[stop-imf] Nigeria debt disgrace

[robert weissman]

The Paris Club today granted Nigeria what it misleadingly calls debt
relief but might more reasonably have been labeled a debt heist.
Desperately poor Nigeria is paying the rich countries $12 billion over
the next year to retire its $30 billion debt to Paris Club countries.
You can celebrate this deal, as the Paris Club does, if you ignore the
fact that creditors generally write down bad debts as a matter of course
(not charity), the billions over principle that Nigeria has already sent
out of the country, the fact that the deal imposes IMF conditionality on
Nigeria (even though the IMF isn't providing credit to the country), and
the reality of the severe poverty in Nigeria. Or, as an alternative, you
could be outraged.

Below, four clips:

1. Paris Club statement
2. Jubilee USA statement
3. Global AIDS Alliance statement
4. Reuters story



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1. Paris Club Statement
http://www.clubdeparis.org/en/news/page_detail_news.php?FICHIER=3Dcom112979=
88840

October 20, 2005

Nigeria

The representatives of the Paris Club creditor countries met on 18, 19
and 20 October 2005 and agreed with the representatives of the Federal
Republic of Nigeria on a comprehensive treatment of its debt. This
agreement implements the debt treatment framework for Nigeria announced
by the Paris Club on 29 June 2005. The representatives of the Paris Club
creditor countries welcomed the ambitious economic program implemented
by the Nigerian authorities since 2003 and their desire to secure an
exit treatment from the Paris Club. This agreement takes place after the
approval by the Executive Board of the International Monetary Fund of
the Policy Support Instrument (PSI) on 17 October 2005 and includes a
debt reduction under Naples terms on eligible debts and a buy back at a
market-related discount on the remaining eligible debts after reduction.
This agreement will be implemented in two phases in consonance with the
implementation of the PSI: - in the first phase, Nigeria undertakes to
pay arrears due on all categories of debts and Paris Club creditors
grant a 33% cancellation of eligible debts; - in the second phase, after
the approval of the first review of the PSI by the Executive Board of
the IMF, planned for March 2006, the Nigerian Government will pay
amounts due under post-cut off date debt, Paris Club creditors will
grant a further tranche of cancellation of 34% on eligible debts, and
Nigeria will buy back the remaining eligible debts. In total, this
agreement allows Nigeria to obtain a debt cancellation estimated at US$
18 billion (including moratorium interest) representing an overall
cancellation of about 60% of its debt to the Paris Club of around US$ 30
billion. Paris Club creditors will be paid an amount of US$ 12.4
billion, representing regularization of arrears of US$ 6.3 billion, plus
a balance of US$ 6.1 billion to complete the exit strategy. This
exceptional treatment of Nigeria=92s debt offers a fair, sustainable, and
definitive solution to Nigeria and Paris Club creditors. With the large
debt relief included in this agreement, Paris Club creditors extend
their strong support to Nigeria=92s economic development policy and its
fight against poverty. Background notes 1. The Paris Club was formed in
1956. It is an informal group of creditor governments from major
industrialized countries. It meets on a monthly basis in Paris with
debtor countries in order to agree with them on restructuring their
debts. 2. The members of the Paris Club which participated in the
reorganization of Nigeria=92s debt were representatives of the governments
of Austria, Belgium, Brazil, Denmark, Finland, France, Germany, Italy,
Japan, the Netherlands, the Russian Federation, Spain, Switzerland, the
United Kingdom and the United States of America. Observers at the
meeting were representatives of the governments of Australia, Canada and
Norway as well as the International Monetary Fund, the World Bank, the
African Development Bank, the European Commission, the Organization for
Economic Cooperation and Development and the Secretariat of the
U.N.C.T.A.D. The delegation of the Federal Republic of Nigeria was
headed by Dr (Mrs) Ngozi OKONJO-IWEALA, Minister of Finance. The meeting
was chaired by Mr. Xavier MUSCA, Director General of the Treasury and
Economic Policy Department of the Ministry of Economy, Finance and
Industry, Chairman of the Paris Club. Technical notes 1. The Policy
Support Instrument (PSI) concluded by Nigeria with the International
Monetary Fund was approved by the Fund=92s Executive Board on 17 October
2005. 2. The total stock of Nigeria=92s public sector has been estimated
as at end 2005 at US$ 36.2 billion, out of which around US$ 30 billion
due to the Paris Club (source: IMF staff report and Paris Club creditors).

