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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 Please note that many outdated links in this archived document may not work.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: Oxfam Debt Statement, 1

Africa: Oxfam Debt Statement, 1
Date distributed (ymd): 970423
Document reposted by APIC

This posting, and the next, contain the executive summary of a new Oxfam International policy paper published this month. The full text of the paper, which includes additional background on Uganda, Mozambique and other African countries, can be found on the Oxfam Web site at -- page no longer available 11/99

The Oxfam International Advocacy Office can be contacted at 1511 "K" Street, Suite 1044, Washington DC 20005, USA; Tel: 1 202 393 5332; Fax: 1 202 783 8739; Email:

Poor Country Debt Relief: False Dawn or New Hope for Poverty Reduction?

Executive summary

"My deepest wish is to go back to school. I haven't been for many years, but I remember it was a good time. It will be a beautiful day for me when I can learn to read and write. Then I will be happy."

Anna Asiimwe is a nine-year-old girl living in the Kabale district of southern Uganda, one of the poorest regions in one of the world's poorest countries. She has something in common with over two million other children in her country, and many millions more across Africa and other developing regions: Anna Asiimwe is not in primary school. From Uganda to Ethiopia, Mozambique, Bolivia and Nicaragua, a crushing burden of foreign debt results in governments spending more repaying creditors than they spend on the health and education of their citizens. Inadequate public spending on social provision means that families must meet the costs of education out of their own pockets, and Anna's parent are too poor to pay. Until last year prospects for change appeared bleak. Then the Government of Uganda announced an ambitious plan to provide free primary school places for up to four children in each family.

The plan, an element in the Ugandan Government's strategy for eradicating poverty, was to be financed partly through domestic revenues; and partly by transferring savings from debt reduction provided under the Highly Indebted Poor Countries (HIPC) initiative, which was adopted by the Boards of the International Monetary Fund (IMF) and the World Bank in September, 1996. Along with around 30 other children in her village, Anna Asiimwe was registered for a place in primary school. Her hopes for an education and a better future soared. Now they have plummeted. Having promised early debt relief for Uganda, some of the world's most powerful countries have used their influence to delay action for at least one year. The Ugandan Government is sticking to its plan for providing free education. But faced with a higher than expected debt repayments bill, the timetable for implementation has been delayed. For Anna Asiimwe and other children in her village, it means another year without school, another lost opportunity.

Debt problems are usually measured in terms of cold financial data. Public debate is discouraged by the obsessive secrecy of creditor governments and international financial institutions, and by impenetrable technical jargon. But behind this dense fog, the debt crisis wears a human face. It is the face of a young girl - a girl like Anna Asiimwe - denied an opportunity for the education which could lift her out of poverty because some northern governments regard national debt repayment as a higher priority than her schooling; it is the face of a child whose mind and body are not growing properly because of recurrent infectious diseases - diseases which could be prevented by transferring a fraction of what is spent on debt to primary health care; and it is the face of a women forced to walk for several hours to fetch water because the claims of foreign creditors have decimated the national budget for water provision. These are the faces of people whose voices go unheard at the debt negotiating table, but whose lives are profoundly affected by debt, and by the actions - and inaction - of creditors.

The debt crisis facing the poorest countries has been discussed too politely for too long. Such politeness implies a tacit acceptance of a situation which ought to be regarded as intolerable. Allowing debt to destroy the growing minds and bodies of young children, to undermine communities, and to further erode the position of the poor is the antithesis of civilised behaviour. Nothing can justify it - and it should not be tolerated.

Effective debt relief would provide the resources needed for a sustained assault on poverty, improving prospects for child survival and human development across a large swathe of the developing world. It would also provides an opportunity for governments of the industrialised world to take their own rhetoric on poverty reduction seriously. Seven years ago, at the World Summit for Children, they pledged support for an ambitious programme of human development. Two years ago they gathered again at the Copenhagen Summit for Social Development to reaffirm that pledge, and to promise co-operation in providing the resources needed to achieve “the elimination of hunger and malnutrition, the provision of food security, education (and) primary health services, including reproductive health care, safe drinking water and sanitation”. Too often, such commitments are forgotten as swiftly as they are made, recalled only as an increasingly vacuous echo down the years. Today, debt reduction provides an obvious mechanism for translating noble declarations into action.

There is another reason for taking decisive action on debt reduction. It is rooted in the self-interest of creditors. At present, debt is fuelling a vicious circle of rising poverty, economic stagnation and increased social tension, contributing to processes which threaten to culminate in the collapse of states and econmic disintegration. The rest of the world will not be immune to the humanitaran and economic consequences of dealing with a growing number of Zaires, Liberas and Rwandas. These consquences can be averted. Yet there is a paralysis in international co-operation - and nowhere more so than in matters of debt relief.

Threats and opportunities

This Briefing carries two simple messages. The first is that there is now an unprecedented opportunity to end the debt crisis in the poorest countries. That opportunity is provided by the Highly Indebted Poor Countries (HIPC) initiative agreed last year by the Boards of the IMF and World Bank. True, there are problems in the design of the HIPC framework. In particular, the time-frame for implementation is too long, the debt-sustainability thresholds have been set too high, and debt relief has not been integrated into a broader programme for advancing human development. Reforms are needed in each of these areas. But the HIPC initiative still provides for the type of comprehensive and integrated approach which could achieve debt sustainability. The second message is that, for all its potential, the HIPC initiative stands on the brink of failure. Seven months ago, the World Bank's President, Jim Wolfensohn proclaimed the new debt relief framework "good news for the world's poor."

