20 February, 1998
World Bank 'help' keeps nations in debt trap
LONDON: A mother in rural Zambia is too poor to buy medicine for both her sick children. One of them dies. In neighbouring Zimbabwe, a mother keeps some of her children off school because she cannot afford the fees. Similar situations are occurring throughout the developing world all because of 'help' from the International Monetary Fund and the World Bank.
Under the 1996 Heavily Indebted Poor Countries Initiative, the IMF and the World Bank insists that to qualify for debt relief developing countries must cut back on public spending. Increasingly, the poor are being forced to pay for vital services such as health-care and education and they are paying the price in lives.
Sixteen months after the launch of the Initiative, not a single country has had any debt written off and today, religious leaders around the world, addressing the finance ministers of the richest nations meeting in London, accused the IMF and the World Bank of watering down their promises.
In a letter to the London Financial Times, the Archbishops of Canterbury and Cape Town, British chief rabbi Jonathan Sacks and UK Buddhist representative Yukimasa Hagiwara, among others, said they were concerned by "apparent delays in implementing this initiative and by the dilution of its original promise".
Andrew Simms of Christian Aid added his voice to the criticism saying: "The Initiative's scope is incredibly limited, and it's at far too low a level."
The scale of the problem of debt and how to solve it is put into sharp focus by the recent Asian crisis. Soon after the fall of the Tiger economies, the international financial community rapidly mobilized some US$100 billion for South Korea, Indonesia and Thailand, a sum that would wipe out the debts of the 41 so-called "heavily-indebted poor countries".
But while global financial institutions hurried to the aid of the ailing Tigers, for the poorest states they are not the solution to hardship but the cause of it.
There is some reason to be optimistic. Last week, in Rome, the UN's International Fund for Agricultural Development (IFAD) - established two decades ago to help the rural poor - launched a trust fund for heavily indebted poor countries that seeks to protect social services for the rural poor.
The fund will complement the IMF/World Bank initiative, giving IFAD a voice in negotiations on debt relief plans. It is now using that voice to call for or government spending on health-care and education to be maintained.
"It's not just a programme of austerity that's needed, but also one that protects the rural poor," IFAD's president, Fawzi Al-Sultan of Kuwait, said.
Uganda will be the first country to benefit from the fund: its debts will be reduced by US$5.67 million from this April. That will enable the Ugandan government to safeguard rural services. Burkina Faso and Bolivia will also benefit this year, and 12 more - 11 of which are African - will follow.The IFAD fund may give the debt relief programme a more human face but the money available is still woefully insufficient. IFAD plans to give the fund around US$60 million over the next three years, while the IMF and the World Bank will relieve some US$5-8 billion of debt. But the debts of developing countries are much higher.
According to the Jubilee 2000 Coalition, a London-based network of non-governmental organizations, a far more radical alternative is needed. They are campaigning for 'unpayable' debts - those which can be repaid only by making massive cuts in health-care and education - to be written off in 2000 to mark the millennium.
Jubilee 2000 estimates that over 50 countries are crippled by debt, with 'unpayable' debts amounting to US$100 billion - many times more than the IMF/World Bank initiative would write off. This is not commercial debt, but money that is owed on past loans from agencies such as the World Bank.
"The objective is to break the chain of oppression of Third World debt by persuading leaders to commit themselves to action on debt remission," said the coalition's director, Ann Pettifor.
When leaders of the world's most powerful countries - Canada, France, Germany, Italy, Japan, Russia, UK and USA - meet in Birmingham, central England, in May for their annual summit, the Jubilee 2000 Coalition is planning to form a 60,000-person human chain around the venue.
They needed no such public pressure to respond with alacrity to the Southeast Asian crisis, which impacted directly on jobs and markets in Europe and North America in a way the developing world's plight does not. But while the IMF-Bank initiative and the IFAD fund are a start, the world's most vulnerable people need something bigger and faster - above all, a programme of vision and compassion. -Dawn/Observer News Service (c) London Observer.