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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. For current information and action alerts from Africa Action, visit http://www.africaaction.org. Please note that many outdated links in this archived document may not work.

Africa: Debt (Recent Documents)

Africa: Debt (Recent Documents)
Date distributed (ymd): 980216
Document reposted by APIC

+++++++++++++++++++++Document Profile+++++++++++++++++++++

Region: Continent-Wide
Issue Areas: +economy/development+ +US policy focus+
Summary Contents:
This posting contains an action alert from the Jubilee 2000/USA Campaign for forgiveness of debt of impoverished countries, a notice from the Mozambique News Agency on the latest developments concerning Mozambique's debts, and a list of selected sites for additional information on Africa's debt.

+++++++++++++++++end profile++++++++++++++++++++++++++++++

THE JUBILEE 2000/USA CAMPAIGN
P.O. Box 29550
Washington, DC 20017
E-mail: coord@J2000USA.org
Tel: 202/783-3566

Part of a worldwide movement to cancel the crushing international debt of impoverished countries by the new millennium

==> A C T I O N A L E R T <==

Urge Clinton To Cancel Africa's Debt!

ACTION: Contact the White House by late February, and urge President Clinton to cancel the entire debt owed by impoverished Sub-Saharan Africa countries to the United States before going to Africa in March. Emphasize that without relief from the strangling burden of debt, African countries will be unable to achieve the economic progress and human development they so urgently need.

Address letters to:

President Bill Clinton
1600 Pennsylvania Ave., NW
Washington, DC 20500
Call the White House comment line: 202-456-1111
Send email to President@whitehouse.gov

SAMPLE LETTER:

Note : this is just a sample text. Please personalize your letter by expressing in your own words why this issue matters to you. Keep your letter to one page.

Dear President Clinton:

Your upcoming visit to Africa presents a critical opportunity to address the problem of the crushing debt borne by the world's most impoverished countries, most of which are in Africa.

I understand that you plan to give high priority during your trip to commercial relations. However, I believe it is critical that you place emphasis on relieving Africa's debt. This debt not only discourages private investment but also blocks real progress toward poverty reduction and environmentally sustainable development.

While I applaud your inclusion of some funds for debt relief in your latest budget proposal to Congress, I urge you to take even bolder action in advance of your trip by speaking out in support of cancellation of the entire debt owed by poor African countries to the US government. It is a tragedy that the countries of sub-Saharan Africa are now spending more each year on repaying their debts than they spend on all primary education and health care.

The debt owed by African countries to the United States is about $4.5 billion, representing a relatively small share of Africa's total debt burden. Yet, cancellation of even this small share would send an important message to Africans as well as to other creditor governments that the United States recognizes the need to resolve the debt that weighs so heavily on impoverished people in that region. It would also follow a similar announcement by the United Kingdom to cancel the bilateral debt of the poorest Commonwealth countries.

I support the call of the Jubilee 2000/USA Campaign for debt reduction that benefits people living in poverty, involves them in the process of determining the terms of debt relief, and is not tied to conditions that perpetuate poverty or environmental degradation.

Please let me know what steps you are willing to take to address the critical need for debt cancellation.

Sincerely,

[your name and address]

BACKGROUND:

The Jubilee 2000/USA Campaign is calling upon creditor governments and institutions to cancel the crushing debt of the most impoverished countries, most of which are in Africa. President Clinton's planned visit to Africa in late March presents a critical opportunity to raise public attention in the United States to the problem of debt and to take action to resolve the problem.

President Clinton will be the first President in office to travel to Africa. Clinton is expected to give high priority to commercial relations and to present African countries with a new initiative to increase US trade and private investment in the region, as he announced in his recent State of the Union address. It is critical that President also give priority to relieving Africa's debt, since debt discourages private investment and also hinders progress toward fair and environmentally sustainable development. President Clinton should take action in advance of his trip to cancel the entire debt owed by poor African countries to the US government.*

At last calculation, African countries owe the United States about $4.5 billion -- only a small share of Africa's total $236 billion debt burden. But cancellation of even this small share would send an important message to Africans as well as to other creditor governments that the United States recognizes the need to resolve the debt that weighs so heavily on impoverished people in that region. It would also follow a similar announcement by the United Kingdom to cancel the bilateral debt of the poorest Commonwealth countries.

