Africa Needs Debt Cancellation, Not More IMF Programs

Sub-Saharan Africa, so rich in human and natural resources, remains the economically poorest region of the world. Half of its people live in poverty, and in many countries economic conditions have been getting worse for the last 20 years or more.

The greatest barrier to economic recovery is the region's overwhelming debt burden, which amounts to about $230 billion ($203 billion if South Africa, with its anomalous history, is not included). Thirty-three of the region's 44 countries are designated heavily indebted poor countries by the World Bank; most of the rest nearly qualify for that ranking. Creditors -- chiefly the International Monetary Fund (IMF) and World Bank -- impose harsh conditions, and investors shy away from countries with unsustainable debts.

Much of the debt accumulated by African countries was built up during the 1970s, a time of reckless lending by banks and international agencies, and was agreed to by undemocratic governments. In many cases, the population of the borrowing country realized little benefit from the loans as the money disappeared in failed infrastructure projects, corrupt schemes, or unwise investments. The debt has continued to grow since then as governments take out new loans to pay off old ones.

In 1996, sub-Saharan Africa (minus South Africa) paid $2.5 billion more in debt servicing than it got in new long-term loans and credits. The IMF alone has transferred over $3 billion out of Africa since the mid-1980s.

It is the poor people of the indebted countries, those who benefited least, who end up paying the bills through scarce resources diverted to debt servicing, and through the effects of the IMF/World Bank austerity programs. These "structural adjustment programs," which have been imposed repeatedly on almost every country in the region since the early 1980s, mandate massive lay-offs, sharp reductions in credit, increased taxes and higher interest rates, cuts in spending on health and education, and currency devaluation Average real wages decreased in 26 out of 28 African countries surveyed during the 1980s. Cuts in health spending have led to an increase in infant mortality; African children are expected to account for about 40% of infant deaths worldwide by the year 2000. Millions of small farmers, especially women, have been devastated by IMF-induced cuts in credit and agricultural services. Some 40% of the population suffers from some degree of malnutrition.

These programs have failed. Although the IMF invariably insists that indebted countries adopt structural adjustment programs, World Bank figures show that 63 of 69 countries under such plans saw their external debt increase during the programs. The recent bailouts in East Asia came with similar conditions attached, and economists from across the ideological spectrum have strongly criticized them for encouraging recession and layoffs and otherwise dramatically increasing the pain of the financial crises for ordinary people. What has gone too-little remarked is that similar programs have been forced on Africa for nearly 20 years with devastating results.

Congress must insure that none of its actions force countries to abide by more IMF conditions in order to qualify for trade or other benefits. No encouragement should be given to the flawed policies that have impoverished sub-Saharan Africa.

Debt is what subjects African countries to the mandates of the IMF and World Bank. Debt is what diverts resources from health and education spending. And debt is what inhibits productive investment. Any plan to benefit Africa must include comprehensive debt cancellation for sub-Saharan Africa.

  • The external debt burden of sub-Saharan Africa has increased by nearly 400% since 1980, when the IMF and World Bank began imposing their "structural adjustment programs."
  • External debt per capita for the region (not including South Africa) is $365, while GNP per capita is just $308.
  • The external debt for the region (again excluding South Africa), at some $203 billion in 1996, represents 313% of the annual value of its exports.
  • Debt servicing for the region amounts to about 20% of its export income.
  • Africa spends four times more on debt interest payments than on health care.

Congress should support programs for Africa which call for:

  • Immediate cancellation of all bilateral debt owed to the U.S. (including credits and guarantees).
  • Commits the U.S. to meaningfully advocate for similar cancellation by other creditor governments (such as its partners at the Paris Club) and at the multilateral financial institutions.
  • Acquisition and cancellation of African debt owed to U.S. banks.

Congress should not support plans which fund the IMF/World Bank debt relief program, the Heavily Indebted Poor Countries (HIPC) Initiative. Its levels of relief are paltry and it requires several years adherence to structural adjustment programs.

On January 29, Vice President Gore announced that the Administration was committed to greater efforts for debt relief for the world's most impoverished countries. He specifically mentioned the possibility of supporting sales of part of the IMF's gold stocks to support such relief. What was unclear, and what Congress should be aware of, is that some gold-sales proposals would, in the name of debt relief, actually fund the same IMF programs that have contributed to the impoverishment and growing debt burden of countries in Africa and elsewhere.

The Vice President's announcement should be warmly welcomed. But members of Congress who care about Africa should work to make sure that the debt relief he advocates is real debt relief. Any proceeds from the sale or other conversion of IMF gold stocks should go directly to debt relief and not to programs controlled by the IMF and/or the World Bank.

 

More Information on:

IMF and the Brazilian Crisis - www.preamble.org/IMFinAfrica.htm

The Debts of Corruption - www.jubilee2000uk.org/features/odious.html

IMF Impact on African Countries - www.citizen.org/pctrade/Africa/rrbobfn2.htm

Why South Africa Should Say 'No' to IMF Policies - www.twnside.org.sg/souths/twn/title/afri-cn.htm


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