African Social Forum: “We Demand Full Multilateral Debt Cancellation for Africa and the Global South”

15 December 2004 by Collective


The following statement, in response to the news that the U.K. and the U.S. governments are offering different proposals aimed at 100% multilateral debt cancellation, was circulated at the African Social Forum in Lusaka, Zambia. The endorsements below were gathered in a few hours; more will undoubtedly be forthcoming as the statement’s circulation broadens.

We Demand Full Multilateral Debt Cancellation for Africa and the Global South

Drop the Debt 100% — All Impoverished Countries — No Economic Conditions!

As civil society organizations from across the continent of Africa, we are confronted every day by the devastating reality of the crisis of debt. Debt payments to wealthy institutions like the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
and World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

rob our countries of resources we desperately need to provide health care, fight HIV/AIDS, provide education, and make available clean water. Debt is a tool of domination used by rich country governments and creditors like the IMF and World Bank. Conditions attached to debt relief and loans are devastating our economies and undermining our choices as sovereign nations.

For impoverished nations, multilateral creditors — in particular the IMF and World Bank — are the largest creditors. They are also the most powerful: because of their “preferred creditor” status, countries must pay their debts back first to these institutions. If countries do not pay, they are penalized and excluded from most forms of aid and assistance.
The Heavily Indebted Poor Countries Heavily Indebted Poor Countries
HIPC
In 1996 the IMF and the World Bank launched an initiative aimed at reducing the debt burden for some 41 heavily indebted poor countries (HIPC), whose total debts amount to about 10% of the Third World Debt. The list includes 33 countries in Sub-Saharan Africa.

The idea at the back of the initiative is as follows: a country on the HIPC list can start an SAP programme of twice three years. At the end of the first stage (first three years) IMF experts assess the ’sustainability’ of the country’s debt (from medium term projections of the country’s balance of payments and of the net present value (NPV) of debt to exports ratio.
If the country’s debt is considered “unsustainable”, it is eligible for a second stage of reforms at the end of which its debt is made ’sustainable’ (that it it is given the financial means necessary to pay back the amounts due). Three years after the beginning of the initiative, only four countries had been deemed eligible for a very slight debt relief (Uganda, Bolivia, Burkina Faso, and Mozambique). Confronted with such poor results and with the Jubilee 2000 campaign (which brought in a petition with over 17 million signatures to the G7 meeting in Cologne in June 1999), the G7 (group of 7 most industrialised countries) and international financial institutions launched an enhanced initiative: “sustainability” criteria have been revised (for instance the value of the debt must only amount to 150% of export revenues instead of 200-250% as was the case before), the second stage in the reforms is not fixed any more: an assiduous pupil can anticipate and be granted debt relief earlier, and thirdly some interim relief can be granted after the first three years of reform.

Simultaneously the IMF and the World Bank change their vocabulary : their loans, which so far had been called, “enhanced structural adjustment facilities” (ESAF), are now called “Growth and Poverty Reduction Facilities” (GPRF) while “Structural Adjustment Policies” are now called “Poverty Reduction Strategy Paper”. This paper is drafted by the country requesting assistance with the help of the IMF and the World Bank and the participation of representatives from the civil society.
This enhanced initiative has been largely publicised: the international media announced a 90%, even a 100% cancellation after the Euro-African summit in Cairo (April 2000). Yet on closer examination the HIPC initiative turns out to be yet another delusive manoeuvre which suggests but in no way implements a cancellation of the debt.

List of the 42 Heavily Indebted Poor Countries: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoro Islands, Congo, Ivory Coast, Democratic Republic of Congo, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Laos, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Zambia.
(HIPC) Initiative was launched by the World Bank in 1996 to provide a “robust exit” to the crisis of debt faced by impoverished nations. Eight years on, the program has failed to achieve this goal. HIPC has provided too little relief, to too few countries, with devastating conditions. It is time to move beyond the failed HIPC Initiative towards another approach: Full (100%) multilateral debt cancellation for all impoverished nations, without harmful conditions.

