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Note: This document is from the archive of the Africa Policy E-Journal, published
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Africa: Debt Action
Africa: Debt Action
Date distributed (ymd): 001129
APIC Document
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-Wide
Issue Areas: +economy/development+ +US policy focus+
Summary Contents:
This posting contains (1) a letter from Salih Booker, as director
of APIC, The Africa Fund, and the American Committee on Africa, to
the U.S. representative to the International Monetary Fund,
supporting Zambia's call for cancellation rather than rescheduling
of its unsustainable debts, and (2) an action alert from the
Globalization Challenge Initiative and ISODEC (Ghana), calling for
immediate messages to the World Bank in opposition to user fees
being imposed in the latest structural adjustment agreement for
Tanzania. APIC supports the action call, and asks our supporters
to respond with their own messages to the World Bank director
representing their country (phone, fax and e-mail contact
information for U.S. is below; for other countries visit
http://www.challengeglobalization.org/html/ta_menu6.shtml)
A posting also being sent out today contains an analysis and
position statement against the user fees by the Tanzania Gender
Networking Project.
+++++++++++++++++end profile++++++++++++++++++++++++++++++
Letter to Department of the Treasury on Zambia Debt
November 27, 2000
[See also statement by Zambian government]
Tim Geithner
Under Secretary of State for International Affairs
Department of the Treasury
1500 Pennsylvania Ave., NW, Suite 3432
Washington, DC 20220
Dear Mr Geithner,
As the Board of the IMF prepares to meet to decide whether Zambia
is eligible for debt relief under the Heavily Indebted Poor
Countries (HIPC) Initiative, we write to express our deep concerns
about the clear ineffectiveness of this debt relief framework.
While the HIPC Initiative was designed to ease the debt burden of
heavily indebted poor countries and reduce their debt to
“sustainable levels”, the case of Zambia only serves to underline
the inadequacies of this scheme. Last year, Zambia paid $137
million in debt service to international creditors. Under the
HIPC plan, it will actually be required to pay more in annual debt
service in the short and medium term than it has to date. Because
of IMF loans which come due in 2001, Zambia's yearly payments will
rise by over 50%, to more than $200 million next year. Debt
relief under the HIPC scheme is therefore not relief at all.
Zambia is one of the world's most impoverished countries, with over
four-fifths of the population living on less than $1 a day. It is
one of the countries most severely affected by the HIV/AIDS
pandemic, with one in five adults infected with the disease. Yet
debt service expenditure, at 10.3% of GDP, represents the single
largest item in Zambia's budget. Over the past eight years,
Zambia has followed World Bank and IMF structural adjustment
policies, implementing reforms that have actually increased the
poverty gap, in order to fulfil the criteria for HIPC debt relief.
Even with the full application of this relief, Zambia's debt will
not reach 'sustainable levels' until after 2005, according to the
IMF's own analysis.
Throughout Africa, governments are being forced to sacrifice the
health or education of their own populations in order to service
massive foreign debt burdens. Neither the original HIPC
Initiative, nor its 'enhanced' version, adopted at the 1999 G-7
Summit, has succeeded in easing the debt burden of impoverished
countries. The existing debt relief framework has failed to
address Africa's debt crisis, and Zambia's plight is a clear
illustration of this. Rather than facilitating the reduction of
the debt burden, the HIPC Initiative serves the interests of
creditors, by squeezing the maximum in debt payments from the
world's poorest countries. This seems to be the definition of
'sustainable'.
The proposals before the IMF to ease the payment 'spike' which
Zambia faces next year will only restructure the debt burden and
delay the upcoming increase in debt service. The Zambian
government and civil society organizations there are calling for
special consideration for Zambia's situation, highlighting the
country's track record in meeting debt service obligations, and
emphasizing its commitment to using freed up resources to fight the
HIV/AIDS crisis. We join them in calling for the cancellation of
Zambia's outstanding debts as the only adequate response to the
obvious failure of the HIPC approach.
We respectfully urge you to support Zambia's appeal in your
meetings with the IMF Board, and to work for the cancellation of
Zambia's debt.
Sincerely,
Salih Booker
Director
Africa Policy Information Center
The Africa Fund
American Committee on Africa
ACTION ALERT
GLOBALIZATION CHALLENGE INITIATIVE
Dear Friends:
Below follows an important urgent action alert from Sara Grusky of the
Globalization Challenge Initiative, and additional material from Tanzanian
NGOs.
The IMF and World Bank are preparing to consider the "Poverty Reduction
Strategy Paper (PRSP)" package for Tanzania. The policy package was
designed in consultation with foreign creditors rather than local
citizens, despite Bank/IMF claims that their "new" PRSP policy will
enhance civic participation.
