Conference supports call for debt write-offs

The economic chapter of the Commission for Africa has urged rich countries to write off the debts of poor nations, to give fresh impetus to the continent's development. The main objectives of the Commission for Africa, launched by British Prime Minister Tony Blair in February 2004, are to "generate new ideas and action for a strong and prosperous Africa, using the 2005 British presidencies of the G8 and the European Union as a platform", and to support the New Partnership for Africa's Development (NEPAD). A communique released on Tuesday at the end of the conference in Cape Town, South Africa, largely endorsed the call by Britain's chancellor of the exchequer, Gordon Brown, for a 'Marshall Plan for Africa'. Britain has already announced the cancellation of bilateral (country-to-country) debt owed to it by Mozambique and Tanzania, and Brown has proposed that other rich G8 nations follow suit. The chancellor addressed delegates on Monday, at the tail-end of his trip through Africa, by observing "on present progress in sub-Saharan Africa: primary education for all will be delivered not as the Millennium Development Goals (MDGs) solemnly promised in 2015, but 2130 - that is 115 years late; the halving of poverty, not as the richest countries promised by 2015, but by 2150 - that is 135 years late; and the elimination of avoidable infant deaths not ... by 2015, but by 2165 - that is 150 years late". He said the Africa Commission could "become the vehicle by which we agree to ... once and for all, write off the historic but unpayable debts of the past for the poorest countries and end an injustice that has lasted far too long". Brown noted that 80 percent of Africa's external debts were owed to the World Bank and International Monetary Fund (IMF). He said detailed proposals to use IMF gold to write off debt and ask World Bank shareholders to take over the debts, owed to them by 70 of the poorest countries, had been discussed with commissioners and finance ministers. He announced that "from now until 2015 we [Britain] will take responsibility for our share of the World Bank debts". Brown also proposed that rich countries begin this year by setting aside 0.7 percent of their national income for "long-term and predictable aid". This would facilitate the creation of an International Finance Facility, generating US $50 billion each year from 2005 to 2015. The conference communique also called for the commission to propose a "100 percent multilateral debt service relief for HIPC [Highly Indebted Poor Countries] and other countries, shaped by development needs and poverty, rather than the narrow export-to-debt ratios", and commented that while "Africa's economic development is in the hands of Africans, progress towards the MDGs will be slow without a significant increase in resources". In his speech to the conference, South African Finance Minister Trevor Manuel said that according to research by the commission, meeting the needs of the MDGs would require at least US $25 billion annually. Manuel noted that a key method of advancing economic growth "and spreading it more widely through our populations is ... to expand trade". African countries have long complained that structural adjustment and market liberalisation programmes, forced on them as conditionalities for loans, have had a negative impact on the development of their industries, and that subsidies and protectionist policies have effectively barred them from European and US markets. To this end, Brown called for the commission's report, scheduled to be released in March, ahead of the G8 summit in July, to reflect the need for "lasting, deep-seated trade justice that would mean not only that Europe and the richest countries be honest about and address the scale of the waste and scandal of agricultural protectionism, but to address infrastructure needs - transport, power, water, telecommunications and skills - and provide the resources that will enable developing countries to participate successfully in the international economy". Brown will be meeting with 25 European Union finance ministers, as well as those of the United States and Canada, to seek their support for these proposals. George Dor of the debt-cancellation lobby group, Jubilee, told IRIN that while the developments at the conference were welcome, the framework of the proposed debt-relief initiatives remained unclear. "Firstly, since the mid-90s there's been discussion around cancelling bilateral debt - in that sense it's not particularly new: it has always been the case that the IMF and World Bank are the main creditors to countries in Africa. In terms of the IMF revaluing its gold stocks [to finance debt write-offs], it's technically quite an easy thing to do. However, what you could have is a potentially negative impact on the gold price, and the countries affected could be the ones [debt write-offs] were meant to help ... the gold producing countries in Africa," Dor explained. Britain's decision to "to shoulder its portion of World Bank debt" was commendable, but "it would have to be met by other countries", he added. "That's a challenge to the other G8 nations and related countries. If we see other G8 countries following suit ... [it will mean] that, instead of poor countries putting immense amounts of resources into servicing debt, a larger amount of resources will be available for countries to grow their economies," Dor noted. But, he said, concern remained that debt write-offs might come with "a new form of conditionalities". "If the [debt] cancellation happens in relation to a set of agreements that compel the [indebted] countries to keep to various structural adjustment programmes of the World Bank and IMF, or new agreements have to have particular trading and investment relationships with particular countries, one could see a situation where debt cancellation - that appears to be such a positive on paper - not translating into meaningful benefits for people on the ground," Dor cautioned. Regarding the International Finance Facility, Dor said it remained unclear as to how this instrument would function. "What would be the framework of such a facility; the conditions under which it would operate? Will there be conditions attached to the 0.7 percent of national income contributed by rich nations? In what way would specific country-related deals be incorporated into that? Under what conditions will money be lent from such a facility [to developing nations]?" he asked. Dor concluded that "as long as there's another set of obligations or conditionalities - for example, a criterion that [poor] countries must stick to a neo-liberal macroeconomic policy that entails privatising your water supply - when people living on less than a $1 a day cannot afford to pay for water - you resolve nothing". The conference communique welcomed Brown's call for the urgent creation of the International Finance Facility, but urged the international community to examine "other innovative sources" of funding, such as "special levies and international taxes", as a new mechanism was needed to "address the impact of unexpected shocks" on the people of Africa.