[stop-imf] FT: Poor countries' debt relief 'failing'

[robert weissman]

Financial Times

Poor countries debt relief 'failing'

By Christopher Swann in Washington
Published: September 13 2004

International efforts to lighten the debt burden on the world's poorest
countries are failing to provide the expected level of relief, according
to a new report to be discussed today by finance ministers from the G7
nations.

Charity groups are hoping that the annual progress report by the World
Bank and International Monetary Fund will add to pressure on wealthy
countries to write off 100 per cent of the debt of the most impoverished
states - a prospect raised at the last G7 meeting at Sea Island, Georgia.

The Highly Indebted Poor Countries Initiative (HIPC) was set up eight
years ago with the aim of eliminating $100bn (=A355bn, =8080bn) of the debt
of the poorest countries. So far about a third of the debt has been
cancelled and some estimates suggest HIPC countries still have about
$90bn in debt stock.

The latest update provides additional evidence that even those countries
that have received HIPC relief have unsustainable debt levels - defined
by the initiative as more than 150 per cent of annual exports.

The cost of topping up relief to reach this level - estimated last year
at $860m - is now expected to be more than $2bn, according to the report.

Last year's report estimated that countries entering the process would
spend $2.4bn servicing their debts last year. In fact they spent $2.8bn
- an average of 15.2 per cent of government revenues and higher than the
expected 14.6 per cent.

The report also produced new forecasts, suggesting that those countries
qualifying for relief because of their high debt-to-export ratios would
see these ratios fall by less than expected. Instead of emerging from
the process with debt-to-export ratios averaging 140 per cent, they were
now likely to end up with ratios of 171 per cent.

Max Lawson, policy adviser to Oxfam, said the research underlined the
need for more radical action on debt. "We welcome signs that the G7
appear to be moving towards a full write-off of debt. The HIPC process -
though positive - has been painfully slow."

Some non-governmental organisations are worried, however, that a more
generous debt write-off might be offset by a reduction in new aid. "It
is vital that any deal results in real new money and is not just a piece
of financial housekeeping," said Romilly Greenhill, a policy officer at
Action Aid.

Jubilee USA network, the debt campaigners, have pressed the IMF to sell
or revalue part of its gold reserves in order to help pay for a debt
write-off.