|Debt||Previous - Next
a debt-free start for a billion people
Speech to the launch of the Jubilee 2000 Afrika
|By Ann Pettifor|
|The Costs of Debt
1. For every $1 received in aid grants in 1996, Africa paid back $1.31 in debt service
2. Africa owes $227.2 billion to creditors - $379 for every man, woman and child in Africa
3. Africa shoulders 11 per cent of the developing world's debts, with only 5 per cent of the developing world's income - twice the burden of any other region in the developing world
4. The IMF expects to have taken out at
least $600 million more from Africa than it has put in during 1997
5. In 1996, Africa paid $14.5 billion in
debt service, the highest level since 1990
6. Africa now spends twice as much on debt service as on basic health care
7. Excluding Zambia, whose debt service was artificially inflated by the settlement of arrears in 1995 with the World Bank and IMF, Africa's debt service payments rose by 21 per cent between 1995 and 1996
8. Africa could pay only 57 per cent of the debt repayments due in 1995
9. The prices of exports from Africa fell by 1.2 per cent on average each year from 1990 to 1996 and the effect of export and import prices combined makes Africa one third worse off than they were in 1980
10.1f Africa's export prices had kept pace with import prices since 1980, Africa could have repaid all its debt one and a half times over
Jubilee 2000 Coalition
Chains Around Africa
I want to acknowledge the debt that we in the Jubilee 2000 Coalition owe to our founder. Although our work on debt is building on past achievements, there is one aspect of our work that is original. And that is the linking of the concept of Jubilee, the need for massive debt relief, and the celebration of the coming millennium. That concept was the vision of one of the descendants of a British anti-slavery campaigner: Martin Dent, who is with us here today. I would like to salute Martin for the outstanding work he has done, and continues to do for the Coalition.
In 1996 Martin persuaded a group of us to turn his idea into reality. With the support of Christian Aid, CAFOD and TearFund, we started the campaign in a shed on the roof of Christian Aid's building in Waterloo, London - with only the promise of money, no supporters and one member of staff. Within two years Jubilee 2000 has become an international movement of ordinary people, objecting strongly to a global financial system that leads effectively to debt bondage; and bringing real pressure to bear on leaders of the world's most powerful economies. In that sense we reflect the movement against slavery in the 19th century, and the anti-apartheid movement this century. Those too were international movements, led by resistance from slaves in the South, and black South Africans, and supported by ordinary people in the North that objected to their governments' role in both the slave trade and the system of apartheid.
What does Jubilee 2000 stand for? Above all we challenge the injustice inherent in international financial relations.
We assert strongly the co-responsibility of creditors as well as debtors for the creation of high levels of debt. We go further: we assert that the powerful have more responsibility, because of their leverage over the international financial system. We recognise equally that elites in debtor countries have an in-built incentive to over-borrow. Invariably they are in political office for periods much shorter than the full repayment term of a loan. However we seek to highlight the lack of discipline in the international lending process, which encourages reckless lending.
When we first raised these objections, our voices were heard only in the wilderness. The 1997 Asian financial crisis changed all that. Now there is widespread recognition that Asia's crisis was precipitated by reckless lending - and by the insistence of Western governments, through the IMF, that capital markets be forced open and de-regulated. At the time of writing, (Spring 1998) the Asia debt crisis is still being played out. Private bankers, that lent money without consideration for the capacity to repay, have been bailed out by the IMF, backed by taxpayers in rich countries. At the same time the people of Thailand, Indonesia and South Korea have been "buried in debt" to quote the International Herald Tribune. A new debt crisis is in the making.
The lack of discipline in international lending can largely be blamed on the absence of fair, legal supervision of international financial relations and the absence of an international bankruptcy law. When Pan American recently went bust, its directors immediately filed "for protection from creditors". When sovereign governments run out of reserves of foreign currency with which to pay foreign debts - both private as well as government debts - they cannot "file for protection." Instead private debts, as in South Korea and Thailand, are effectively nationalised, and the government brought under intense pressure to divert resources from other spending to repay creditors. The pressure is applied by OECD governments, through the International Monetary Fund. The IMF is both a major creditor in its own right, but also the agent of all creditors, private and public. There is no international, independent "receiver" to offer protection to debtors, and to draw a line under debts. There is no objective assessment made of the debtors' ability to pay, and of the losses to be suffered by creditors.
