GLOBALIZATION, DEBT RELIEF AND POVERTY REDUCTION

CONCEPTS AND POLICIES*

DR SUMIT ROY

*This paper is based on the first millennium Lecture/Seminar of the London

School of Hygiene and Tropical Medicine, University of London, delivered

on 19 January, 2000. The author, a Senior Visiting Fellow, School of Social

and Human Sciences, City University, UK, has been researching on

globalization and structural change and has acted as an Independent

Expert on Globalization and poverty for UNCTAD, United Nations

Conference on Trade and Development. He has been a Senior Economist

at the International Labour Office, Geneva, was nominated to serve on the

UN Human Rights Commission, and has taught in the UK, India and

Nigeria. His publications include Economic Progress and Prospects in the

Third World:Lessons of Development Experience Since 1945, Edward

Elgar [co-authored with Sir Hans Singer], Agriculture and Technology in

Developing Countries:India and Nigeria, Sage, and papers in the Economic

and Political Weekly and World Affairs. Comments to

SumitRoy100@hotmail.com <mailto:SumitRoy100@hotmail.com>

________________________________________________________________

ABSTRACT

Globalization is the major challenge in the new millennium with

profound implications for economic, political and socio-cultural change.

It is symbolized by compression of the world economy and a blurring of

national borders, driven by Information and Communication

Technology [ICT], and a marked shift of power from nation states to

non-state inter-governmental, non-governmental, and private forces.

Controversy surrounds the professed gains of globalization with intense

anxiety over the plight of developing, and in particular heavily indebted

nations, which may be marginalized.

Against the above backdrop debt relief [ 1] is a powerful tool in curbing

external debts and releasing resources to alleviate poverty and boost

growth.This, however, has to be sustained and bolstered by external and

domestic policies and a genuine commitment to reshaping

developed-developing country relationships: aid, foreign investment,

trade and fiscal, democratic and institutional reforms.

Analysis of debt relief and poverty has emphasised the technical, the

economic, or the socio-economic aspects, often driven by extremes of

narrow financial or moral and emotive concerns, without adequately

locating the roots and the socio-political motivations of relief strategies

and integrating them with complementary policies.

This paper is focussed on contributing towards a fuller understanding of

the relationship between debt relief and reduction of poverty in a

political economy and historical frame. It unfolds the role of state and

non state institutions in initiating, co-ordinating, and practicing bold

and innovative measures to reduce the debt burden and fulfil essential

human needs while inducing long term structural changes: mortality,

longetivity, elimination of old and new diseases [eg.HIV/Aids], literacy,

primary and secondary education, and social development, and

domestic-external economic conditions for growth. This theme is

explored through the Heavily Indebted Poor Countries [HIPC] Initiative,

under the umbrella of the World Bank and the IMF, and the major

creditor nations, to enable poor indebted, and often conflict ridden

developing, nations, primarily in Africa, with vulnerable social groups,

escape from unsustainable debt and improve livelihoods. The analysis

uncovers tensions in the creation, management, and execution of debt

relief , and its scope of making long term impact on poverty, in the

absence of a coherent and long term vision of a global world.

The strategy under the Initiative reveals [a] use of specific indicators

and [b] pursuit of debatable economic and social policies: firstly, the

ratios of Net Present Value, NPV, debts :exports, NPV of debts: fiscal

revenue, and revenue: GDP, and, secondly, structural adjustment and

social measures. Over a three year phase, culminating in a ‘decision

point’, a country has to establish that it has been pursuing economic

reforms and poverty reduction. If debts are still unsustainable a debt

relief package is devised but countries only receive their full entitlement

of relief once they have implemented a set of pre-determined structural

policies over a flexible time span. Deep seated concerns have emerged

over aspects of market based adjustment, often through slashing of

public expenditure and social programmes for the poor, to restore

economic balance. Changing formulations and frameworks of the

Initiative, underlined by ‘broader and faster’ debt relief, arouse

searching questions on its role in curbing poverty.

THE HISTORICAL CONTEXT

Globalization centres on compression of the world economy

undermining the sovereignty of the nation state and shifting power to

non state forces encompassing inter-governmental, non-governmental,

and private institutions which increasingly shape and steer policies. This

has far reaching implications for sustainable growth, conflict reduction

and human rights. In a historical setting it unfolds a new phase in the

restructuring of inter-nation/state relationships releasing new tensions,

anxieties and opportunities. This makes it critical to re-conceptualize

visions of material progress, peaceful coexistence, and human rights.

