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Note: This document is from the archive of the Africa Policy E-Journal, published by the Africa Policy Information Center (APIC) from 1995 to 2001 and by Africa Action from 2001 to 2003. APIC was merged into Africa Action in 2001. Please note that many outdated links in this archived document may not work.

Africa: Multilateral Debt, BFW Alert
Date Distributed (ymd): 960306

BREAD FOR THE WORLD ACTION ALERT
FEBRUARY 5, 1996

Bread for the World National Office, 1100 Wayne Avenue, Suite
1000, Silver Spring, MD 20910, Phone: 301-608-2400, Fax:
301-608-2401, E-mail: bread@igc.org.

EASING AFRICA'S DEBT BURDEN

I. Issue

Enormous foreign debt has had a devastating impact on the
development of most African countries in the last decade.
Twenty-five of the world's poorest countries in Africa owe
enormous debts, primarily to foreign governments and to
international lending institutions such as the World Bank and
the International Monetary Fund (IMF). Much of the debt was
acquired by corrupt, undemocratic governments and originally
used to purchase military weapons or finance wasteful or
ineffective projects. Now, instead of investing in food
production, health care, housing and education, African
countries must make huge debt payments.

The international response to Africa's huge debt burden has
been inadequate. But in June 1995, there was a breakthrough
when political leaders from industrialized nations called for
a new debt reduction strategy for the world's poorest nations.
In response, the World Bank and IMF are discussing a proposal
that would ease the foreign debt burden of the world's poorest
countries.

The proposal recognizes the extent of the problem and
acknowledges that both creditors and debtors share
responsibility. The proposal would create a new fund, the
Multilateral Debt Facility (MDF), to help poor countries
reduce billions of dollars in debts they owe to the World
Bank, IMF and other international institutions. More
important, administrators of the MDF would also assess a
country's total debt and coordinate its reduction with
governments and private creditors.

But the MDF faces several obstacles. First, the IMF,
unrealistically projecting strong economic growth and the
steady flow of foreign aid, questions the need for a new
solution. Second, there is controversy regarding debtor
countries' eligibility for debt relief through the MDF. The
World Bank and IMF want it tied to structural adjustment
policies that have not worked very well in Africa. Bread for
the World favors conditions that require debtor nations to
demonstrate commitment to development and poverty reduction.
Additionally, Bread for the World supports funding the MDF
through existing reserves of the World Bank and IMF, without
diverting available resources from development aid. Poor
countries in Africa need both debt reduction and aid in order
to escape the cycle of poverty and indebtedness.

II. Action

Write to Treasury Secretary Robert Rubin, the U.S.
representative on World Bank and IMF policy committees.
Commend him for his support of a comprehensive solution to the
debt problems of the poorest countries in Africa. Urge him to
press the World Bank and IMF to ensure that:

* funding for debt reduction comes from existing reserves of
the World Bank and IMF, NOT diverted from development aid;

* the borrowing government's commitment to poverty reduction
be a major condition for reducing its debt; and

* total debt is addressed and reduced to manageable levels in
the near future.

III. Write

Robert Rubin, Secretary of the Treasury, 15th and Pennsylvania
Avenue NW, Washington, DC 20220 Fax: 202-622-2599

Send copies to:

James Wolfensohn, World Bank President, World Bank, 1818 H
Street NW, Washington, DC 20433 Fax: 202-477-1305

and

Michel Camdessus, IMF Managing Director, International
Monetary Fund, 700 19th Street NW, Washington, DC 20431 Fax:
202-623-4661

Also send a copy to: Bread for the World, Issues Department

IV. Background

Poor countries in Africa are saddled with heavy debts, many of
which were unjustly accrued. Since the debt crisis in the
early 1980s, Northern creditors have responded by
restructuring loans and providing new loans to service debts.
With new loans, stringent policies enforced by the IMF and
World Bank require governments to cut social spending programs
and reduce government subsidies. Poor people, particularly
women and children, pay the heaviest price for the debt
burden. For many poor countries, this approach has resulted
only in increasing debt.

In 1982, Sub-Saharan Africa's total debt was $80 billion.
Despite endless rounds of rescheduling, it rose to $210
billion in 1994. Africa's debt to the World Bank, IMF and
other multilateral institutions has increasingly become
problematic, since countries are obligated to pay this debt
first. Repayments to the multilateral institutions are now
equivalent to more than half of the World Bank's new loans.
Thus, aid intended for development is used for debt payments.
Even so, Africa has only been able to pay half the principal
and interest owed to creditors since the mid-1980s. Meanwhile,
dependence on aid is reinforced, and the indebted country
continues in perpetual indebtedness.

The debt burden has had a significant impact on poor people in
Africa. The $13 billion annually repaid by African governments
to Northern creditors represents more than double their
spending on health and primary education combined. Each year,
the government of Uganda spends approximately $2.50 per capita
on health, compared with $30 per capita on debt payments. In
addition, Africa's unsustainable debt burden has deterred
private and foreign investment.

The proposed MDF offers an important opportunity to address
this problem, if it is appropriately financed, linked to
poverty reduction and requires the participation of all
multilateral institutions, including the IMF.

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For additional information on this issue contact either Bread
for the World in Washington or, in Toronto, the Inter-Church
Coalition on Africa (iccaf@web.apc.org). See also the
document "Multilateral Debt Reduction:  A Proposed Framework,"
from the Inter-Church Coalition on Africa, 129 St. Clair Ave.
W. Toronto, ON M4V 1N5, Tel: 416 927 1124   Fax: 416 927 7554,
E-mail: iccaf@web.apc.org, which was reposted by APIC on
January 26 in two parts.  It is available by Web or Gopher at
the following URLs:




These and other documents on Web or Gopher sites can also be
retrieved via e-mail by using the WebMail server (for
instructions send a message "help" to webmail@www.ucc.ie) or
the Agora server (for instructions send a message "help" to
agora@kamakura.mss.co.jp).

************************************************************
This material is being reposted for wider distribution by the
Africa Policy Information Center (APIC). APIC's primary
objective is to widen the policy debate in the United States
around African issues and the U.S. role in Africa, by
concentrating on providing accessible policy-relevant
information and analysis usable by a wide range of groups and
individuals. APIC is affiliated with the Washington Office on
Africa (WOA), a not-for-profit church, trade union and civil
rights group supported organization that works with Congress
on Africa-related legislation.

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