[Peace-discuss] Fwd: Africa: Debt Deal Substantive but Modest

[Al Kagan]

FYI.  I think the most important thing to keep in mind in reading this 
is that the 18 countries have already gone through the Highly Indebted 
Poor Countries (HIPC) process.  That means that they have completed the 
neo-liberal transformation of their economies.  Other countries that 
get debt relief in the future will also be required to do the same.  It 
also is important to recognize that this debt was an impossible burden 
and these countries would have never been able to pay it back anyway.


Begin forwarded message:

> From: africafocus at igc.org
> Date: June 13, 2005 9:15:47 AM CDT
> To: akagan at uiuc.edu
> Subject: Africa: Debt Deal Substantive but Modest
>
>
> Africa: Debt Deal Substantive but Modest
>
> AfricaFocus Bulletin
> June 13, 2005 (050613)
> (Reposted from sources cited below)
>
> Editor's Note
>
> G8 finance ministers have decided to write off 100% of stocks of
> debt owed to international financial institutions by 18 countries,
> including 14 in Africa. This decision, still to be ratified by the
> G8 summit in July and by the annual meetings of the IMF, World
> Bank, and African Development Bank in the fall, is estimated to
> cover some $40 billion in debt, with annual savings to the 18
> countries coming to about $1.5 billion.
>
> The $40 billion write-off, which came after years of campaigning by
> debt cancellation activists and months of negotiations among rich
> country policymakers, is substantive but modest compared to
> Africa's estimated total external debt of $300 billion. While
> celebrating the decision, many commentators and campaigners were
> quick to point out that the move was only a first step to provide
> countries with the chance to meet globally agreed minimum
> development goals. Although nine other countries might soon become
> eligible, as many as 40 more are still in need of similar action.
>
> Moreover, G8 action to provide greater financial resources for the
> Global Fund to fight AIDS, Tuberculosis, and Malaria and other
> critical needs for international investment are still in doubt. And
> international trade negotiations as yet show no signs of addressing
> the concerns of developing countries. The pressure for further
> action is therefore certain to continue through the G8 summit in
> July and beyond.
>
> This AfricaFocus Bulletin includes a brief summary of the G8 debt
> plan, reposted with permission from allAfrica.com, and the full
> text of the official statement on June 11 from the G8 finance
> ministers meeting in London.
>
> For previous AfricaFocus Bulletins on Africa's debt, see
> http://www.africafocus.org/debtexp.php
> On other related economic issues, see
> http://www.africafocus.org/econexp.php
>
> ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
>
> Many thanks to those subscribers who have recently sent in a
> voluntary subscription payment to support AfricaFocus Bulletin. If
> you haven't yet sent in such a payment and are able to do so,
> please help AfricaFocus reach more people with reliable information
> on Africa. Send in a check or pay on-line by credit card. See
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>
> ++++++++++++++++++++++end editor's note+++++++++++++++++++++++
>
> G8 Debt Agreement to Benefit 23 African Countries; Separate Deal
> for Nigeria Mooted
>
> June 12, 2005
>
> By Reed Kramer
> Washington, DC
>
> [Reposted with permission from http://allafrica.com]
>
> The agreement on 100% debt relief for developing countries
> announced by finance ministers from the eight largest industrial
> nations on Saturday initially benefits 14 nations in Africa.
> Another nine African countries could qualify for full debt
> cancellation in the next 12 to 18 months, and the ministers pledged
> "to provide a fair and sustainable solution to Nigeria's debt
> problems in 2005" through the informal grouping of creditor nations
> known as the Paris Club.
>
> The nations first in line for debt forgiveness are 18 (including
> four in Latin America) that have reached the "completion point" in
> the Highly Indebted Poor Countries (HIPC) initiative launched by
> the World Bank and International Monetary Fund in 1996. The 14 in
> Africa include Benin, Burkina Faso, Ethiopia, Ghana, Madagascar,
> Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal, Tanzania,
> Uganda and Zambia. Nine others that are considered close to
> completion are Cameroon, Chad, Democratic Republic of Congo,
> Gambia, Guinea, Guinea-Bissau, Malawi, Sao Tome and Sierra Leone.