History has witnessed shifts and changes in diverse phases of

integration, disintegration and re-integration of inter and intra

nation/state links with measures to harness human energy and creativity,

curb tensions and usher in growth.Power relationships expose major

turbulence and frictions. This is mirrored in diverse historical epochs

arising from economic, military, political and cultural ties often

stemming from unequal bargaining encounters: trade, wars, colonialism,

and post colonialism.

Globalization marks continuity and change with the emergence of new

forms of inter-nation/state economic, political and cultural exchange,

based on the diffusion of Information and Communication Technology

[ICT], enabling instant communication over time and space beyond

human imagination.This is blurring national borders. Hence,

demarcation between states, national autonomy, and the scope of

control within borders need to be re-conceptualized. This provokes

critical questions on the nature of integration of nations with the

changing world economy while retaining control over domestic

policies. This is expected to sharply vary between states and arouses

anxiety about the plight of poor developing nations. This makes it

essential to grasp the roots of globalization and its policy impact so that

weak nations, and vulnerable groups, are not isolated and marginalized,

and, indeed, can share in its professed benefits.

Alas, poor nations are handicapped by their recent experience of debt

and confront obstacles in fulfilling the necessary pre-conditions for

globalization. Thus, debts impose a major burden on them with crippling

short and long term effects on economic management. Debts encapsulate

the culmination of dues stemming from inability to manage

domestic-external relationships. This can be traced to imbalances in the

latter and demands a fuller understanding of the underlying causes and

ways of restoring balance between the domestic and the world

economy. Debt relief should not be seen simply as a short term panacea

but as a strategy for revitalizing rights and obligations of debtors and

creditors. It should use the most efficient and equitable mechanisms to

build internal and external economic power with minimal

socio-economic disruption. Strategies to curb debts should mirror the

interests of debtors and creditors in the context of changing international

norms going beyond simple rhetorics. This should capture the values,

the measures, and the practices of agreements to pave the way for

sustainable development.

Mounting debts gave rise to a range of possible solutions: rescheduling,

debt for equity, and payment in local currency, culminating in debt relief

centred on interlinked bi-lateral and multilateral measures, supported by

creditors, debtors and governments, to reduce the external debt burden

of poor developing countries. Resources saved through debt relief were

to be used for basic needs, exemplified by health, education and social

welfare, under strict supervision by the creditors. This embodied,

compared with previous strategies, a more holistic vision of

development. The emphasis was on economic management which

recognized the limited prospects of debt repayment in the foreseeable

future by poor countries coupled with risks of reversing development

over the post independence phase and ensuring that future growth

prospects are not blocked. This was motivated by pressures to stimulate

globalization. Such laudable goals, however, cannot be divorced from

the unequal bargaining power of poor vis a vis rich countries and the

controversies over development thinking and practice.

Debt relief measures emerge against a backdrop of changing post

coldwar domestic -international economic and political relationships.

This unfolds a number of phases with nations having to adapt to the

changing world economy: the ‘golden age’ [1950's and 1960's], debt led

growth [1970's], and the ‘lost decade’ [1980's], and the ‘global age’

[1990's and beyond]. This is marked,first, by buoyant growth in the

world with rising commodity and manufactured exports prices; second,

a subsequent phase of increasing oil prices, surplus oil revenues [for

producers] and access to cheap loans to encourage borrowing fuelling

the accumulation of debts; third, a phase of inability to gain access to

cheap loans, rising interest rates, falling exports, declining levels of aid,

and mounting debts emerged with the imposition of harsh economic

measures to curb external debts; finally, a phase of liberalization and

globalization was unleashed to establish a more open, market based

world economy which developing nations were coaxed to join.

The link between the second and the third phase is primarily provided by

the rise in oil prices and oil incomes, with recycling of oil revenues

through the banking system, emanating from inability to absorb oil

revenues in the major oil producing countries [eg.Saudi Arabia, Kuwait,

Abu Dhabi], and growth being fed by access to cheap loans. It was

assumed that this would be sustained and that the loans would be repaid

with ease. However, the second oil price rise in the late 1970's was

followed by stringent monetary policies in developed nations to control

inflation with rising interest rates,and inability of developing nations

to gain access to the former cheap loans. This was compounded by

falling exports of developing nations. There was mounting pressure on

the latter in the 1980’s to make repayment of external debts a key policy

to establish balance of payments equilibrium. However, increasing

external debts coupled with incapacity to meet debt servicing

[ie.payment of principal and interest] obligations intensified economic

and social distress. This paved the way in the 1980’s for structural

adjustment policies initiated by the World Bank and the IMF.

