Oxfam says IMF should get out of debt relief business (fwd)

[Robert Weissman <rob@essential.org>]

Oxfam says IMF should be removed from pivotal role in debt relief
Date: Thu Apr 22 16:35:41 CDT 1999

   WASHINGTON, April 22 (AFP) - The international aid organization Oxfam
called Thursday for an end to the IMF's key role in a debt-relief scheme for
poor countries to allow the initiative to focus more on poverty reduction
than economic reform.
   "We need to get the IMF out of the way, ratchet down the cost of debt
service to a sustainable level and treat education and health spending as
necessary investments," said Oxfam Advocacy Director Veena Siddharth.
   "We must not mortgage the future of the developing world because of bad
decisions by national leaders and international bankers."
   She was addressing a press conference ahead of meetings here next week of
finance chiefs from the world's seven richest nations as well as the
governing bodies of the World Bank and the International Monetary Fund. The
debt question is expected to figure high on the agenda.
   Oxfam has been a persistent critic of a 1996 World Bank-IMF plan to ease
the debt burden carried by the world's most impoverished nations.
   The agency contends that the Highly Indebted Poor Countries (HIPC)
initiative offers too little relief too slowly and under conditions that
harm the poor.
   Under the plan, debt relief becomes available after a six-year qualifying
period during which beneficiaries must adhere to strict IMF reform measures.
   At its inception, the initiative was aimed at reducing 100 billion
dollars' worth of debt owed by 20 of the world's poorest nations by 1998.
   But three years after HIPC was launched, only 10 countries have qualified
for debt reduction and seven have actually had their burden eased by about
3.1 billion dollars, according to the World Bank.
   Meanwhile, pressure has increased for debt reduction to be extended to a
total of 41 debt-laden nations, most of them in Africa.
   Oxfam is calling for the elimination of the IMF's role as a "gatekeeper,"
which enables it to determine conditions for debt relief.
   To replace IMF conditionality, Oxfam advocates a "human development
window" that would be opened to indebted countries that commit themselves to
invest the savings from debt relief to poverty reduction.
   It would also establish a "fiscal cap," limiting debt service to 10-15
percent of a country's government revenue.
   Siddharth faulted the IMF for viewing HIPC as simply a means of "bringing
more economies into its economic reform programs."
   "While these countries do need reforms, they need reform and growth that
focus on poverty reduction," she said.
   "The Fund is failing to take this issue as seriously as it deserves."
   Several industrialized countries have put forward their own plans for
greater debt relief but differ as to how much money should be involved and
how the plans should be funded.
   France has said the cost of any new debt relief should be shared
equitably according to the size of the donor economy rather than the amount
of the outstanding loans.
   In this way, according to the French, those countries that have lent the
most in the past will not pay a disproportionate share of the cost.
   The United States has meanwhile proposed that it and other countries
provide an additional 50 million dollars to enable complete forgiveness of
much outstanding debt.
   In addition Republican Congressman James Leach, chairman of the House
Banking Committee, has introduced a bill that would cancel debt owed the
United States by poor countries for reduced rate loans or credits given
through US foreign aid or agricultural development programs.
   It would also reduce by at least 90 percent the debt owed by poor nations
in market rate loans incurred in US foreign assistance projects.