Committee for the Abolition of Illegitimate Debt

As we get closer to the December 2007 general elections, the regime of the Kenyan President, Mr Kibaki, gets tougher and tougher, resorting to police forces to repress peaceful demonstrations.

The latest evidence of this hardening was given on July 31 and August 2 when fifteen people were violently arrested by the police as they were demonstrating against a bill whereby the Kenyan Members of Parliament (MPs) would grant themselves a payoff for the end of their term. It has to be recalled that in this country 60% of the population lives with less than one dollar a day and that the Kenyan MPs are already among the better paid in the world with a monthly €10,000, which is equivalent to ten years of a Kenyan civil servant’s basic salary.

Repression of social movements

On July 31 a first demonstration took place in front of the Parliament to ask for the withdrawal of the bill. Although the demonstration went smoothly, the police intervened and arrested five people, among whom the former director of Transparency International, an NGO that campaigns against corruption. After the police car that transported them had an accident, four of them were taken to hospital under police surveillance, while the fifth person, a woman, was driven directly to the central police station. The MP Charity Ngilu, who is also the Minister of Health, then decided to go to the police station to obtain the demonstrator’s transfer to hospital. They were manhandled by the police and finally fled in the Minister’s official car. On August 2, the Minister was summoned to the police station, and a demonstration in her support was organized. Then again, ten other demonstrators were arrested for “illegal gathering” and “hindrance to the functioning of a police station”. Seven of them are from the People’s Parliament, an alterglobalist organisation which organized alternative conferences during the January 2007 World Social Forum in Nairobi. They were directly brought to a tribunal and were bailed out for 20,000 shillings per person (i.e. approximately €190). They are now awaiting trial and could be condemned to four years emprisonment (one year for “illegal gathering” and three years for “hindrance to the functioning of a police station”) and to pay a fine whose amount is left at the discretion of the judges. The next hearing is to take place on October 17, 2007. As for the four people arrested during the first demonstration, they were all released for their constitutional rights had not been respected (they had not been brought before a court at the end of the 24-hour custody).

Despite the arbitrary arrests and financial pressures to prevent any expression of social contest, the members of the People’s Parliament will not give up the fight for social justice. They already organized two other demonstrations against the controversial bill on August 8 and 9. In view of the popular mobilisation, the MPs were forced to suspend discussions. Now it is time for the populations and the governments in the North to show their solidarity with the people of Kenya, by putting pressure on President Kibaki so that he does not sign this law. Indeed the very likely adoption of the law by the MPs does not alone make it applicable: the President’s signing is required for it to come into force. So what can we do? We can for example send letters of protest to President Kibabi and bring the case to media attention in order to denounce the regime’s authoritarian methods and the MPs’ self-granted pay raise, which is an insult to the Kenyan population, whose fundamental needs are not met.

Extreme poverty

As in other sub-Saharan African countries, the population in Kenya is affected by extreme poverty, resulting in the drop in life expectancy from 57 years in 1986 to 48 years in 2004. However, all the international financial institutions and the rich creditor countries forming the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

 [1] are still asking for the payment of a seven-billion-dollar external debt. In order to service the debt, which drains up to 40% of the annual budget, the Kenyan leaders have chosen to sacrifice the human basic needs of the population (education, health, housing…). And yet according to the 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.

and 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 ’s criteria the Kenyan debt is not considered “unsustainable.” [2] That is why Kenya is not even entitled to the modest debt relief of the HIPC 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. initiative (Heavily Indebted Poor Countries).
But for all that, the Kenyan authorities keep on meekly applying the neo-liberal policies dictated by the World Bank and the IMF, serving the interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. of TransNational Companies. On July 2007, when the 2007/2008 budget was presented, the objective presented by the Minister of Finances, Amos Kimunya, was clear enough: “the budget aims at reducing the administration red tape that impedes access to property and services and replace it by a red carpet for private investors.” [3] The minister then explained that the budget deficit of 1.6 billion dollars would be funded the privatisation of public companies, especially in the banking and telecom sectors. As for the outrageous salaries of the Kenyan MPs, they are not even questioned!