The adjustment measures set out to correct the balance of payments

through curbing state expenditures, including pruning social spending,

and shifting to the market.This stemmed from belief in establishing

external and internal balance, and eventually reviving growth, with

positive impact on poverty. SAP's were based on neo-liberal

assumptions, in sharp contrast to interventionary Keynesian concepts,

with focus on the virtues of the market and liberalizing economies.

Major criticisms were levelled at the emphasis on debt repayment and

the inability of stimulating growth and resolving poverty.This emerged

against a backdrop of tensions between the Bretton Woods [BW]

institutions and the United Nations, and supporters and opponents of

both, over the virtues of SAP's, and the extent to which they constituted

viable development strategies. Neo-liberal approaches informed the BW

institutions while the UN was influenced by Keynesian concepts. The

latter challenged SAP’s and called for more intervention and closer

accommodation of growth and poverty reduction rather than simply

pursuit of balance of payments equilibrium. However, the criticisms to

which the early SAP's were subjected did impact on making them

relatively more flexible with gradual efforts to incorporate growth, and

more recently measures to alleviate poverty.This was encapsulated in

‘safety nets’ for the poor while strict adjustment was retained for the

goals of balance of payments equilibrium and growth. Such notions

were pursued through various policies exemplified by the Brady Plan,

to tackle debts: debt re-scheduling, debt for equity swaps, delaying

payment of interest, and payment of interest in local currency. Alas,

these had limited impact. At best the balance of payments of some

countries was restored for a time with some growth but without reducing

poverty and in some cases allegedly worsening the latter.

Controversies over SAP's exposed the deep seated economic, political,

and ideological divide between the BW institutions and other

international institutions; the former, of course, in which the developed

nations were dominant, had the clout to influence decisions about the

terms and conditions of making loans. In contrast, the UN institutions, in

which developing countries were numerically more powerful, lobbied

against the harshness of SAP's and the plight of poor indebted nations

and their most vulnerable groups. They were, however, ineffectual. This

mirrored weak financial and political power in international negotiations.

Regions which were not much affected by the ‘lost decade’ were firstly,

East Asia, which had good export led growth with a strong state

combined with market forces, and limited self imposed adjustment; and,

secondly, South Asia, with relatively ‘closed’ economies and limited

external debts.

The capacity to curb the debt burden and the simultaneous call for

liberalization and globalization of the national and the international

economy intensified the urgeny of radical interventions to tackle debts

and build the foundation for sustainable development. This shaped the

context of policies from the 1990's onwards with reassessment of debt

reduction measures. Debt relief emerged as a major instrument, though

not an adequate one, to pave the way for globalization. It has to be

placed in the realm of the political economy of domestic- external

policies: trade, finance, [portfolio loans], foreign direct investment, aid,

and relevant monetary, fiscal and sectoral measures.This, moreover,

emerges in the setting of post coldwar realignments in the aftermath of

the breakdown of ideological division between the ‘socialist’ and the

‘capitalist’ camps and its impact on developing nations; the former

collapsed and the latter survived championing the virtues of the market.

The political economy of the interplay of domestic -external policies

uncovers falling levels of aid, selective FDI, though increasing but

confined to specific countries and sectors, coupled with inadequacy of

capital inflows and, indeed, significant capital outflows. Even if such

policies were reversed it would take time for positive effects to emerge.

It should be emphasised that debt relief can provide immediate support

in meeting urgent needs of poor indebted countries and the most

deprived rural and urban groups. In the long run it could be invaluable

in enabling an exit not only from unsustainable debts but also from

unsustainable lives.Of course, complementary domestic and external

policies should accompany debt relief so that countries do not slide back

into debt and can pursue sustained growth. Poverty reduction, too, along

with adjustment and growth, is increasingly seen as a key ingredient of

an integrated ‘package’ to resolve economic and social ills.

Aid, though essential for development, is often tied to the donor

country's interests. Such flows can be used for debt servicing and also

for non -developmental purposes. eg. financing military ambitions.

However, nations often justify the latter in terms of a safeguard against

potential or actual threats to national security.

Public figures, politicians, community and religious leaders, have voiced

their anguish over the suffering of the poor stemming from external

debts and the havoc on their daily lives coupled with the long term

effects on social and political stability. This message is mirrored in the

statements and speeches of major third and first world leaders:former

President of South Africa, Nelson Mandela, the late Tanzanian President

Julius Nyerere, and the Pope.

