[naiman-columns] Clinton's Debt Relief: Too Generous or Too Stingy?(fwd)

[Robert Weissman <rob@essential.org>]

Date: Fri, 15 Oct 1999 10:31:44 -0400
From: Robert Naiman <naimanr@preamble.org>
To: naiman-columns@egroups.com
Subject: [naiman-columns] Clinton's Debt Relief: Too Generous or Too Stingy?

Clinton's Debt Relief: Too Generous or Too Stingy?

After President Clinton announced that he supports 
100% cancellation of the debts owed by the poorest 
countries to the United States, some poll data 
suggested that people thought Clinton was being too 
generous.

They were probably reacting more to the soaring 
rhetoric of Clinton's speech, than to any grasp of 
the impact of the debt. The governments of these 
poor countries are forced to divert resources from 
spending on health care and education to spending 
to service external debts. For example, the Jubilee 
2000 Coalition estimates that Mozambique could save 
the lives of 100,000 children a year if it were 
allowed to spend half the money on health care and 
education that it now spends on debt service.

Forty-one countries are called "Heavily Indebted 
Poor Countries" by the World Bank. The debts of 
these countries to the U.S. government are 
estimated at about $6.7 billion.

However, these debts are already deeply discounted 
by the U.S., because no one ever expects them to be 
paid. They're carried on the books at about 10% of 
their nominal value. In other words, they could be 
cancelled with an appropriation of about $600 
million.

Let's compare that to something else in the U.S. 
budget: the cost of F22 aircraft that the Air Force 
wants to build. Each one of these planes costs well 
over $150 million. The Air Force wants to build 339 
of them. Getting rid of four planes -- reducing the 
number of planes by about 1% -- would pay for the 
debt cancellation.

Or we could compare this $600 million to the $18 
billion that the U.S. gave last year to the 
International Monetary Fund -- that $600 million is 
about 3% of what we gave to the IMF.

In fact the Administration proposal does not even 
call for canceling all the debts of the HIPC 
countries, only some of them.

However, the folks getting their information from 
watching speeches on TV were right in a sense. The 
Clinton proposal was far too generous -- but not to 
poor countries. It was too generous to two 
institutions funded by the U.S. taxpayer that have 
failed miserably: the International Monetary Fund 
and the World Bank.

Tucked into the Administration proposal was an 
appropriation for "multilateral debt relief" -- to 
address unpayable debts owed by poor countries to 
the World Bank and the IMF. Unlike the U.S., the 
IMF and the World Bank don't write down the value 
of unpayable debt, but insist these debts must be 
fully paid. They know poor countries can't pay the 
debt, so they insist that countries like the U.S. 
make extra contributions to the IMF and the Bank to 
compensate for the amount of debt service that 
can't be squeezed out of poor countries. This 
process is called "multilateral debt relief." It's 
more of a bailout to the IMF and the World Bank -- 
two rich institutions  -- than a helping hand to 
poor countries, who rarely have their actual debt 
payments significantly reduced as a result of this 
kind of "relief."

As if that weren't bad enough, in order to qualify 
for this "relief," poor countries have to implement 
"economic reform" programs designed by the IMF and 
the World Bank. You might think that "economic 
reform" would be a good thing. Who is against 
reform? It's like being against apple pie. But it 
turns out that "reform" programs designed by the 
IMF -- sometimes called "structural adjustment 
programs" -- happen to be the sorts of things that 
University of Chicago economists installed in Chile 
during the military dictatorship under Pinochet: 
slashing wages, mass layoffs, cutting public 
spending on health care and education. These 
policies are applied on a scale that would provoke 
mass strikes and demonstrations if they were 
applied, say, in the United States or France, and 
indeed they often provoke mass protests in the 
countries where they are implemented, even under 
repressive governments. But these protests are 
often ignored, because governments are under great 
pressure to honor their agreements with the IMF, 
and government officials carrying out the policies 
are often picked by the IMF.

Folks reacting to Clinton's rhetoric thought he was 
being generous. But as usual, Clinton was only 
feigning to the left -- his real priorities were 
elsewhere. It's going to take a lot more pressure 
before the Administration becomes truly generous 
towards poor countries by getting stingy towards 
the IMF.


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Robert Naiman <naimanr@preamble.org>
Preamble Center
1737 21st NW
Washington, DC 20009
phone: 202-265-3263 x277
fax:   202-265-3647
http://www.preamble.org/
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