>
> Britain put the price tag for writing off the debts of the 18
> eligible countries at $40 billion, plus an additional $11 billion
> for the soon-to-be eligible nine. Aid groups and debt relief
> proponents say 62 countries need total debt forgiveness if they are
> to meet the Millennium Development Goals that were adopted by the
> United Nations in 2000 and include cutting poverty and disease in
> half by 2015. The ministers said that the World Bank and African
> Development Bank would be compensated 'dollar for dollar' for the
> debt cancellation, while the cost of debt relief for the
> International Monetary Fund "should be met by the use of existing
> IMF resources" or, by "extra resources" where necessary.
>
> For Nigeria, the G8 ministers provided encouragement that a relief
> package, which has been under discussion with creditors in the
> Paris Club, may be agreed during the G8 Summit in Gleneagles,
> Scotland in early July. "Nigeria is key to the prosperity of the
> whole continent of Africa," the ministers' declaration said. "We
> welcomed Nigeria's progress in economic reform as assessed in the
> IMF's intensified surveillance framework, noted its move to
> IDA-only status, and encouraged them to continue to reform."
>
> President Olusegun Obasanjo said last week that his government is
> hoping to utilize the oil-producing country's foreign reserves to
> cancel its entire Paris Club debt. Obasanjo and his finance
> minister, Ngozi Okonjo-Iweala, have waged an intensive lobbying
> effort to persuade leading creditors that the democratically
> elected government's ambitious economic reforms should earn the
> country respite from the debt burden racked up by previous military
> regimes. Nigeria, with a population exceeding 130 million, earns
> the least revenue per capita of any of the large oil producing
> nations, the minister has said. In recent years, Nigeria has been
> paying about $1 billion annually to its Paris Club creditors, about
> half of what was owed.
>
> Various options for reducing or eliminating Nigeria's indebtedness
> have been under discussion with Paris Club members. While Nigeria
> is seeking a 100% write-off, some creditors are reportedly
> insisting that some or all of what the country has earned from
> recent rising oil prices be used to buy back the debt at a
> substantial discount. "A fair discount might be in the range of
> 20-33 cents per dollar of face value," Todd Moss from the Center
> for Global Development in Washington, DC wrote in a widely cited
> article published in April. That would be consistent with recent
> debt relief arrangements for Iraq and Argentina, Moss said, and
> would cost Nigeria $6 - 9 billion - "about the recent increase in
> their foreign reserves from the oil windfall." Obasanjo has argued
> that debt payments would be better spent on improving education,
> health and electricity generation.
>
> Another 11 countries, including nine in Africa and two in Asia,
> could benefit from the agreement announced Saturday, if they
> continue to progress in meeting HIPC objectives. Burundi, Central
> African Republic, Comoros, Republic of Congo, Cote d'Ivoire,
> Liberia, Somalia, Sudan and Togo are classified as 'pre-decision
> point countries', according to the HIPC criteria, and could become
> eligible for debt cancellation if they complete the process
>
> "We are absolutely insistent that transparency on all sides is
> essential for granting future aid and debt relief.," said Gordon
> Brown, Britain's chancellor of the exchequer, who chaired the
> finance ministers meeting. "We're working with the IMF and World
> Bank to improve transparency and tackle corruption."
>
> Speaking after the meeting concluded, Brown said: "We are conscious
> of the abject poverty and the relentless and unyielding poverty
> that so many countries and individuals face. We are being driven
> forward by the urgent need to act. We have found ourselves united
> with a shared purpose." He called the statement "the most
> comprehensive statement that finance ministers have ever made on
> the issues of debt, development, health and poverty."
>
> Brown, who was a member of the Commission for Africa established
> last year by British Prime Minister Tony Blair, which called for a
> doubling of aid to Africa over the next three to five years, said
> "I'm very encouraged not just by agreement on debt we signed today
> but also the EU's decision to double aid by 2010, so the agenda for
> Gleneagles is aid, debt relief and trade justice."