GLOBALIZATION AND DEBT RELIEF:THE VISION AND THE

REALITY

Debt relief captures an attempt to escape from unsustainable burden of

pressures to fulfil contractual obligations incurred in the past to repay

loans with interest often based on spurious dealings between specific

social groups and private and multilateral financiers, depriving poor

nations, and the most insecure, and politically weak, of basic rights.

Thus, unjust and unfair burdens call for drastic steps to escape from

unsustainable debts and restore faith in a meaningful, and balanced, life.

Simple debt relief implies charity. It ignores the deep seated causes of

debts and places the primary burden on the debtor. Hasty measures

emerge to repay debts siphoning off resources from essential human

needs. This inhibits and frustrates the scope of the poor to participate in

society. In contrast, refusal to repay debts mirrors defiance accusing the

creditor and sections of the national population who procured and used

the loans, often with the support of external creditors, for illegitimate

ends; this is supported by the experience of late President Mobuto of

Zaire who obtained loans for maintaining a luxurious life style and

a dictatorial regime while the poor were deprived of justice and essential

needs. The recent history of the oil crisis reveals that debts were

brought about by a mixture of economic and political forces. This

demands holistic and collective solutions.

The urgency to implement debt relief [2] in Africa and confront specific

forms of poverty, underscored by basic health and education, was

clearly the culmination of the severe limits of previous policies in

developing nations to curb external debts and its economic and social

consequences.The focus on the balance of payments and external debt

reduction have long term impact on development, and, hence, the

scope of fulfilling the dream of a global world. This needs to be seen in

the realm of debates on poverty: concepts, including definitions and

profiles shaped by economic, social and political power and the

vulnerability of specific social groups, identification and measurement,

domestic and external causes, and short and long term strategies,

including relevant growth and employment programmes, supported by

institutional, safety nets and human development measures, in relation to

the levels [individual, household, project, sector, country, and region].

This should be the frame of international, national and regional

institutions which aim to fulfil basic human needs by 2015: halving

global poverty, bringing about universal primary education, reducing

infant mortality by two thirds and maternal mortality by three quarters,

establishing universal access to reproducible health service, and

reversing current trends in the loss of environmental resourcs and

gender disparities in primary and secondary education.

International institutions, civil society, and nation states can steer this

process by devising policies to reduce debts and channel the resources

saved through debt relief to combat the most urgent needs and build

human capital: primary health, nutrition, and education. In this respect it

is essential to ensure that the major institutions do not usurp power and

that democratic governance is ushered in. .

Investment in physical capital stimulates growth of incomes. This can be

taxed or used for acquiring goods and services in the market. However,

the uncertainty of savings and investment finance, the long gestation

periods for growth to emerge and ‘trickle down’ to the poor, combined

with heavily skewed distribution of income in most indebted developing

nations, make it vital to boost the status of basic needs. This unfolds in

the context of the historical and the changing post coldwar political

economy.

Evolving a powerful conceptual tool for analysing the relationship

between debt relief and poverty reduction has been forcefully voiced by

members of civil society and regional institutions who profess to protect

the poor. The relationship is a complex one. But it has been recognized

that all stakeholders, debtors and creditors have a responsibility towards

making it a success. A number of issues need to be confronted.

The HIPC Initiative has to be seen in terms of its history, its critiques,

and its role in tackling poverty. The changing formulations,

frameworks, financing, practice, and modifications of the policy, since

its inception, in 1996, uncover the realism of its goals of providing

‘deeper, broader, and faster’ debt relief. This is underscored by its scope

of reshaping the lives of the poor in the most indebted and tension

ridden region,Africa, which faces a range of uncertainties on both the

external and the domestic front:[3] low levels of GNP growth rates,

inadequate export growth rates, declining terms of trade, falling aid

levels, barriers to trade, selective foreign investment, limited scope of

raising revenues through fiscal measures, and a weak agricultural

base.Analysis of the historical shifts in the Initiative and case studies of

recipient nations offer insights into the realism of such concepts..

The Initiative focussed on debt relief for multilateral and bi-lateral

debts [4]:approximately 37 per cent and 48 per cent of total external

debts of poor developing nations are primarily owed to multilateral and

bi-lateral bodies with about 15 per cent owed to private bodies

[eg.banks]; the Initiative aims to reduce debts of poor developing nations

by $ 100 billion out of total estimated external debts of $ 315 billion.

