Committee for the Abolition of Illegitimate Debt

In this context, it is crucial to investigate the role played by international financial institutions. Everything we know leads us to believe that the policies imposed by these institutions, the main financial backers of General Juvénal Habyarimana’s dictatorial regime accelerated the process resulting in the genocide. In general, the negative impact of these policies is not taken into consideration to explain the tragic unfolding of the Rwandan crisis. Only a few authors highlight the responsibilities of the Bretton Woods institutions [1], which have rejected any kind of responsibility.

At the beginning of the 1980s, when the debt crisis exploded in the Third World, Rwanda (like its neighbour Burundi) had very little debt. Whereas in other parts of the world, 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 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 were abandoning their go-go loan policy and preaching abstinence, they adopted a very different attitude with respect to Rwanda to which they granted major loans. Between 1976 and 1994, there was a twenty-fold increase in Rwanda’s external debt. In 1976, it amounted to $49 million, while it was nearly $1 billion in 1994, increasing especially rapidly as of 1982. Its principal creditors were the IFIs or International Financial Institutions — the World Bank, the IMF, and similar institutions, and the WB and the IMF played the most active role in this debt process. In 1995, IFIs held 84% of Rwanda’s external debt.

The dictatorship in place since 1973 guaranteed that there would be no progressive structural changes in the country. That explains why it was actively supported by Western powers such as Belgium, France, and Switzerland. In addition, it could be a rampart against the countries in the region that were still mulling over thoughts of independence and progressive change (for instance, neighbouring Tanzania where there was the progressive President Julius Nyerere, one of the African leaders in the Non-Aligned Movement Non-Aligned Movement
NAM The Non-Aligned Movement is a group of countries who, beginning in the 1950s, promoted a policy of neutrality towards the blocs led by the two superpowers – the USA and the Soviet Union –, who were by then fully engaged in the Cold War. In April 1955, a conference of Asian and African countries was held in Bandoeng (Indonesia) to promote unity and independence for the Third World, decolonization and an end to racial segregation. The initiators were Tito (Yugoslavia), Nasser (Egypt), Nehru (India) and Sukarno (Indonesia). The actual birth of the Non-Aligned Movement occurred in Belgrade in 1961. Other conferences would follow in Cairo (1964), Lusaka (1970), Algiers (1973) and Colombo (1976).
The work of the Non-Aligned Movement, which includes 120 countries, has had limited impact in recent years. ).

Throughout the 1980s and up until 1994, Rwanda received many loans, but the dictator Habyarimana embezzled much of them. The loans granted were supposed to be used to better integrate Rwanda’s economy into the world economy by developing its capacities to export coffee, tea, and tin (its three main export products), which was detrimental to the crops cultivated there to satisfy local needs. This model worked until the middle of the 1980s, when the price of tin, then that of coffee, and finally tea, collapsed. Rwanda, for which coffee was the main source of hard currency, was hit hard by the breaking up of the coffee cartel at the beginning of the 1990s by the United States.

 Using international loans to prepare for the genocide

Only a few weeks before the Patriotic Front of Rwanda launched its offensive in October 1990, the government of Rwanda signed an agreement with the IMF and the WB in Washington to implement 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/ measures.

When they were implemented in November 1990, the Rwandan currency dropped by 67%. By way of compensation, the IMF granted strong currency loans for quick disbursement so that the country could keep importing goods. The funds were used to artificially improve the balance of payments Balance of payments A country’s balance of current payments is the result of its commercial transactions (i.e. imported and exported goods and services) and its financial exchanges with foreign countries. The balance of payments is a measure of the financial position of a country vis-à-vis the rest of the world. A country with a surplus in its current payments is a lending country for the rest of the world. On the other hand, if a country’s balance is in the red, that country will have to turn to the international lenders to meet its funding needs. . The prices of imported goods skyrocketed: for instance, the price of petrol went up by 79%. Selling imported goods on the domestic market made it possible for the government to pay the army’s wages, and the number of recruits increased in staggering proportions. The structural adjustment measures included a decrease in public spending, wages were frozen, and there were massive layoffs in the civil service, but part of the savings were used for the army.

Whereas the prices of imported goods increased, the price at which producers could sell coffee was frozen, as imposed by the IMF. As a result, hundreds of thousands of small coffee producers went bankrupt [2], and together with the most deprived layers of city dwellers they became a permanent supply of soldiers for Interahamwe and army recruiters.

The following measures were among the ones the WB and IMF imposed in Rwanda: an increase in consumption taxes and a decrease in corporate taxes, an increase in direct taxes on low-income families through a reduction of fiscal advantages for large families, and restrictions on credit facilities to farmers.

To account for its use of loans from the IMF/WB, Rwanda was allowed to submit old invoices for imported goods. This practice made it possible for the government to pay for the massive purchase of weapons intended for the genocide. Military expenses increased three-fold between 1990 and 1992 [3]. Over this period of time, the WB and the IMF sent out several missions of experts, who highlighted the positive consequences of the austerity policies enforced by Habyarimana, yet threatened to discontinue payments if military expenses increased further. The Rwandan government then used various ploys to conceal military expenses: Lorries bought for the army were accounted for in the budget of the transport ministry, a significant portion of the petrol used in the army or militia vehicles was part of the budget for the ministry of health. The WB and the IMF eventually stopped providing financial support in early 1993, but they did not expose the existence of bank accounts the Rwandan government had in foreign banks on which there were substantial amounts of money still available to buy more weapons. It can be said that they failed in their duty to control the use of the funds loaned. They should have stopped their loans in early 1992 when they learned the money was being used to buy weapons. They should have warned the UN at once. As they went on supplying support until 1993, they helped a government that was preparing a genocide. As early as 1991, human rights organisations had tried to draw international attention to the massacres that paved the way for the genocide. The World Bank and the IMF systematically supported a dictatorial regime, with the help of the US, France, and Belgium.