(*Note that current law restricts the United States from forgiving the debt of countries that systematically violate human rights, that have excessive military spending, or are engaged in terrorism or drug trafficking.)

AN EXCERPT FROM THE JUBILEE 2000/USA EDUCATIONAL PACKET:
(forthcoming from Jubilee 2000/USA -- stay tuned for ordering information!)

"I called long ago for the cancellation of the crippling debt we have had to bear for so long. . . . There are others who have joined their voices in this campaign. There is something called Jubilee 2000. We ask our friends who have stood by us in the dark days of oppression and injustice. This is the new moral crusade to have the debt canceled following the biblical principle of Jubilee. Basically [this principle] says everything belongs to God; all debts and mortgages must be canceled in the Jubilee Year to give the debtors a chance to make a new beginning." -- Archbishop Desmond Tutu in a speech to the General Assembly of the All Africa Conference of Churches, October, 1997.

..........

The debt burden inhibits the social and economic development that is needed to lift people out of poverty.... Its cancellation -- if carried out in ways that benefit ordinary people -- can bring a new opportunity for hope to millions who are currently unable to meet their basic human needs.

The countries of sub-Saharan Africa, for example, spend more each year on repaying their debts than they spend on all primary education and health care.

In 1996 the government of Mozambique spent twice as much money "servicing" -- i.e. making timely interest and principal payments -- its international debt as it spent on health and education. Yet one out of four children in Mozambique dies before reaching the age of five due to infectious disease. Zambia spends $4 on debt servicing for every $1 on health, while infant mortality rates are rising. In Ethiopia, debt payments are four times public spending on health, while over 100,000 children die every year from easily preventable and treatable diarrhea. In 1996 Uganda spent only $3 per person on health care while spending $17 per person on repaying its debt. Yet one of every five Ugandan children dies from a preventable disease before reaching the age of five.

THE ORIGIN OF THE DEBT

Africa

In addition to actions by northern economies that raised real interest rates for southern governments and dried up the demand for southern products, other factors have worsened Africa's debt problems. During the Cold War, donor governments were more interested in gaining allies than in whether the governments served the people or the money went to productive purposes. Newly independent African nations were led by inexperienced governments. Many projects financed by donors were poorly designed and unproductive: roads that went nowhere, factories that never produced, and power plants that were left uncompleted. This misspending left nothing behind except debt with no productive capacity to pay for the projects. In addition, some leaders wasted money on military expenditures and personal corruption.

Africans with money kept their wealth overseas ("capital flight"). Civil wars and natural famines caused additional devastation. The African Development Bank, where the borrowers maintain a majority of decision making power, continued to make high interest loans to desperately poor countries. Neither these market rate loans nor low interest loans have been repaid, but the debt continues to grow as interest is charged for unpaid principal and unpaid interest. Because of inadequate resources to reduce Africa's debt, governments built up huge arrears. They paid a portion of their debt obligations, especially to the IMF and the multilateral institutions; what was not paid was added to the still unpaid principal of the debt. The size of the debt ballooned.

Compounding the problem, international financial institutions and donor governments gave African governments poor advice on how to reform their economies. Donor governments lacked the political will to support an adequate solution to the debt. Ordinary Africans were excluded from having a voice in the decisions about debt relief and its conditions, while rich donor governments dominated the discussion.

Africa has been trapped by the past -- old debt drains new sources of development funds and absorbs the time and skills of African leaders. Ridding Africa from the debt burden will not eradicate poverty. It can free Africa to address the present and future needs of its people and its land.