The core of the scheme rests on stringent economic conditions for the

assessment of nations which claim to confront unsustainable debts

requiring urgent debt relief to escape from economic and social havoc

based on the assessment of economic performance. This has to fulfil the

conditions of the creditors. External and domestic economic factors for

evaluation are outwardly objective and could be linked to the specific

situation in each country over time: the former incorporates dependence

on exports for national income [ exports: GDP], the intensity of debts,

embodied in NPV of debts: exports, and the latter is captured by the

revenue: GDP ratio and NPV of Debts: fixed revenue. In principle over a

three year phase culminating in a ‘decision point’, a country has to

establish that it has been pursuing economic reforms and poverty

reducing strategies and if debts are still unsustainable a debt relief

package is devised. However, as mentioned earlier. countries only gain

access to the full package of debt relief once they have implemented a set

of pre-determined structural reforms over a flexible period. This

approach, coined a ‘floating completion point,’ replacing the previous

fixed three year period under the original framework, sets out to speed

the pace of debt relief.

The scheme adopts a focus which puts the onus on the indebted

nation and is somewhat divorced from the historical forces giving rise to

the debt crisis, its underlying causes, and the relevance and the

controversy over structural adjustment measures. The recent

modifications to the scheme aim to counter criticisms of some of the

technical and financial conditions for granting relief. The fundamental

question is if it can be delivered more quickly to tackle urgent basic

needs without more drastic overhauling of the measure. This includes its

insistence on strict economic performance and the need to bolster relief

and encompass the role of related external and domestic policies. This is

being increasingly emphasised by intergovernmental and non

governmental institutions which form a powerful pressure group,

reiterating major human needs, and long term economic logic, to relax

the tight conditionalities of the scheme. Controversy permeates the role

of market based adjustment often requiring control of public

expenditure by pruning relatively low levels of social protection budgets

to establish internal and external economic balance. Some studies show

that SAP’s have negatively affected the position of the urban poor,

women and children with a marked adverse effect on basic needs in

Africa: literacy and education, the quality of care, health service

utilization, due to the imposition of user fees, search for alternative

sources of health care, and changes in mortality and morbidity and

nutritional status.[5]

The changing formulations imply efforts to incorporate the demands of

intergovernmental and non governmental institutions, as well as other

sections of civil society, to adopt a more sensitive formula related more

closely to the needs of different indebted developing nations and in

particular those which have to straddle a range of uncertainties and

disruptions. Dissatisfaction clouds the limited coverage of the HIPC

strategy, as well as its technical and financial instruments, embodied in

the choice of countries, the assumptions behind conditionalities and

the inclusion or exclusion of nations,and the criteria on which external

and domestic economic performance is judged. Considerable doubts

permeate the scope of reconciling structural adjustment with social

welfare measures.

The history of the Initiative [6] mirrors genuine, albeit debatable,ways of

injecting more flexibility. The actual formulations, however, reveal

pursuit of a belief in traditional SAP's, although increasingly, a focus on

social forces has been emerging to accommodate the criticisms of

inadequate emphasis on poverty reduction,coupled with a need for

greater transparency, and democracy, including accountability, in using

debt relief for specific poverty programmes. In spite of bold steps to

revamp the initial approach, the scheme is unable to separate relief and

poverty from adjustment. This should provoke the search for more

appropriate strategies.

The roots of the Initiative and its creation unfold inherent strengths

and limitations and the scope of making meaningful modifications.

Disillusionment with previous steps to reduce debts forced the rich

countries, and the powerful international institutions, coaxed by

intergovernmental and non governmental institutions, to advocate wider

developmental goals and link debt and poverty.

A meeting of Commonwealth Finance Ministers, followed by

subsequent discussions among the major leaders of the rich G 7 nations,

and the eventual acceptance by the BW institutions [the World Bank and

the IMF] of debt relief as a component of its policy, formed the key

historical stages. Subsequent modifications, put foreward by major

developed country leaders, impinged on modifying and refining the

instruments of debt relief to make the scheme more equitable and

accessible to a wider group of nations, and make explicit the connection

between debt relief and poverty reduction and monitor it within a

participatory and democratic frame. Shifts in the thinking and the

strategy of the Initiative have been accompanied by persuasive

arguments to bolster it through collective action to support domestic and

external policies. This aimed to ensure that countries did not slip back

into debt and that growth could be sustained by an urge to integrate

indebted nations into a globalizing world.