In the case of the poorest countries this situation was somewhat ameliorated in 1996, when the IMF and Word Bank decided, for the first time in their history, that some debts of some of the poorest countries had to be cancelled. They launched the Heavily Indebted Poor Country (HIPC) Initiative to much fanfare. Under HIPC, an assessment has to be made of a country's ability to pay. Unfortunately this assessment is effectively made by creditors - and as a result of this fundamental flaw debt relief has been minimal.
We note that in past debt relief arrangements for Western governments, generous relief was offered, in contrast to what is on the table today through HIPC. Britain and Germany received substantial debt relief after the Second World War - relief which gave their children and grandchildren a future. Germany was not required to divert more than 5% of income from exports into debt service. Today Britain and Germany insist that Mozambique, recovering from Civil War and the ravages of apartheid, should divert 20% of her pitiful income from the export of prawns and cashew nuts, to servicing debt.
Its the fundamental injustice in relationships between debtors and creditors that Jubilee 2000 seeks to highlight.
We reject this injustice and these double standards.
It is the fundamental injustice in relationships between debtors and creditors
that Jubilee 2000 seeks to highlight. We note for example the contrast in the treatment
by creditors of a big bankrupt European company, Eurotunnel - and their treatment
of the poorest countries of the world. Because of the protection offered to Eurotunnel
by the legal concept of limited liability, the children of the employees of Eurotunnel
are protected from being held liable for the debts. British law protects them from
suffering as a result of the mistakes of Eurotunnel's management. Not so the children
of Tanzania. When Julius Nyerere asks:
The injustice can be illuminated in another way. In Britain a corrupt businessman, Robert Maxwell, was lent a great deal of money by respectable High Street banks. After his death, they discovered that his company was effectively bankrupt. His sons were challenged in the courts by creditors and others who lost money. The judges ruled the sons were not responsible for the sins of the father.
Contrast the case of bankrupt President Mobutu. He shared many of the characteristics of Robert Maxwell. These weaknesses did not deter international creditors, notably the IMF, the World Bank, and the British and American governments. Together they lent him $8.5 billion between 1981 and 1990. This was particularly misguided because in 1980 the IMF had asked a respectable German banker - Erwin Blumenthal - to investigate the Bank of Zaire. He reported to the IMF's Managing Director that it was utterly corrupt and rotten, that no creditors could ever expect to get their money back. The following year the IMF granted the Bank of Zaire the biggest loan ever given to an African government.
Now the reason for this was not just incompetence. The Cold War was still being fought out in that region of Africa, and Zaire was a convenient buffer against the threat of communism in Angola. But whereas the sins of the Maxwell father were not visited on his sons; the sins of Mobutu and his supporters are being visited on the sons and daughters of Zaire. Today the poor people of the new Democratic Republic of the Congo are diverting precious resources that could be used for economic recovery and rebuilding, into the coffers of those who backed Mobutu.
So first and foremost Jubilee 2000 challenges this injustice, these double standards in international financial relations.
We note also that high levels of debt in developing countries are used as the mechanism for ensuring intervention by Western governments (through the IMF) in the running of those economies. The IMF dominates every attempt by debtor countries to seek debt relief. No country may come before the Paris Club of creditors seeking to reschedule her debts, without first jumping economic hurdles set by the IMF, and adopting an IMF structural adjustment programme (SAP) based on a set of policies defined as "the Washington Consensus". These policies are used to force poor countries to open up their markets to Western traders. In contrast the IMF does not bring pressure to bear on Western governments to open up their markets to traders from the South who wish to sell textiles, lemons or wine into Western markets. The European Common Market erects strong barriers against such traders. In the US, farm subsidies and trade barriers protect strong vested interests. It is not possible for poor countries to sell rice into the markets of Japan.
