Dropping the Debt?

If the only outcome of debt cancellation was to help government finances resulting in little or no measurable positive effects on ordinary people in the villages, then these efforts would probably be seen by most as pointless. Many of us fear that finances gained by indebted governments might be spent on arms or projects that do not help the poorest, or even worse would ‘disappear’ into corrupt government officials own pockets.

To help this, the More Economically Developed Countries (MEDCs) that own the debt have tried to identify poorer countries that are committed to using money to reduce poverty and that have some strategies in place to do this. An initiative was launched in 1996 by the IMF and World Bank, with the aim of ensuring that no poor country faces a debt burden it cannot manage. These countries must have demonstrated macro-economic stability and have set out a structure plan to reduce poverty. Countries must meet certain criteria, commit to poverty reduction through policy changes and demonstrate a good track-record over time. The Fund and Bank provide interim debt relief in the initial stage, and when a country meets its commitments, full debt-relief is provided.  A number of such countries that have been identified as HIPCs (Heavily Indebted Poor Countries)  and where debt relief or cancellation has taken place there are some measurable benefits for those who need it most. Debt cancellation has allowed Zambia to spend more money on the much needed areas of health and education. Basic health care was made free to millions living in rural areas. Before this in 2003, Zambia was spending twice as much on debt repayments as on health care.

Debt relief in Tanzania has helped increase the number of children in primary school by 50%, build around 2500 new primary schools and recruit 28,000 extra teachers. In Uganda spending on poverty has risen by 75% since 2000 and access to health services and immunisation rates have almost doubled.

The direct correlation between debt cancellation and the benefits to the ordinary people on the ground continues. Social spending has increased in HIPCs by between 20-50%. Mozambique has introduced a free immunisation programme for its children. In Uganda, Malawi and Tanzania, primary education fees have been abolished and Benin has done the same albeit only in its rural areas. Both Mozambique and Senegal have promised to increase spending on HIV and Aids prevention.

In the longer term it has been possible to measure increased and relatively sustained annual growth rates (GDPs) in both Mozambique and Uganda (5%) which should eventually enable an improved economy and the consequential improvement for those in rural areas.

Although Nigeria, the largest of Africa’s countries with a population of around 130 million is not a HIPC country, around $17 billion has been agreed to be written off. The Nigerian government has promised to use this directly to tackle poverty and will invite international monitoring of the spending by organisations such as Oxfam and Action Aid. One aim is to enable three and a half million children to go to school within three years. At the same time the Nigerian government has taken some steps to deal with its corruption problems by sacking a number of judges and the inspector of police on corruption charges.

Not all people see the HIPC initiative in a positive way and in fact some see this as a way for the creditors just to get their loans repaid and therefore you will have to judge for yourself as to what extent it has been successful. Other initiatives as outlined by the G7 summit in 2005 promised much offering debt forgiveness of “the vast bulk” of money owed by the poorest countries, the majority African. Some fear that by erasing bad debts it will just allow struggling nations to apply for new loans and the whole debt cycle will just be perpetuated.

The real test has to be the measurable quality of life improvements for those in the villages.

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