webmaster@africanidea.org

IDEA Advocacy for African Debt Cancellation

There is abundant literature that deals with African debt crisis and there are a significant number of advocacy groups and individuals for Africa’s debt cancellation. Some of the leading advocates in the African debt cancellation movement are Africa Action, Africa Focus Bulletin, Jubilee 2000, Oxfam and the European Network on Debt and Development (Euordad), the All Africa Conference of Churches, Percy S. Mistry, Bishop Desmond Tutu, Thandika Mkandawire and Charles C. Soludo, Jeffery Sachs etc.

Percy S. Mistry in his “Resolving Africa’s Multilateral Debt Problem: A Response to the IMF and the World Bank,” (September 1996) suggests “compelling argument for a new strategy to resolve the multilateral debt problem of poor countries in Africa.” He thoroughly examines the crisis dimension, composition, and characteristics of multilateral debt in Sub-Saharan Africa. Five years earlier, Mr. Mistry had already addressed the African debt crisis in “African Debt Revisited: Procrastination or Progress” (November 1991).

Reinforcing Mistry’s themes and arguments, Jubilee 2000 and Eurodad argue “Heavily Indebted Poor Countries (HIPC) initiative is too slow and limited in scope. Under normal HIPC terms, debts may be cancelled only after a six year (or more) qualification period.” The later is what is known as the ‘completion point’ and put as a precondition by the Bretton Woods institutions so that poor countries can qualify for debt cancellation (in most instances, this is debt reduction rather). At face value, debt reduction, even if it is drastic, could sound impressive but at close scrutiny there is no doubt the remainder debt, however small, could ensnare African nations in a vicious cycle of poverty. For instance, on July 2002, Mauritania got debt relief: “the Paris Club announced its intention of reducing Mauritanian debt by 95 percent. This means a reduction from US $320 million to US $16 million.” (www.afrol.com/news2002). However, Mauritania being a poor African nation is not in a position to meet her debt “obligations” in the face of exorbitant interest rates.

More than any other advocacy group that IDEA acknowledged above, Africa Action succinctly and cogently analyzes the African debt trap and its implication for poor African nations: “the 48 countries of sub-Saharan Africa spend approximately $13.5 billion every year repaying debt to rich foreign creditors for past loans of questionable legitimacy. These debt repayments divert money directly from basic human needs such as health care and education, and fundamentally undermine African governments’ fight against AIDS pandemic and their efforts to promote sustainable development. The All-Africa Conference of Churches has called Africa’s massive foreign debt burden ‘a new form of slavery, as vicious as the slave trade’.”

Interestingly, Africa Action views Africa’s debt not only as illegitimate but also as a superimposition by creditor nations that, ironically, were supposed to pay reparation to the African people. Africa Action substantiates its position as follows:

· Debts contracted by dictatorships and repressive regimes, and used to strengthen the hold of these regimes are illegitimate.

· Debt contracted by formally democratic but corrupt governments, which was stolen by leaders or senior officials, is illegitimate.

· Debts contracted and used by improperly designed projects and programs are illegitimate.

· Debt that swelled because of high interest rates and other conditions imposed by creditor governments and banks are illegitimate.

· All debt owed by the South to the North can be considered illegitimate. The argument here is ‘who owes what to whom?’ Africa Action and Jubilee South maintain that the countries of the South are in fact creditors of an historical, social and ecological debt, which Northern countries refuse to recognize.

Why Africa’s debt is illegitimate is further reinforced by Africa Action analysis of various relevant concepts such as 1) odious debt, 2) debt repudiation. 3) International Debtor’s Court, and 4) disclosure and classification of debts.

Odious debt refers to the regime type (dictatorial and repressive) mentioned above. The rationale here is that the population should not be held responsible to bilateral and multilateral debts contracted and agreed upon by repressive regimes for their own vested interests. For instance, the people of DR of Congo should not be subjected to debt payment plan for what the kleptomania Mobutu had squandered for 32 years.

Debt repudiation is the “unilateral cessation of debt repayment” although creditor nations and/or International Financial Institutions (IFIs), almost always, can retaliate and punish recalcitrant “indebted” poor nations. The punishment could range from impeding nations from entering into global markets and trade, to economic embargo and severance of diplomatic relations.

Instead of debt repudiation, however, debtor African nations can declare bankruptcy and take their case to a hypothetical (but anticipated) International Debtor’s Court as suggested by Jubilee 2000. Both sides can argue their cases in front of independent arbitrators of the Court. The Court will have the final say and its decision could be final and binding. If the Court is composed of independent judges, the HIPCs could benefit and justice could be served. If, on the other hand, the Court is influenced and controlled by the creditor nations, it will be a futile exercise on the part of the HIPCs to endeavor to get even a modicum of debt forgiveness.

Disclosure of debts simply refers to being transparent and accountable to all debts incurred under any circumstance. But it is not just keeping track of all HIPCs debts. It is actually aimed at investigating the legitimacy of the loans and ultimately to create insolvency measures for their cancellation.