--

2. Jubilee USA Statement
http://www.jubileeusa.org/press_room/release102005.html

Jubilee USA Network * www.jubileeusa.org

FOR IMMEDIATE RELEASE
Wednesday, October 20, 2005

Contact:  Debayani Kar, 202-783-0215, 202-246-8143
                 Neil Watkins, 202-783-0129, 202-421-1023

Nigerian Threat to Repudiate Helps Force Paris Club to Deliver Debt
Cancellation

Civil Society Concerned by Creditors=92 Insistence on Immediate $12
billion Payment to Secure Cancellation, IMF Conditions

WASHINGTON =96 Nineteen rich country creditors grouped in the Paris Club
officially announced today an $18 billion write-off of Nigeria=92s debt,
whose total debt to these creditors is around $30 billion. While Jubilee
USA Network and other civil society groups welcome the Paris Club=92s move
to write off a substantial portion of Nigeria=92s debt, groups expressed
specific reservations on the deal, including the terms of the debt
buyback and the involvement of the International Monetary Fund (IMF),
which is not a Nigerian creditor. Some observers pointed to the role of
an early 2005 process in the Nigerian parliament calling on the
government to repudiate the impoverished country=92s debt as a key factor
forcing the Paris Club to act.

Jubilee USA is concerned however about specific terms of the agreement
reached today that would require the Nigerian government to spend $12
billion on debt service payments over the next six months as part of the
buyback arrangement, while adhering to a newly-created IMF economic
program. The new IMF program, the Policy Support Instrument, extends IMF
power to those countries it is not lending to. Past impoverished country
experiences with similar IMF programs have shown that such programs lead
countries to privatize essential services and cut social sector
spending. Despite the concerns, Jubilee USA Network shares the Nigerian
government=92s hopes that debt cancellation will allow the country to
channel resources away from debt servicing and towards health care,
education, and other critical social needs.

Debayani Kar, Communications and Advocacy Coordinator of Jubilee USA
Network said: =93Nigeria=92s debt write-off at the Paris Club demonstrates
the partial success of the Nigerian parliament=92s threat to cancel its
own debt through repudiation, which helped to force the hand of these
creditors. While we  are encouraged by the Paris Club's agreement to
cancel some of Nigeria's debt, we don=92t think it makes sense to make an
impoverished country like Nigeria pay $12 billion when that money should
be spent on AIDS, health, and education.=94

Rev. David Ugolor, President of African Network for Environment and
Economic Justice (ANEEJ) in Benin City, Nigeria said: =93The Paris Club
cannot expect Nigeria, freed from over 30 years of military rule, to
muster $12 billion to pay off interest and penalties incurred by the
military. Since the debt, by President Obasanjo's own admission, is of
dubious origin, the issues of the responsibilities of the creditors must
be put on the table at the Paris Club. As desirable as an exit from debt
peonage is, it is scandalous for a poor debt distressed country, which
cannot afford to pay $2 billion in annual debt service payments, to part
with $6 billion up front or $12 billion in three months or even one year.=
=94

Sony Kapoor, Senior Advisor at Christian Aid (UK) said: =93The deal will
provide much overdue relief and free Nigeria from much of its
debilitating debt. However it took the threat of repudiation to get this
cancellation =AC as if the obvious need of the people and the odious
nature of much of the debt were not enough. What is worse is that
creditor countries are extracting a pound of flesh in the form of $12
billion worth of payments from Nigeria and have put in place a new IMF
program despite Nigeria not owing anything to the Fund. On a more
positive note, the deal has set the scene for a more assertive
negotiating stance by other indebted developing countries.=94

--

3. Global AIDS Alliance statement
http://www.globalaidsalliance.org/press102005.cfm

GLOBAL AIDS ALLIANCE

Nigeria's Creditors Should be Ashamed, says Global AIDS Alliance

Nigeria to Send $12.4 Billion to World's Richest Nations

Contact: Paul Zeitz, 1-202-365-6786

Washington, Oct 20 -- Today Nigeria reached an agreement with its largest
creditors, grouped in what is known as the Paris Club. The agreement will
lead to the cancellation of a large portion of Nigeria's massive $35.9
billion debt, 85.8% of which is owed to the Paris Club. The debt had built
up over many years, following loans given by France, Germany, Japan, the
United Kingdom and others to a string of Nigerian despots.

In today's agreement Nigeria has been granted cancellation of $18 billion o=
f
its eligible debt. But, to receive this deal, Nigeria had to commit to
paying the Paris Club nations $12.4 billion, mainly to France, the UK, and
Germany. This figure comprises $6.3 billion in arrears to be paid by the en=
d
of October, plus another $6.1 billion for a debt buy-back operation next
March.

"This agreement extracts $12.4 billion from Africa and transfers it to a
group of wealthy countries who do not really need the money," said Dr. Paul
Zeitz, Director of the Global AIDS Alliance. "It is an outrage that
creditors simply plan to use this payment to fill their treasuries. The
annual budget of such creditors as Japan and the United Kingdom is over 100
times that of Nigeria. Surely we can do better than accepting taking
billions from the world's poorest continent. We expect more from the G8
nations, who promised Africa so much in their Gleaneagles declaration in
July."

