in Africa,
despite strong historical ties with the continent and important economic
and political relations with African countries. The U.S. acknowledges that
Africa's debt hinders efforts to combat poverty and HIV/AIDS, but it
refuses to support debt cancellation for Africa.
* Another key difference between Iraq's debt and Africa's debt is who the
creditors are. Much of Iraq's debt is bilateral and is owed to rich
European countries and to Japan. Most of Africa's debt is multilateral and
is owed to the World Bank and IMF, where the U.S. is the principal
shareholder. The U.S. appears more willing to pursue the reduction of
debts for which it is not a creditor.
* The Bush Administration and the U.S. Congress argue that much of Iraq's
debt is odious, but they refuse to apply the same criteria to African
countries' debt when it is clear that much of Africa's debt is also
odious. * The U.S. appears unwilling to support debt cancellation for
Africa because the U.S. actually gains a great deal from Africa's economic
enslavement. The U.S. and other rich countries, as well as the World Bank
and IMF, use Africa's debt as leverage to manipulate the continent's
economic fate to serve their interests.
* Despite the social and economic costs of this massive outflow of
resources from the world's poorest region, the U.S. continues to insist
that these debts be repaid. Yet the U.S. does not feel that Iraq's debt
should be enforced in the same way. Such a blatant double standard in U.S.
foreign policy must be exposed and rejected outright.

What the U.S. Should Do

* The U.S. is the largest and most powerful shareholder in the World Bank
and IMF, Africa's primary creditors, and it should use this power to
promote debt cancellation for Africa.
* A new report released by the Debt & Development Coalition Ireland
confirms that the World Bank and IMF have the resources to cancel all the
debts owed to them by the poorest countries without negatively impacting
their credit rating or lending ability.
* Secretary General of the United Nations, Kofi Annan, has repeatedly
called for a new solution to the debt crisis and the suspension of debt
service payments in the interim.
* As a first step to supporting debt cancellation for Africa, Africa
Action believes that the U.S. government should immediately do the
following: 1. Undertake an inventory of the debts currently being repaid
by African countries, in order to determine the legitimacy of creditor
claims. 2. Complete a study to ascertain what would be the cost to
creditors of the full cancellation of Africa's debts.
3. Declare a moratorium on debt repayments by African countries until such
time as an inventory of these debts has been compiled and the costs of
100% cancellation have been determined, these two studies providing a
foundation for moving towards a just resolution to the continent's debt
crisis.