MOZAMBIQUE +NOT SATISFIED+ WITH PARIS CLUB DEBT RELIEF

REPORT FROM THE MOZAMBIQUE INFORMATION AGENCY (AIM)

Maputo, 13 Feb (AIM) - The 80 per cent reduction in Mozambique's debt stock agreed to by the Club of Paris, the grouping of major creditor nations, in January is not enough to bring the country's debt down to fully sustainable levels, Prime Minister Pascoal Mocumbi told reporters in Maputo on Friday.

Shortly after the Paris Club announcement, Mozambican and Russian technical delegations concluded negotiations on Mozambique's debt to the former Soviet Union. In line with the Paris Club position, the Russians would go no further than an 80 per cent reduction.

While this does eliminate around two billion dollars worth of debt, it still leaves Mozambique owing Russia 509 million dollars, to be paid over 33 years, at an interest rate of 0.8 per cent per annum.

Mocumbi said that the Paris Club and the Russian debt relief arrangements left the country with +a relatively sustainable debt. But we would like a fully sustainable debt+.

+We are not satisfied with the outcome we reached with Russia+, he declared. +The debt should have been reduced by 95 per cent or even by 100 per cent, given the conditions under which we acquired that debt. The Russians know that perfectly well+.

Around two thirds of the debt to Russia was military debt, incurred through the purchase of Soviet military equipment during the war of destabilisation.

As for the Paris Club position, Mocumbi said +we would have achieved greater conditions for sustainability if they had gone beyond an 80 per cent write-off. The Paris Club have their own reasons for their procedures, but we are not satisfied+.

The delay in dealing with the ex-Soviet debt (caused largely by conflicting figures in Maputo and Moscow, thanks to difficulties over the rouble exchange rate) has also postponed Mozambique's entry into the HIPC (Highly Indebted Poor Countries) debt relief initiative, which seeks dramatic reductions in both bilateral and multilateral debt.

Reaching an agreement with Russia was a HIPC pre-condition imposed by the IMF and the World Bank. Since the deal was not reached until the end of January, hopes that the HIPC +decision point+ (the moment when the IMF and the World Bank declare Mozambique to be eligible for HIPC treatment) would be reached in December were dashed.

World Bank officials insist on a gap of at least 18 months between the +decision point+ and the +completion point+ (when the debt relief is actually implemented), during which time Mozambique has to continue showing what the IMF regards as +good performance+ in implementing its structural adjustment programme.

This means that there is no chance of a +completion point+ in 1998, and even the mid-1999 date suggested by World Bank country director for Mozambique, Phyllis Pomerantz, is compromised. The end of 1999 now looks like the earliest date that the IMF and World Bank will agree to, unless friendly creditors put strong pressure on the Bretton Woods institutions.

Mocumbi said that Mozambique had done all in its power to achieve an early +decision point+. It was now up to World Bank and IMF officials to decide.

An IMF delegation is currently in Maputo, he revealed. +We have expressed our concerns to them, asking when the decision point will be reached+, said Mocumbi. +We would like it to be as soon as possible+.

He regretted that it had not proved possible to meet the pre-conditions for the decision point (essentially the negotiations with Russia) +in due time. But we couldn't do anything else+.

Asked about supposed difficulties with some Paris Club creditors, notably Portugal and Japan, Mocumbi said that since the Paris Club as a whole had taken a position, there should be no serious problems with its individual members.

He hoped that +at bilateral level, we may obtain better terms than those offered by the Paris Club+. (AIM)

<Circulated by Joseph Hanlon (j.hanlon@open.ac.uk) to the Mozambique Peace Process Bulletin list.
Selected AIM Reports are also available at http://www.poptel.org.uk/mozambique-news>


Note:

Additional resources on Africa's debt can be found at:

(1) Oxfam International Debt Papers
http://www.oxfam.org.uk/policy/papers/lpapers.htm

(2) Jubilee 2000 (International Debt Forgiveness Coalition)
http://www.oneworld.org/jubilee2000/

(3) European Debt Network on Debt and Development
http://www.oneworld.org/eurodad


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 individuals.


URL for this file: http://www.africafocus.org/docs98/debt9802.php