Return
to Story Page
To print: Select File and then Print from your
browser's menu
The Group of Eight major powers has announced with great flourish the decision to extend debt relief to heavily indebted poor countries (HIPCs), mainly of Africa. Excluding Russia, the creditor nations are the US, Canada, Japan, Germany, France, Britain and Italy. They have decided to cancel $70 billion of the estimated $250 billion owed by HIPCs.
The creditor nations will forgive $50 billion of government-to-government loans extended at commercial interest rates and $20 billion of official development assistance lent on soft terms. (The debt relief will be financed in part by selling a tenth of IMF's gold holdings). Generous? Hardly. As pointed out by German Chancellor Schroeder, most of the countries had little prospect of ever repaying the loans. The indebted HIPCs are down and out. The point will not be missed that HIPCs have still to cope with servicing $180 billion of debt owed to the affluent world. They have not been given any new resources.
The debt relief package is no big deal. It is aniggardly response to the public campaign in the west (comparable to the anti-apartheid movement against white rule in South Africa) for a major initiative to free HIPCs from crippling indebtedness. The campaign had the support of Pope John Paul. The British government declared HIPC debt as "the greatest moral issue" of the day. But the G-8 meet at Cologne chose to be minimalist. Hapless Mozambique, for example, will see its annual debt service fall by 25 per cent, freeing $30 million a year.
This, according to a US calculation, will be a half of Mozambique's health budget. But what of the other half, and the education budget, wiped out by $90 million of the country's annual debt servicing liability? The people in HIPCs, comprising 41 nations, are miserably poor. The reckoning is that four million children below the age of five will die this year of preventible diseases. About 50 million children of primary school age will continue to remain out of school. So what should be the priority: meeting foreigndebt servicing obligations or social spending to achieve the internationally accepted target of halving (by 2015) the number of people living in absolute poverty? True, the governments of the HIPCs borrowed freely in the early 70s; but it is also true that western banks induced them to borrow at low interest rates.
HIPCs needed grants, not loans from affluent governments. They were squeezed by the subsequent rise in interest rates and the fall in their commodity export prices. Even so, the affluent nations view debt reduction in terms of the level of sustainable debt, that is, debt servicing that can be financed by HIPC exports. The strategy holds the poor nations on a tight leash, provides them no new resources and forces them to hold down social sector spending. The prescription underscores the moral failure of the G-8.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
------------------------------------------------------------
This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
------------------------------------------------------------