>
> While noting the EU action, as well as the "tripling" of U.S.
> development assistance and the creation of the Millennium
> Development Account by the Bush administration, the ministers said
> "It is crucial that the international community improves the
> effectiveness of aid," and they called on all donors to "harmonise
> their operational procedures, align aid behind country-owned
> priorities for growth and poverty reduction and provide for
> measurable results."
>
> The ministers' statement said "our highest common priority in trade
> policy for the year ahead will bring real and substantial benefits
> to poor countries." G8 members "want to deliver increasing market
> access for developing countries" and eliminate subsidies that
> distort trade opportunities.
>
> "We recognise that all countries can benefit from a reduction in
> trade barriers, but they will not benefit as long as they do not
> have the capacity to compete in international markets," Brown said.
>
> A British proposal for an International Finance Facility (IFF) that
> would provide $100 billion for development by issuing bonds backed
> by the development assistance budgets of wealthy nations has been
> opposed by the United States and Japan. Instead Brown announced a
> pilot IFF project to fund for vaccination efforts in Africa without
> U.S. or Japanese involvement.
>
> ********************************************************
>
> G8 Finance Ministers' Conclusions on Development,
> London, 10-11 June 2005
>
> United Kingdom Treasury (London)
>
> June 11, 2005
>
> London
>
> 1. We reaffirm the commitments we made at our meeting in February
> this year to help developing countries achieve the Millennium
> Development Goals by 2015, to make particular efforts in Africa,
> which on current rates of progress will not meet any of the
> Millennium Development Goals by 2015, and to set out for G8 Heads
> of Government and States the steps we believe can be taken to
> further implement the Monterrey Consensus on an open world trade
> system; increased aid effectiveness; absorptive capacity; increased
> levels of aid; and debt relief.
>
> 2. We reaffirm our view that in order to make progress on social
> and economic development, it is essential that developing countries
> put in place the policies for economic growth, sustainable
> development and poverty reduction: sound, accountable and
> transparent institutions and policies; macroeconomic stability; the
> increased fiscal transparency essential to tackle corruption, boost
> private sector development, and attract investment; a credible
> legal framework; and the elimination of impediments to private
> investment, both domestic and foreign.
>
> 3. We reaffirm our view of February that it is crucial that the
> international community improves the effectiveness of aid. In
> particular bilateral and multilateral donors need to: harmonise
> their operational procedures; align aid behind country-owned
> priorities for growth and poverty reduction; and provide for
> measurable results. Donors must also: focus their aid on poverty
> reduction; enhance efforts to untie aid, based on DAC principles;
> and deliver aid in a more predictable way. We welcome the progress
> made at the Paris OECD DAC High Level Forum in March, and call on
> the OECD DAC to set by September this year, ambitious and credible
> targets against all the indicators of progress agreed at the March
> meeting.
>
> 4. A successful outcome for the Doha Development Agenda, our
> highest common priority in trade policy for the year ahead, will
> bring real and substantial benefits to poor countries. The Hong
> Kong Ministerial in December will be a critical step towards a
> successful outcome of the DDA in 2006, which delivers substantial
> increases in market access for developing countries; establishes a
> timetable for the elimination of all trade-distorting export
> support in agriculture; and provides effective special and
> differential treatment for developing countries.
>
> 5. However, not all countries will benefit in the short term from
> reductions in trade barriers. Some countries lack the capacity to
> produce and deliver goods to international markets competitively;
> for others, the transitional costs of moving to more open markets
> may be substantial. We also recognise that poor countries face
> particular problems and need the flexibility to decide, plan and
> sequence reforms to their trade policies to fit with country-owned
> development programmes. We commit to provide support to enable
> developing countries to benefit from trade opportunities. We call
> on the IFIs to submit proposals for the Annual Meetings for
> additional assistance to countries to develop their capacity to
> trade and ease adjustment in their economies, based on a systematic
> analysis of transition costs, so they can take advantage of more
> open markets.