We are aware of discussions going on now within the G-7 (in particular proposals by the UK and US governments), the IMF and World Bank, and other forums about possibilities for 100% (full) multilateral debt cancellation. We are encouraged that after many years of half-measures, full cancellation is being discussed at these levels.

However, we must be clear about the principles for such discussions to meet the goals and aspirations of African civil society.

First, 100% multilateral debt cancellation is critical. Attempts to determine a “sustainable” level of debt for impoverished nations desperately trying to address the crises of HIV/AIDS and economic injustice should be rejected. For impoverished nations struggling to meet the human needs of their peoples, full 100% multilateral debt cancellation is the only option.

Second, this cancellation must come without any economic conditionalities. The HIPC program and PRSPs are riddled with conditions such as privatization, indiscriminate trade liberalization, opening up markets, fiscal and monetary targets. These conditions have devastated our economies long enough. Debt cancellation must come without any economic conditions attached. Moreover, we reject and find that the IMF’s Poverty Reduction and Growth Facility (PRGF) must be dismantled and abolished. The PRGF is not a force for development in our countries; the conditions attached to loans from this facility have devastated our economies. It is time to end the role of the IMF in poor countries once and for all; closing the PRGF is a critical first step towards doing this.

Third, multilateral debt cancellation must apply to all impoverished nations, not just the 42 HIPC nations. We reject proposals which only address countries that have reached HIPC “completion point.” Many countries would be excluded from this approach. Moreover, non-HIPC countries must be included in efforts towards 100% debt cancellation. Countries including Haiti, Jamaica, and Nigeria are not part of HIPC, despite their extreme indebtedness.

Finally, we think that the multilateral financial institutions should do their fair share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. , and should contribute the bulk of the resources to finance debt cancellation. The IMF and World Bank are two of the richest financial institutions in the world. The IMF sits atop more than $30 billion in gold which currently serves no productive purpose. The IMF could sell this gold and use proceeds to cover debt owed to the World Bank and other multilaterals. The IBRD could easily mobilize more than $10 billion in accumulated profits and reserves and could commit a share of its annual multi-billion dollar profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. to debt cancellation. The IMF should close down the PRGF facility and use its resources to cancel IMF debt. These are wealthy institutions; it is high time for them to do their fair share and by paying for debt cancellation, begin to acknowledge their role and responsibility in the debt crisis.

We do not believe that concerns about the “additionality” of debt cancellation should be allowed to postpone the full cancellation of the multilateral debt. Cancellation is significantly more valuable to our peoples than additional aid. Aid comes with its own conditions, and often creates more debt. The resources realized from debt cancellation can be used as governments — with ample interventions from civil society — see fit. Aid is a promise we have seen broken far too often; cancellation’s benefits would be lasting.

Endorsed by the following debt campaigners:

Tafadzwa Muropa - Zimbabwe
Sy Koumbo S. Gale - Chad
Constancia de Pina - Cape Verde
James Kashiki - Zambia
Godfrey Mfiti - Malawi
Rev. Lumu Shabani - Democratic Republic of Congo (Kinshasa)
Benoit Essiga - CGT Liberte - Cameroon
Hassan Sayouty - Espace Associatif Maroc - Morocco
Demba Moussa Dembele - Forum for African Alternatives - Senegal
Taoufik BenAbdallah - ENDA - Senegal
Engudat Bekele - PAC - Ethiopia
Bakary Fofana - CECIDE - Guinea
Archinson Mhlata - PCO - South Africa
Pat Dooms - Orange Farm Vision - South Africa
Dao Dounantie - Jubile 2000 / CAD - Mali
Kone Solange - FNDP/ASAPSU - Cote d’Ivoire
Ouattar Diakalia - FNDP - Cote d’Ivoire
Dieng Amady Aly - Forum de Tiers Monde - Senegal
Seydou Ndiaye - ACAPES - Senegal
Abubacar Ndiaye, RADI - Senegal

Lusaka, Zambia
14 December 2004



cadtm.org

CADTM

COMMITTEE FOR THE ABOLITION OF ILLEGITIMATE DEBT

35 rue Fabry
4000 - Liège- Belgique

00324 226 62 85
info@cadtm.org

cadtm.org