"Nigeria's government has made the best of a terrible situation," he noted.
"In the long run, Nigeria could save a billion dollars a year in debt
repayments and potentially double health spending. That is an impressive
achievement. Nigeria has the third highest number of HIV positive people in
the world, and with these resources it could scale up AIDS treatment."

"However, the creditors should be ashamed of themselves if they simply take
this money," Zeitz stated. "These creditors often knew that the money would
be siphoned off by dictators and deposited in western banks, and the
resulting debt is morally illegitimate. They bear a moral obligation to
think more creatively about how to use this money. Nigeria has already paid
these creditors $11.6 billion in debt service since 1985. We challenge the
creditors to redirect this additional $12.4 billion to Africa's
development."

"A substantial portion of this sum should be given to the Global Fund to
Fight AIDS, Tb and Malaria and specified for high-quality health projects i=
n
Africa," Zeitz said. "The Global Fund has stated that it urgently needs
greater contributions to proceed with additional grant-making next year."

"The contribution of Nigeria's debt payments would revolutionize the
financial status of the Global Fund. Let's make sure African resources go
towards helping Africa, not wealthy nations."

Even with the recent scale up in global AIDS programs, the needs of orphans
and vulnerable children are far from being met, and millions of children
face abandonment. Global AIDS Alliance released a report today, "Remember
the Children: Global Fund Round 6 in 2006," which shows that with greater
resources the Fund could dramatically increase funding to help children.

The new report is online at:
www.globalaidsalliance.org/remember_the_children.cfm

The Fund could also use these resources to help Africa improve health
systems. Better health systems are needed to not only to fight AIDS, tb and
malaria, but also to prepare for a possible avian flu pandemic.

--

4. Reuters
http://today.reuters.com/news/NewsArticle.aspx?type=3DworldNews&storyID=3Du=
ri:2005-10-20T125145Z_01_MOR022420_RTRUKOC_0_US-ECONOMY-NIGERIA-PARISCLUB.x=
ml&pageNumber=3D0&summit=3D


Reuters

Nigeria signs debt relief with Paris Club
Thu Oct 20, 2005 8:51 AM ET

By Swaha Pattanaik

PARIS (Reuters) - Oil exporter Nigeria received an $18 billion debt
write-off from Western creditor nations on Thursday in recognition of
its efforts to reform its economy and reduce corruption.

The accord with the 19-member Paris Club of sovereign lenders comes four
months after it agreed the idea in principle, and should stimulate
foreign and private sector investment in Africa's most populous nation.

"With the large debt relief included in this agreement, Paris Club
creditors extend their strong support to Nigeria's economic development
policy and its fight against poverty," the Paris Club said in a statement.

The debt reduction would be under Naples terms, which are applied to the
poorest countries' debts and are equivalent to a 67 percent discount on
the face value of debt, it added.

Nigeria owes about $25 billion in debt to the Paris Club, plus around $6
billion in arrears.

The deal was also linked to a new agreement with the International
Monetary Fund signed earlier this week to monitor Nigeria's
implementation of a home-grown reform agenda.

Senator Udoma Udo Udoma, who was involved in the three-day talks in
Paris, said the agreement would stimulate investment.

"It will open Nigeria up to greater trade and investment, and stimulate
the private sector because we will be seen as a country in good credit,"
he said.

Nigeria had previously been paying less than half its dues to the Paris
Club.

PHASED DEAL

The debt deal for Nigeria, which is the world's eighth-biggest oil
exporter but has among the lowest income per capita in the world, will
be implemented in two phases.

In the first phase, Nigeria will pay arrears while Paris Club creditors
will grant a 33 percent cancellation of eligible debts, the Club said.

The second phase will follow in March next year when the IMF will make
its first review of the Nigerian economic reform program under its
Policy Support Instrument.

"The Paris Club creditors will grant a further tranche of cancellation
of 34 percent on eligible debts, and Nigeria will buy back the remaining
eligible debts," the Club said.

In total, Nigeria is expected to pay about $12 billion in return for $18
billion in relief.

The accord got a mixed reception from lobby groups pushing for debt
cancellation for poor countries.

"While we are encouraged by the Paris Club's agreement to cancel some of
Nigera's debt, we don't think it makes sense to make an impoverished
country like Nigeria pay $12 billion when that money should be spent on
AIDS, health and education," said Debayani Kar of Jubilee USA Network.

Nigeria was passed over for debt relief in the 1980s and 1990s as it did
not have an agreement with the International Monetary Fund and was ruled
by military dictators until 1999.

But President Olusegun Obasanjo, elected in 1999, has introduced a
home-grown reform agenda with IMF monitoring and made debt relief his
top priority in relations with the West, arguing money for debt
repayments would be better spent on rebuilding decayed social services.

The Paris Club deal also hinged on a perception in the West that
Obasanjo has made progress in fighting graft in one of the most corrupt
countries in the world.

(Additional reporting by Tom Ashby in Abuja)