[weisbrot-columns] World's Poorest Countries Are Still Waiting forReal Debt Relief (fwd)

[Robert Weissman <rob@essential.org>]

World's Poorest Countries Are Still Waiting for Real Debt Relief
Mark Weisbrot

 New details are emerging each day about the G-7's latest 
debt relief initiative for poor countries, which was officially 
announced over the weekend. The leaders of the seven countries 
(the US, Japan, Germany, Britain, France, Italy and Canada) have 
presented the initiative as a bold step forward. 

 But one should always read the fine print in these matters, 
especially when dealing with loan sharks. Of the 36 countries that 
the G-7 claims will gain from the new debt relief, only about 16 
will see their debt payments significantly reduced. And even these 
countries will still be spending more on debt service than on 
desperately needed health care and education.

 The IMF and World Bank passed their Heavily Indebted 
Poor Countries (HIPC) initiative in 1996, but three years later, only 
two of the 41 HIPC countries have seen any reduction in their debt 
payments. The latest G-7 move constitutes a recognition, in 
response to continuing international protests by religious and anti-
poverty groups, that the HIPC plan has failed.

 Perhaps the worst feature of the new G-7 initiative is that it 
will actually increase the power of the International Monetary 
Fund over the indebted countries. Putting the IMF in charge of 
debt relief is like appointing Bill Gates to head up the anti-trust 
division at the Justice Department. To call it a conflict of interest is 
an understatement.

 One of the IMF's most important functions for decades has 
been to act as a cartel organizer for the world's most powerful 
creditors, including not only international financial institutions like 
the Fund itself and the World Bank, but also private multinational 
banks. This was demonstrated most recently in the Asian economic 
crisis, where the IMF's major accomplishment was to force the 
governments of South Korea and Indonesia to guarantee the bad 
loans that foreign investors had made there. 

 In the poorest and most indebted countries, the IMF has 
been most concerned with shifting resources to the export sector, 
so these economies could earn the maximum foreign exchange 
with which to pay off their debts. The Fund has not been overly 
concerned when these policies have led to environmental 
destruction, reduced domestic investment, or cutbacks in 
desperately needed social services such as health care. 

 The IMF has used its enormous power to force 
impoverished and indebted countries to adopt its policies, which 
are written into "structural adjustment" agreements with the Fund. 
The G-7 initiative would allow the IMF to continue certifying 
which countries qualify for debt relief, on the basis of their 
adherence to the Fund's often destructive policies. 

 In order to qualify for debt relief under the new initiative, 
countries would have to undergo "structural adjustment" for three 
years; if they stray from IMF strictures during the following three 
years, the previous debt relief would be cancelled.

 There are bi-partisan efforts underway in Congress to break 
the IMF's stranglehold over the world's poorest countries, and to 
promote real debt relief. The latest is a bill proposed by 
Congresswoman Cynthia McKinney, Democrat of Georgia, which 
would cancel the debts of the 41 HIPC countries (plus Haiti) 
to the United States. It would also deny U.S. funding to the 
IMF until it has cancelled the debts that these countries owe
to the Fund, and until it stops making "structural adjustment" 
loans to poor countries.

 It is worth noting that two of the countries that are not 
expected to see any debt service reduction from the latest G-7 
initiative are Congo (Democratic Republic) and Nicaragua. Congo 
(formerly Zaire), a war-ravaged and desperately poor country, has 
an enormous $13 billion foreign debt. Most of this was borrowed 
by the late dictator Mobutu, who seized power in 1965 with the 
help of the US Central Intelligence Agency, and was backed by the 
United States for most of his 32-year rule. The money went right 
out of the country into Swiss bank accounts, yet Congo's poor are 
expected to shoulder the burden of this borrowing.

 Nicaragua is one of the most indebted countries in Latin 
America, with a debt that is three and a half times its annual 
income. The United States government still owes Nicaragua more 
than $17 billion from a 1986 judgement by the World Court-- the 
same court we went to when American hostages were taken in 
Iran. The judgement was for part of the damages inflicted by 
illegal paramilitary actions, funded by the US government in 
Nicaragua during the 1980s.

 Maybe it's time we looked at both sides of the ledger when 
we total up the poor countries' debt.

Mark Weisbrot is Research Director at the Preamble Center, in 
Washington, D.C.

Name: Mark Weisbrot 
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