To no one’s surprise the World Bank congratulated the Kenyan government for this budget in keeping with the privatisation policies it has forced upon the indebted countries since the famous Structural Adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/ Programs (SAP) of 1981. Colin Bruce, the World Bank country director in Kenya, said that the World Bank would support Kenya and help it achieve its “vision which seeks to transform the economy from low to middle income status” by 2030. This statement raises fear of a long lasting and harmful role of the World Bank. Before 2030 comes, there is no doubt that the people in Kenya will have to make huge sacrifices, and bear the very high price of unfair measures such as VAT increase, so that Kenya can pay its debt. The Kenya National Bureau of Statistics already noted a 0.7% increase in the consumer price index between June and July 2007, due to the rising prices of cabbage, sugar and bread.

An odious debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts.

The repayment of the debt, for which such anti-social measures are said to be implemented, must now be questioned, since the major part of the debt was incurred during the dictatorship of Arap Moi from 1978 to 2002. Although the dictatorial nature of the regime was in no way doubtful, the external creditors did not hesitate to support it by granting numerous loans. For the period between 1986 and 1995 alone, the international creditors granted 8 billion dollars to Kenya. According to the anti-corruption commission appointed by the Kenyan government in 2002, 10 billion dollars would have ended up in the bank accounts of the dictator’s clan. Thus a great part of this debt is “odious” and can be legally repudiated by the present government. Indeed, according to the theory of the odious debt set out by Alexander Sack in 1927, “if a despotic power incurs a debt not for the needs or in the interest of the State, but to strengthen its despotic regime, to repress the population that fights against it, etc., this debt is odious for the population of all the State. This debt is not an obligation for the nation; it is a regime’s debt, a personal debt of the power that has incurred it, consequently it falls with the fall of this power.”

Unfortunately, without a strong pressure coming from the Kenyan civil society, it is very unlikely that the authorities will have the political courage to repudiate this debt, which impedes the human development of the population and mortgages the political and economic sovereignty of Kenya. The Kenyan people must then make use of the civic tool of the audit in order to identify the illegitimate and odious debts and legally claim their repudiation. The audit is every citizen’s right under the article 21 of the Universal Declaration of Human Rights of 1948 [4] and the article 19 of the International Covenant on Economic, Social and Cultural rights of 1966. [5] Both texts were ratified by Kenya. Nevertheless, cooperation between Kenyans and citizens in the North is needed since many documents such as the loan contracts may be scattered. Furthermore, the Kenyan authorities make the access to these documents difficult.

Finally, the audit will make it possible to establish the responsibilities of the creditors from the North in Kenya’s present level of debt. It will highlight the relationship between the increasing debt and the human rights violations under Arap Moi’s dictatorship, and especially the active support of the World Bank. Unfortunately, Kenya is only one case among many others where the World Bank played a decisive role, [6] including the Iranian Shah’s dictatorship after the Prime Minister Mossadegh was overthrown in 1953, the military dictatorship put in place by the US in Guatemala after the democratic president Jacobo Arbenz was overthrown in 1954, the dictatorship under the Duvaliers from 1957 in Haiti, the one under General Park Chung Hee in South Korea from 1961, the Brazilian generals’ dictatorships from 1964, Suharto’s in Indonesia and Mobutu’s in the Congo from 1965, the militaries’ in Thailand from 1966, Idi Amin Dada’s in Uganda and General Hugo Banzer’s in Bolivia in 1971, the dictatorship of Ferdinand Marcos in the Philippines from 1972, the ones under Augusto Pinochet in Chile, the Uruguayan generals and Habyarimana in Rwanda from 1973, the military junta in Argentina from 1976, the dictatorship in Pakistan from 1978, Saddam Hussein’s coup in 1979, and the Turkish military dictatorship from 1980.
On the basis of these audits, legal actions shall be taken against the authorities of the countries in the South and the World Bank, accessory to the embezzlement of public funds and human rights violations, so that an end is put to their impunity. Finally, in response to the Declaration of the World Social Forum of Nairobi, the complete and unconditional cancellation of the Third World debt is the necessary step that must be taken to be freed from the International Financial Institutions’ diktat which impedes the satisfaction of basic human needs.