We reject these double standards for rich and poor countries.
Furthermore, we have considerable doubts as to the effectiveness of economic policies imposed on indebted nations by Western creditors.
We note that the Chief Economist of the World Bank, Joseph Stiglitz, in a speech in Helsinki, Finland on the 7th January, 1998, attacked IMF economic conditionality as "the dogma of liberalisation (which) has become an end in itself and not a means to a better financial system". He argued that "the set of policies which underlay the Washington Consensus are neither necessary nor sufficient, either for macro-stability or longer-term development" They are "sometimes misguided" and "neglect fundamental issues".
He argues that these policies have not been imposed on highly indebted countries like the United States. He notes that "had this advice been followed (in the US) the remarkable expansion of the US economy would have been thwarted". Yet these policies are effectively imposed on sovereign developing country governments with high levels of debt.
We reject this injustice and these double standards.
Our demands are spelled out in the Jubilee 2000 Petition. This has quickly become a global Petition, a form of global graffiti, with people all over the world putting their stamp on it - through thumb prints, signatures and other forms of personal identification. Like the pre-historic walls of caves, or the trunks of trees, the Jubilee 2000 Petition has become a space on which people all over the world can make their mark and insist on change. By 1998 it was being signed in over sixty countries.
The Petition is carefully worded. First we call for the cancellation of "unpayable" debts - i.e. not all debts. If a debtor country has debts of $1000 and can only afford to repay $100 we call for the write-off of that portion of the debt that is not payable. The key of course is in defining that which is payable.
Our demands are spelled out in the Jubilee 2000 Petition. This has quickly become a global Petition, a form of global graffiti, with people all over the world putting their stamp on it - trough thumb prints, signatures and other forms of personal identification.
We call for relief to be given to the most impoverished countries, not all developing countries.
We call for resources freed up by debt relief to be directed to the poor. There is a common misunderstanding that Jubilee 2000 is calling for debtors to be given additional resources through debt relief. This leads to concern that corrupt elites will benefit. Debt relief on its own will not necessarily result in additional resources - it will only remove a burden. Many countries need additional resources - in which case they need both debt relief and more aid in the form of grants. We believe that Africa, for example, needs both debt relief and a "Marshall Plan" of aid, if her peoples are to recover from the deep depression of the 1980s. If there are additional resources made available, we insist that conditions are placed on governments to ensure these resources are diverted to the poor.
We lay great store by transparency - both in the lending process, but also in agreements for debt relief. We want the people of indebted countries to be made fully aware of any relief being granted to their governments, particularly if additional resources are freed up by the process. We want ordinary people in creditor countries to be made aware of how and why their governments make loans to the poorest countries.
Finally we take as our deadline the new Millennium. We do this to put pressure on creditors, and on ourselves to build up the momentum of the campaign, but, above all, so that millions of people in developing countries will be given a real reason to celebrate in the year 2000. In the words of Archbishop Ndungane of South Africa we call for an "act of immeasurable power and grace...to reshape the world's economy. In this way the third millennium can be a Jubilee celebration, and the Risen Lord can help us understand his proclamation "Behold, I make all things new!".
|This was the keynote address at the opening of the Afrika Jubilee 200 Campaign
Conference in Accra, Ghana on April 16th 1998.
For more information on the UK Jubilee 2000 Coalition write to Nick Buxton, Jubilee 2000 Coalition, P O Box 100, London SE1 7RT.
For more information on the Afrika Campaign - Jubilee 2000 Coalition write to P.O. Box 1938, Tema, C.l, Greater Accra Region, Ghana. Tel: (21) 500718.
The Irish Jubilee 2000 Campaign is co-ordinated by the Debt and Development Coalition, All Hallows, Grace Park Road, Dublin 9. Tel/Fax: (01) 857 1828. E-mail: email@example.com
Previous - Next