In recent months, a steady stream of positive and self-congratulatory public statements from the IMF and World Bank have reinforced this view. Such messages seriously misrepresent reality. Two of the strongest candidates for early debt relief - Uganda and Bolivia - have been treated shamefully. Neither will see any reduction in their debt burden until next year, and both will suffer significant losses of foreign exchange as a result. Most other candidates for debt relief will be placed on the back-burner until 2000 and beyond.

Far from being good news for the poor, the HIPC framework stands in grave danger of becoming a monumental irrelevance. What has gone wrong? In short, the political will to make the HIPC initiative work has been lacking. Some of the most powerful Group of Seven (G7) countries - Germany, Japan, and Italy - opposed the initiative from the outset, and are now using their influence on the Boards of the IMF and World Bank to delay implementation and minimise the level of debt relief provided. Unfortunately, they have now been joined by the US. Previously a strong supporter of the HIPC framework, the US Treasury is now seeking to delay implementation, even for countries with exemplary track records.

For its part, the IMF has played a highly destructive role. Two years ago, the IMF denied the existence of a debt problem and ruled out participation in any debt reduction. Today, the Fund's management and technical staff are developing foot-dragging on implementation into an art form, supporting the efforts of those G7 countries seeking to undermine the substance of the HIPC initiative while keeping its packaging intact. One of the primary concerns of the Fund has been to minimise the costs to itself of financing debt relief, placing narrow institutional self-interest over the needs of the world's poorest countries. This is scandalous abuse of power and authority, for which the Fund's Managing Director, Michael Camdessus, must accept prime responsibility.

A challenge to the World Bank

Set against this powerful array of political forces, advocates for the debtor governments are thin on the ground. The British Government has played a crucial role in pressing for flexible implementation of the HIPC framework. It has been supported by the governments of Australia and New Zealand. World Bank staff have also attempted to develop the initiative in a constructive spirit. Where leadership has been lacking is at the highest political level of the World Bank. Without the personal commitment of Jim Wolfensohn, it is unlikely the HIPC framework would have seen the light of day. For that he deserves credit. But the World Bank President is now failing to drive the initiative forward.

This is not in the best interests of the World Bank. Recently, Mr Wolfensohn received the backing of shareholders for his Strategic Compact - a vision for the World Bank in the 21st century. That vision, in the opening words of the Compact, is "to achieve greater effectiveness in the World Bank's basic mission - poverty reduction." Improving access to basic social services is identified as central to the success of this mission. But if the World Bank President is incapable of persuading key governments on his Board to implement a modest proposal for reducing the crushing burden of debt on the poorest countries, what hope is there of him delivering on the Strategic Compact?

In short, none at all. That is why Oxfam International sees the HIPC initiative as a litmus test of Mr Wolfensohn's commitment to poverty reduction, and of his capacity to recast the World Bank as a force for enhancing the interests of the poor. There is a growing sense that, for all the encouraging rhetoric on poverty reduction to emerge from the World Bank since Mr Wolfensohn's arrival, there has been little delivery of substance. This perception would change if he took a principled stand on behalf of the poor in debtor countries, openly challenging the IMF and those G7 countries bent on consigning the HIPIC framework to a slow death. Oxfam International urges the World Bank President to confront his Board with a simple message: "Back me in making the HIPC initiative work, or I will be unable to realise my longer-term vision for the Bank as an agency for poverty reduction." Failure to deliver on debt reduction now gravely threatens the credibility of the multilateral system. More immediately, it threatens the livelihoods of poor people. Without a renewed sense of purpose and political vision, the HIPC initiative will unquestionably fail. There are doubtless many diplomatic formulations which could be arrived at to explain such an outcome. But stripped of diplomatic niceties, what is happening in the Boards of the Bretton Woods Institutions is an outrage perpetrated against a large and highly vulnerable section of humanity. Ultimately, the actions of those responsible for delaying debt reduction is resulting in lost opportunities for human development, and - in the last analysis - lost lives.

We state this fact bluntly because it is the harsh reality. In 1990, international political leaders gathered at the World Summit for Children to agree a plan of action for reducing child deaths by half over the next decade, along with other human development targets. The external finance needed to achieve these objectives through investment in primary health, nutrition, and water and sanitation is considerably less than is being spent on debt. These are precisely the investments which Mr Wolfensohn says he wants to encourage. Yet despite the opportunity created by the HIPC framework, debt relief is not regarded by his Board as a poverty issue.

The human costs of this lost opportunity for human development will be high. In this Briefing we review the National Plans of Action for achieving the targets set at the World Summit for Children for seven countries in Africa. In each case, debt relief could make a decisive contribution, helping to create the foundations for a sustained assault on poverty. In each case the potential welfare gains are enormous - and they are achievable. For the seven countries reviewed, successful implementation of the national plans would save the lives of 3.2 million children over the next seven years. Viewed in a different light, continued obstruction on the part of the IMF and the governments of Germany, Japan, and the US will help to consign the same children to an early grave.

(continued in part 2)

This material is being reposted for wider distribution by the Africa Policy Information Center (APIC), the educational affiliate of the Washington Office on Africa. 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.

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