>
> 6. Tackling diseases that undermine growth and exacerbate poverty
> in developing countries will require not only strengthened health
> systems, but also improved treatment, including universal access
> for AIDS treatment by 2010 and development of vaccines, including
> for HIV and malaria. We have made progress this year in
> implementing the Global HIV Vaccine Enterprise agreed at Sea
> Island, and are committed both to taking this further; and to
> scaling up our support for vaccines and medicines research through
> the successful Public Private Partnerships model. We call for a
> report on progress by the end of the year. We recognise also that
> advance purchase commitments (APCs) are potentially a powerful
> mechanism to incentivise research, development and the production
> of vaccines for HIV, malaria and other diseases. We asked Minister
> Siniscalco to consult the relevant institutions, governments and
> industry, with the aim of developing concrete proposals by the end
> of this year.
>
> 7. The Enhanced HIPC Initiative has to date significantly reduced
> the debt of 27 countries, and we reaffirm our commitment to the
> full implementation and financing of the Initiative. Moreover,
> individual G8 countries have gone further, providing up to 100 per
> cent relief on bilateral debt. However, we recognise that more
> still needs to be done and we have agreed the attached proposal. We
> call upon all shareholders to support these proposals which we will
> put to the Annual Meetings of the IMF, World Bank and African
> Development Bank.
>
> 8. We also recognised at Monterrey that a substantial increase in
> ODA and private capital flows will be required to assist developing
> countries to achieve the Millennium Development Goals. We
> acknowledge the efforts of all donors, especially those who have
> taken leading roles in providing and increasing ODA and committing
> to further increases.
>
> 9. Specifically we welcome: the progress the EU has made towards
> the 0.39 per cent ODA/GNI target agreed at Barcelona; the
> announcements by France and the UK of timetables to reach 0.7 per
> cent ODA/GNI by 2012 and 2013 respectively; and the recent EU
> agreement to reach 0.7 per cent ODA/GNI by 2015 with an interim
> target of 0.56 per cent ODA/GNI by 2010 - a doubling of EU ODA
> between 2004 and 2010. In line with the EU agreement, Germany
> (supported by innovative instruments) and Italy undertake to reach
> 0.51 per cent ODA/GNI in 2010 and 0.7 per cent ODA/GNI in 2015. We
> welcome the tripling of US ODA to Sub-Saharan Africa and the near
> doubling of US ODA to all developing countries since 2000. The US
> now accounts for roughly 25% of all ODA to Sub-Saharan Africa. In
> addition, we welcome the launch of the Millennium Challenge Account
> and the President's Emergency Plan for AIDS Relief. We welcome
> Japan's commitment to double its ODA to Africa over the next three
> years and Canada's budget plans to finance its commitment to double
> aid levels from 2001 to 2010, and to double aid to Africa by 2008.
> In addition, we welcome Russia's $2.2 billion contribution to the
> HIPC Initiative.
>
> 10. As we prepare for decisions at the G8 Summit in Gleneagles we
> continue our work programme on: the IFF and its pilot, the IFF for
> Immunisation; some of the revenue proposals from the Landau Report,
> including a pilot project, supported and led by France and Germany,
> for a contribution on air travel tickets to support specific
> development projects and to refinance the IFF; the Millennium
> Challenge Account; the Enhanced Private Sector Assistance with the
> African Development Bank; and other financing measures; so that
> decisions can be made on how to deliver and bring forward the
> financing urgently needed to achieve the Millennium Development
> Goals.
>
> 11. Nigeria is key to the prosperity of the whole continent of
> Africa. We welcomed Nigeria's progress in economic reform as
> assessed in the IMF's intensified surveillance framework, noted its
> move to IDA-only status, and encouraged them to continue to reform.
> We are prepared to provide a fair and sustainable solution to
> Nigeria's debt problems in 2005, within the Paris Club.