The information that follows below lays out the problem in some detail.
The summary is that the structural adjustment program is very harsh, and
user fees for healthcare and education -- something the United States is
now obligated to oppose by law -- continue to impede access to health and
education programs.
What can you do? The Tanzanian package will be considered at the IMF and
Bank later this week. Contact the executive directors (country
representatives) to the IMF and Bank and inform them that the important
structural adjustment issues were not on the negotiating table during the
PRSP process.
For those in the United States, remind the U.S. executive directors that
they are obligated to oppose loans that require user fees for healthcare
and education.
The U.S Executive Director to the World Bank is Jan Piercy. Contact
information: tel: 202-458-0110, fax: 202-477-2967, e-mail:
jpiercy@worldbank.org.
The U.S. Executive Director to the IMF is Karin Lissakers, tel:
202-623-7759, e-mail: klissakers@imf.org.
For other countries, check
http://www.challengeglobalization.org/html/ta_menu6.shtml
Calls and faxes are more effective than e-mails, but e-mails are
MUCH better than nothing.
Thanks! And don't forget to act right away -- decision making
begins Thursday.
BACKGROUND
STRUCTURAL ADJUSTMENT PROGRAM (SAP) ALERT
ON IMF AND WORLD BANK LENDING TO TANZANIA
Executive Summary
By Globalization Challenge Initiative, A Project of the Tides
Center, USA and the Integrated Social Development Programme,
(ISODEC), Ghana [for the full 30-plus page text of the "Structural
Adjustment Program (SAP) Information Alert for Tanzania" contact:
global.challenge@juno.com]
In late November and early December, the Government of Tanzania
(GOT) will seek endorsement of its Poverty Reduction Strategy Paper
(PRSP) from the Boards of the IMF and World Bank. Preparation of
an acceptable PRSP, which is a three-year national development
strategy, is a new pre-condition for low-income governments seeking
assistance from donors and creditors, especially the IMF and World
Bank. Never before have the IMF and World Bank possessed the power
to endorse a borrowering country's entire national plan.
Ironically, the institutions have seized these powers in the name
of enhancing "country ownership" of the development process.
The Government of Tanzania (GOT) prepared its PRSP with more input
from foreign creditors and donors than from its own citizens. The
government is dependent on donors and creditors for the majority of
its development budget and, to survive, it must heed its creditors
and donors. There are fewer incentives to heed the cries of
citizens -- especially the poor and disadvantaged.
The PRSP lacks credibility because the process lacked the informed
participation of citizens' groups. (See attached statement from
Tanzanian organizations. also posted today) Citizen
"participation for validation" of the PRSP arises when donors and
creditors, especially the IMF and World Bank, negotiate with the
GOT in secret and fail to disclose agreements and commitments to
the public. This was the case in Tanzania.
Key macroeconomic and structural adjustment issues were addressed
in secret negotiations, occuring in parallel to the PRSP
consultations. These negotiation excluded citizen's groups.
Citizens that buy and sell and pay taxes were excluded from key
decisions about whether or how the economy of Tanzania will be
liberalized, privatized and increasingly oriented to produce
exports. Policies, such as those relating to the price of money
and goods, taxation options, trade liberalization, and the
privatization of key state-owned enterprises were not "on the
table" for negotiation during the PRSP consultations. Beyond
public view, a handful of government officials negotiated the
following arrangements with the IMF and the World Bank during the
first half of 2000:
- IMF and World Bank Action in March 2000, which structured a debt
relief operation for the GOT [through the Highly Indebted Poor
Country (HIPC) Initiative] and set the terms and conditions of such
relief.
- IMF Action in April 2000, which extended a $181 million
structural adjustment loan [through the IMF Poverty Reduction and
Growth Facility (PRGF)] to the GOT. To secure the loan, the GOT
agreed to execute a multitude of policies.
- World Bank Action in June 2000, which extended a $290 million
structural adjustment loan to the GOT. The World Bank's policy
does not require disclosure of information about this loan.
- Tanzania's macroeconomic and structural policy framework, which
provides the basis for the PRSP. Although the PRSP will be
disclosed to the public, the policy framework will not be.
Secrecy, especially secrecy about the role of powerful foreign
creditors, undermines democratic processes and the rights of
citizens. The daily lives of citizens are profoundly affected by
the economic policies that the GOT is obligated to implement as
conditions for securing loans and obtaining debt reduction.
Tanzanian citizens have a right to participate in the formulation
of public policies through open and democratic analysis, debate,
and consensus-building. They have the right to hold their
government accountable for its performance, including its
commitments to foreign creditors and donors. Ultimately, citizens
bear the burden of repaying debts to the IMF and World Bank.
