[stop-imf] Washington Post: Mr. Bush and Africa

[robert weissman]

Mr. Bush and Africa

Washington Post
Tuesday, June 7, 2005; A22

THE BUSH administration already has done a lot for developing countries.
Its global AIDS initiative has transformed the money available to fight
the pandemic; its new Millennium Challenge Corp. is starting to support
poor countries that have good policies. Now pressure is building on the
administration to add to that progress: British Prime Minister Tony
Blair hosts the Group of Eight summit of industrialized countries next
month and wants to announce new help for Africa. A coalition of faith
groups and entertainers that includes the rock star Bono is pressing for
a U.S. contribution. Mr. Blair will meet President Bush in Washington
today, and a new round of debt relief is being cooked up behind the
scenes. But the administration should go further.

The Bush and Blair governments have been discussing debt relief since
last year. Both agree that the previous rounds of forgiveness, in 1996
and 1999, have proved inadequate. Both want debt payments to
international financial institutions such as the World Bank and the
International Monetary Fund to be canceled for a group of 33 highly
indebted poor countries. But the two governments have disagreed on how
to pay for debt relief. The British want rich countries to shoulder the
cost of repaying the World Bank, thereby getting poor countries off the
hook while protecting the World Bank's balance sheet. The Bush
administration wants the World Bank to absorb the cost of debt
cancellation, which would mean shrinking future World Bank assistance to
poor countries. Meanwhile the British want the International Monetary
Fund to sell some of its gold to pay for debt relief. The administration
resists because senators from western gold-producing states claim that
IMF sales would drive down the price of gold; other gold producers,
including Canada, share this position.

The British arguments are stronger on both counts: It's better to
provide debt relief in a way that keeps the World Bank strong; gold
producers, who have enjoyed rising prices lately, should not be allowed
to become deal breakers. But debt relief should not dominate the
discussion ahead of the G-8 summit. It is only one mechanism for
increasing the resources available to finance development, and it has
the perverse effect of tending to reward countries that borrowed
imprudently in the past. The administration should announce a further
Africa initiative of $6 billion a year -- the U.S. share of the $25
billion increase advocated by the recent British-convened Commission for
Africa.

A $6 billion initiative would represent a big jump in U.S. aid; in 2003,
aid came to $16 billion. But $6 billion would also be a modest
contribution relative to the size of the federal budget and the nation's
prosperity. U.S. generosity, measured as a share of gross domestic
product, would still lag behind the average in industrialized countries.
Of course, spending billions is pointless if the money is wasted. But
aid does tend to accelerate poverty reduction in countries with good
policies, and if such countries ever had as much money as they could
usefully spend, other aid could be spent in rich countries on things
that boost development. Aid could finance research into new,
Africa-appropriate seeds, for example; or it could go to the fund that
buys vaccines for poor countries, thereby boosting the incentive for
pharmaceutical firms to allocate research dollars to challenges such as
malaria. Mr. Bush has shown that he understands the case for more
development spending. He should follow his instinct again, boldly.