 Exacerbated social contradictions

For the genocidal project to be achieved, more than just a government was needed to devise it and acquire the necessary tools; the people also had to be impoverished and driven to a level of desperation at which they were ready to do anything. 90% of the population in Rwanda was living in the countryside, and 20% of farm families owned an acre or less. From 1982 to 1994, most of the farming population fell into poverty, while a few others at the other end of the social spectrum were accumulating a huge amount of wealth. Professor Jef Maton states that in 1982 the richest 10% of the population made 20% of rural income; in 1992 they had grabbed 41%, in 1993 45%, and in early 1994 51% [4]. The disastrous social consequences of the IMF and WB enforced policies combined with the plummeting price of coffee (itself a consequence of policies applied by the Bretton Woods institutions, and the US doing away with the cartel of coffee producers at that time) played a key role in the Rwanda crisis. Habyarimana’s regime exploited the widespread social discontent to carry out the genocide.

 The genocide’s financiers

Betwen 1990 and 1994, Rwanda’s main arms suppliers were France, Belgium, South Africa, Egypt and China. China also provided 500,000 machetes. Egypt - whose joint minister of Foreign Affairs, responsible for relations with the African continent, was none other than Boutros Boutros-Ghali - granted Rwanda a 6 million-dollar 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. -free loan in 1991 to purchase arms for its infantry divisions. When the genocide got under way, France and the British firm Mil-Tec provided arms to the rampaging army via the Goma airport across the border in Zaire - violating the 11 May 1994 UN embargo on arms sales to Rwanda (Toussaint, 1996b). Once the Rwandan capital, Kigali, had been overrun by the opposition FPR, a certain number of the key leaders of the genocide were received by the French president. Rwandan leaders-in-exile set up the head office of the Banque Nationale du Rwanda in Goma, with the help of the French army. Until August 1994, the Banque disbursed funds to repay debts for previous arms purchases and to buy new arms. Private banks (Belgolaise, Générale de Banque, BNP, Dresdner Bank, among others) accepted payment orders from those responsible for the genocide and repaid those who financed the genocide.

 Rwanda after the genocide

After the fall of the dictatorship in July 1994, the World Bank and the IMF demanded that the new Rwandan government limit the number of public-sector employees to 50% of the number agreed upon before the genocide. The new government complied.

Initial financial assistance provided by the USA and Belgium in late 1994 went towards repaying the Habyarimana regime’s debt arrears with the World Bank. Financial aid from the West has been barely trickling into the country since then, despite the urgent need to rebuild the country, and provide for the more than 800,000 refugees on its soil since November 1996.

According to David Woodward’s report for Oxfam, agricultural production did recover somewhat in 1996. However, it was 38% lower than usual first harvests and 28% lower than usual second harvests. Industry was taking longer to recover: only 54 out of 88 industrial concerns in operation before April 1994 had resumed activity; most were operating well below previous levels. At the end of 1995, the total value of industrial production was 47% of its 1990 levels.

A 20% wage increase in the public sector in January 1996 was the first such rise since 1981; official estimates, however, are that 80% of public-sector workers live below the poverty line. It comes as no surprise that Rwandans prefer to work in NGOs as drivers and cooks rather than in the public sector. These poverty statistics are not peculiar to the public sector: in 1996, the World Bank estimated that 85 to 95% of Rwandans lived below the threshold of absolute poverty.

It should be noted that there has been a significant increase in the number of households run by women: from 21.7% before the genocide to 29.3% now, with peaks of 40% in some districts. Their situation is particularly disturbing in view of the profound discrimination against women in such matters as inheritance, access to credit and property rights. Even before the genocide, 35% of women heads of households earned less than 5,000 Rwandan francs (17 dollars) per month; the corresponding figure for men was 22%.

In spite of a high rate of adoption of orphans (from the genocide and AIDS deaths), there are between 95,000 and 150,000 children without families.

In the education system, only 65% of children are enrolled in primary schools; and no more than 8% in secondary schools (Woodward, 1996).

In 1994, Rwanda’s foreign debt had reached nearly one billion dollars, the totality of which had been contracted by the Habyarimana regime. Five years later, the debt had increased by about 30% and Rwanda repaid 31 million dollars (figures for 1999).

The debt contracted before 1994 fits the definition of “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. ” perfectly: it follows that the new regime should have been totally exonerated from paying it off. The multilateral and bilateral creditors knew very well who they were dealing with when they lent money to Habyarimana’s regime. After the change of regime, there was not the slightest justification for transferring their claims onto the new Rwanda. Nevertheless, it was done quite shamelessly.

The new Rwandan government that came into power in 1994 tried to persuade the WB and the IMF to renounce their loans. The two institutions refused, threatening to cut off funding if Kigali persisted. They put pressure on Kigali to keep quiet about the aid they had provided to the Habyarimana regime, in exchange for new loans and a promise of future debt cancellation as part of the initiative in favour of 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), launched in 1996.

One can only deplore that the government should have accepted such blackmail. The consequences are pernicious: continued structural adjustment, with its disastrous social and economic consequences, and an increase in foreign debt. In complying, the government of Kigali has gained “good pupil” status in the eyes of the IMF, the WB and the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

. Worse still, the Rwandan regime has become the accomplice of the USA and Great Britain whose policy is to weaken the Democratic Republic of Congo, by taking part, as of August 1998, in the military occupation of its neighbour, the DRC, and by plundering its natural resources.