Currently, the citizens of Tanzania experience "taxation without
representation" because they are denied participation in
formulating critical IMF and World Bank-financed operations.
Fifteen years of structural adjustment programs (SAPs) have not
improved the quality of life for Tanzanian citizens. The IMF and
the World Bank have financed structural adjustment policies in
Tanzania for about 15 years. Per capita income and basic human
welfare indicators have fallen during this time period. For
example, per capita GDP has fallen to the 1960 level and primary
school enrollment rates plunged below 50 percent from an average of
80 percent during the 1980s. (further details in full Tanzania SAP
Alert, box 6.)
The excessive number of policy prescriptions, or conditions,
attached to the new loans and debt relief amount to micromanagement
of the GOT. Tanzania's Policy Matrix, 2000-2002," which was
appended to the Interim PRSP by the IMF and World Bank lists
approximately 157 policies that the Government of Tanzania will be
pressured to implement during this time period. In addition, there
are more than 20 policy conditions linked to debt relief, ten
policy conditions linked to the World Bank's Country Assistance
Strategy (CAS), and additional conditions linked to IMF and World
Bank-financed structural adjustment loans.
Policy prescriptions will have various impacts on the citizens of
Tanzania; some will be negative. Some policy conditions may
principally benefit foreign creditors and investors. Others may
support or undermine the objectives of sustainable development and
poverty reduction in Tanzania. The "SAP Alert" elaborates on
problematic policy prescriptions, including those which:
- Set fiscal and monetary targets that may continue to undercut
public services, reduce internal demand, aggravate unemployment,
and handicap efforts to boost investment in infrastructure and
human development.
- Impose cost-sharing (i.e. new fees for services) in schools,
health care centers and hospitals, which will continue to rob
vulnerable communities of essential health and education services.
The U.S. Government is now bound by law to oppose loans involving
cost-sharing provisions. On October 25, 2000, the U.S. Congress
passed a bill that requires the United States Executive Directors
at the IMF, the World Bank and the regional development banks to
oppose any loan that imposes user fees or service charges on poor
people for primary education and health care. The legislation was
subsequently signed into law.
- Further reduce import tariffs. Such tariff reductions often
result in a flood of imports that can undermine domestic industrial
and agricultural producers.
- Require capital account liberalization to attract foreign
investment. However, speculative transactions provide profits to
foreign investors while offering few, if any, benefits to the poor
majority of Tanzania.
- Require privatization of public companies, which can increase
unemployment, lower wages, increase the cost of goods and services,
and decrease access to poor populations.
- Require the privatization of agricultural enterprises. Already,
privatization has increased the prices of fertilizer and other
inputs, and reduced access to credit. While large farmers and
private traders have benefited from liberalization and
privatization, small farmers, who constitute the majority of
Tanzania's population, have not.
- Require the GOT to remain current on debt service payments. This
is a standard condition of IMF loans. However, nearly a quarter of
the government's 2001 budget is devoted to servicing external debt.
In fact, even after debt relief, the level of Tanzania's external
debt service rises. (Debt servicing requirement in 2001 will be
higher than requirements in 1996-2000.)
It is important to assess whether such policy conditions will hurt
or help Tanzanians, especially poor and marginalized groups and
women. However, the main issue relates to how these policy
conditions are formulated. Behind closed doors, the IMF and World
Bank push these policies on a government which is "on its knees"
and desperate for foreign exchange. Negotiations relating to PRSPs
and adjustment conditions should never undermine domestic
consensus-building processes.
How to Convey Your Views to the
Executive Directors of the IMF and World Bank
Tanzanian citizens are conveying their views of the PRSP and
adjustment processes to their government and to their
representatives on the Executive Boards of the IMF and World Bank.
To convey your views, locate the names, addresses, phone, fax and
e-mail contacts of the World Bank and IMF Executive Directors that
represent your country at: http://www.challengeglobalization.org.
In designing the PRSP process, the Executive Directors committed
their institutions to open and transparent processes that would
reconcile structural adjustment conditions with poverty reduction
goals. Their promises are unfulfilled. Macroeconomic and
structural policies cannot be designed in a participatory fashion
to serve poverty reduction goals because, for the most part, they
are formulated in secret. [For the full text of the Tanzania SAP
Alert contact: global.challenge@juno.com]
This material is produced and distributed by the
Africa Policy Information Center (APIC).APIC provides
accessible information and analysis in order to promote U.S.
and international policies toward Africa that advance economic,
political and social justice and the full spectrum of human rights.
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