Africa’s debt cancellation, of course, cannot simply be realized by dint of political fiat nor can it be eliminated by rebel regimes that would like to uphold ‘debt repudiation.’ It should be negotiated with the North, particularly with bilateral and multilateral donors and IFIs, and pave a way toward debt forgiveness altogether. The donors could argue, “debts cannot be negotiated” despite the North-South Dialogue and the New Partnership Discourse. In the event the North adamantly disappoints African initiative, however, other alternative paths could be sought, as we shall see in the concluding part of this essay.

African countries were better off before the advent of structural adjustment program (SAP) of the 1980s. Now, even the Bretton Woods institutions have recognized that adjusting African nations are poorer and some are even on the brink of disaster. In some instances, due to limited role of the state in economic development, engendered by SAP, and the gradual elimination of subsidies, African workers and farmers are thrown into abject poverty. Neither the 1996 HIPC Initiative nor the subsequent IMF measure of Enhanced Structural Adjustment Facility (ESAF), later renamed Poverty Reduction and Growth Facility (PRGF) have ameliorated the negative encounter of African states and the welfare of their respective people.

African nations that suffered immeasurably under the Enhanced HIPCs Initiative are Benin, Burkina Faso, Cameroon, Gambia, Guinea Bissau, Guinea, Madagascar, Mauritania, Mali, Malawi, Niger, Rwanda, Sao Tome and Principe, and Zambia. Of all these countries, Zambia is the hardest hit.

Lishala C. Situmbeko (Bank of Zambia) and Jack Jones Zulu (Jubilee-Zambia), writing for the World Development Movement (April 2004), contend that “trade liberalization, a key plank of Bank and Fund economic orthodoxy, has been disastrous for Zambia’s manufacturing. Textile manufacturing has been one sector particularly badly hit…there were more than 140 textile manufacturing firms in 1991…and they had fallen to just eight by 2002.”

The Zambian economists also present us a grim scenario of Zambian employment rate: “Not surprisingly, employment has suffered. Manufacturing employment fell from 75,400 in 1991 to 43,320 in 1998. Paid employment in mining and manufacturing fell from 140,000 in 1991 to 83,000 in 2000. Paid employment in agriculture fell from 78,000 in 1990 to 50,000 in 2000 and employment in textile manufacturing fell from 34,000 in the early 1990s to 4,000 in 2001.”

The Zambian crisis is not an isolated incident. The post-SAP economic crisis has metastasized and plagued the majority of African nations. Most African leaders are aware of this fact, but they are either part of the problem or have become helpless political figures vis-à-vis a mammoth global cartel. Major international media such as the BBC had captured the disappointment of African HIPCs. On Monday, June 2, 2003, one of the BBC’s Africa report news item reads “African debt relief ‘not enough’.” As per this report, “ a group of African leaders who were guests at the summit [Evian, France] of G8 major powers have criticized their hosts’ performance on debt relief for poor countries, most of them in Africa.” One of the African leaders, President Olusegun Obasanjo of Nigeria said: “there has been little giving too late. HIPIC came in little bits and pieces and the effect is that it really hasn’t made a tremendous impact.”

Given the current disadvantaged position of African nations and the slim likelihood of African HIPCs exiting from debt and poverty, the only solution is for the lender nations to employ a new paradigm shift – shift from loan to grant, and the Bretton Woods institutions write off African debt one hundred percent! IDEA, Inc. shares the position of many advocacy groups that are aforementioned, but more specifically, our Institute wishes to advocate for Africa’s debt cancellation along the following raison d’etre: 1) moral imperative: a significant number of African countries are suffering from AIDS pandemic, civil strife, and wide-spread famine, let alone manage their economy and meet the ‘decision point’ of the HIPC Initiative; 2) the overall stage of economic development of African nations is vulnerable to chronic debt and permanent unequal partnership with the North.

If the lender nations seriously consider Africa’s plight, they can indeed write off the debt of the Continent and realize the ‘Drop the Debt’ motto of Jubilee 2000. At the end of the spectrum, but closely related to ‘Drop the Debt’ is Jeffrey Sachs’ proposal of the creation of a World Development Agency in lieu of the World Bank. In the short run, the shift from loan to grant by lender powers and the complete write off of African debt is plausible, if not feasible to overcome Africa’s multifaceted problems. In the long haul, however, Professor Sachs’ proposal could render real justice and redeem African nations from the abyss they have encountered for so long.

The advocacy for African debt cancellation initiated and led by Africans and non-Africans is to be commended. In the final analysis, however, visionary and patriotic African head of states, within the framework of the African Union (AU), should come up with a collective measure to undo African debt once and for all. The AU should formulate a new blue print of African collective security that really addresses development issues by first uniting against the pressing debt crisis. The new African collective security should challenge the debt policies of the donor/lender nations in unison and demand reparation for Africa’s service to the North, both in terms of human capital and raw material. Europeans had free lunch in Africa for decades following the Berlin conference of 1884/85 that partitioned the continent among various colonial powers. The Holocaust of Enslavement preceded African colonization, and none of these historical events were seriously addressed, in an effort to redress the plight of Africans. The collective voice of the AU should now air out reparation and include debt cancellation as one of its priority agenda.