>
> G8 Proposals for HIPC debt cancellation
>
> Donors agree to complete the process of debt relief for the Heavily
> Indebted Poor Countries by providing additional development
> resources which will provide significant support for countries'
> efforts to reach the goals of the Millennium Declaration (MDGs),
> while ensuring that the financing capacity of the IFIs is not
> reduced. This will lead to 100 per cent debt cancellation of
> outstanding obligations of HIPCs to the IMF, World Bank and African
> Development Bank. Additional donor contributions will be allocated
> to all IDA and AfDF recipients based on existing IDA and AfDF
> performance-based allocation systems. Such action will further
> assist their efforts to achieve the MDGs and ensure that assistance
> is based on country performance. We ask the World Bank and IMF to
> report to us on improvements on transparency on all sides and on
> the drive against corruption so as to ensure that all resources are
> used for poverty reduction. We believe that good governance,
> accountability and transparency are crucial to releasing the
> benefits of the debt cancellation. We commit to ensure this is
> reaffirmed in future bilateral and multilateral assistance to these
> countries.
>
> Key elements:
>
> * Additional donor contributions will be allocated to all IDA and
> AfDF recipients based on existing IDA and AfDF performance-based
> allocation systems.
>
> * 100 per cent IDA, AfDF and IMF debt stock relief for Completion
> Point HIPCs.
>
> * For IDA and AfDF debt, 100 per cent stock cancellation will be
> delivered by relieving post-Completion Point HIPCs that are on
> track with their programmes of repayment obligations and adjusting
> their gross assistance flows by the amount forgiven. Donors would
> provide additional contributions to IDA and AfDF, based on agreed
> burden shares, to offset dollar for dollar the foregone principal
> and interest repayments of the debt cancelled . Additional funds
> will be made available immediately to cover the full costs during
> the IDA-14 and AfDF-10 period. For the period after this, donors
> will commit to cover the full costs for the duration of the
> cancelled loans, by making contributions additional to regular
> replenishments of IDA and AfDF.
>
> * The costs of fully covering IMF debt stock relief, without
> undermining the Fund's financing capacity, should be met by the use
> of existing IMF resources. In situations where other existing and
> projected debt relief obligations cannot be met from the use of
> existing IMF resources (e.g. Somalia, Liberia, and Sudan), donors
> commit to provide the extra resources necessary. We will invite
> voluntary contributions, including from the oil-producing states,
> to a new trust fund to support poor countries facing commodity
> price and other exogenous shocks.
>
> * Globally and on this basis we are committed to meeting the full
> costs to the IMF, World Bank and African Development Bank. We will
> provide on a fair burden share basis resources to cover
> difficult-to-forecast costs, in excess of existing resources, to
> the IMF, IDA and AfDF over the next three years. Subject to further
> analysis by the institutions we will provide up to $350-500 million
> for this purpose. We are also committed, on a fair burden share
> basis, to cover the costs of countries that may enter the HIPC
> process based on their end-2004 debt burdens. We will also seek
> equivalent contributions from other donors to ensure all costs are
> covered and we will not jeopardize the ability of these
> institutions to meet their obligations. Utilize appropriate grant
> financing as agreed to ensure that countries do not immediately
> re-accumulate unsustainable external debts, and are eased into new
> borrowing.
>
> We call upon all shareholders to support these proposals which
> would be put to the Annual Meetings of the IMF, World Bank and
> African Development Bank by September.
>
> *************************************************************
> AfricaFocus Bulletin is an independent electronic publication
> providing reposted commentary and analysis on African issues, with
> a particular focus on U.S. and international policies. AfricaFocus
> Bulletin is edited by William Minter.
>
> AfricaFocus Bulletin can be reached at africafocus at igc.org. Please
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>
> ************************************************************
>
>

Al Kagan
Africana Unit, Room 328
University of Illinois Library
1408 W. Gregory Drive
Urbana, IL 61820
USA

tel. 217-333-6519
fax 217-333-2214
akagan at uiuc.edu
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