Campaigning by non governmental organizations, before, during and

after major summits, has had a major influence in re-thinking concepts

and policies under the Initiative.They have urged the G7 nations

to focus on the importance of debt relief and take concrete steps. Debt

relief under the scheme was undoubtedly motivated by official creditors

and supported by governments in the hope that it would pave the way for

sustainable development. The use of ICT [Information and

Communication Technology] was a major force in spreading the virtues

of increasing the pace of debt relief backed by societal, political and

religious leaders, including popular figures, to convey the adverse

impact of debts on the neglected, marginalized and weak social groups in

poor countries.

The history of the Initiative, based on meetings of world leaders, can be

summarized:.

First, the Trinidad Commonwealth Finance Ministers Conference in

1990 stressed that debt relief for governmental debts should be adopted

in the context of executing policies stupulated under IMF loans. This

was initiated by John Major the British Chancellor of the Exchequer.

Second, in 1992, at the Malta Commonwealth Finance Ministers

Conference, the idea of debt relief for multilateral loans was floated.This

was seen as the major source of debts for many developing countries.

Third, it was only in September 1996, that the IMF and the World Bank,

at the G7 Lyons Summit, adopted the idea of multilateral debt relief for

poor developing countries.

Fourth, the G7 Summit in Cologne in January 1999 marked a major

move towards placing poverty reduction at the core of an enhanced

HIPC frame. Chancellor Schroder of Germany put foreward a range of

modifications to the initial HIPC thrust to make it ‘deeper, broader and

faster.’ This was the theme to guide discussions, debates and policies on

future HIPC policies and laid the foundation for easing the

conditions/stipulations to guide the external and domestic behaviour and

criteria for defining ‘unsustainable’ debts, the terms of assessment.and

adopting a more flexible time span within which debt relief could be

given to eligible nations. It was emphasised that there should be a clear

and direct link between debt relief and poverty reduction encompassing

the key needs: health,education and social welfare.

However, the summit lacked adequate depth and breadth and was

confined to delivering fast relief. The financial capacity of poor countries

to meet debt obligations required deeper study.. Donors had to go

beyond the Cologne reforms. Poverty reduction was the main focus. The

link between debt relief and poverty was hailed as a laudable goal. A

stable macroeconomic framework and a state led poverty reduction

programme were critical. There was much concern about the nature of

adjustment programmes under the IMF’s Extended Structural

Adjustment Facility, ESAF, and its mixed effects. Successfully linking

debt relief and poverty demanded incorporating ESAF into a broader

and longer term strategy for human development with genuine national

control over macro economic policymaking. This required the reform of

ESAF to strengthen its focus on poverty reduction. Informed country

specific strategies could certainly offer insights into the use of resources

freed by debt relief encompassing monitoring and accountability of

social indicators and the capturing of benefits by the poor with an

enhanced role for civil society. Multilateral institutions were urged to

re-imagine the ways in which debtors and creditors could

co-operate in moulding and executing country level poverty reduction

programmes. Furthermore, international donors required guidance in

re-thinking aid policies to bolster such aims.

Fifth, in September 1999 the IMF-World Bank meeting in Washington

thrashed out the major dynamics of the Initiative. It set out to

accommodate the major concerns posed in Cologne with the thrust on

implementing the debt relief-poverty reduction paradigm. This

embraced a broadening of IMF’s ESAF to incorporate adjustment,

growth and poverty reduction and scrutiny of debt relief for

poverty;ESAF was re-named the Poverty Reduction and Growth

Facility.There was to be closer collaboration between governments,

debtor nations, and civil society. The IMF and the World Bank endorsed

the preparation and implementation of Poverty Reduction Strategy

Papers [PRSP] by borrower countries seeking to benefit from the

Initiative.The aim was to establish a firm link between debt relief and

poverty reduction by making the HIPC effort an integral component of

broader efforts to execute outcome-oriented poverty reduction strategies

using available resources.

The focus on poverty was to be devised by a government in conjunction

with other actors. Once the PRSP was approved by the World Bank and

the IMF it was to form the basis for the tripartite agreement between

these institutions and the government. The PRSP was to replace the

Policy Framework Paper as the document which would establish the

policy directions and resource allocation frameworks for IMF and Bank

lending for concessional assistance. It was to cover a three year time

frame.

Finally, at the recent G8 summit in Japan [July 2000] the G 7 leaders

continued to debate the strengths and deficiencies of the Initiative.

The core of this rested on accepting the urgency of matching the

rhetorics with the policies.

The focus on PRSP, in particular, poses searching questions. This

emphasised participation by international agencies, national

governments, and civil society in defining, planning and implementing

poverty reduction strategies informed by principles of accountability,

transparency, legitimacy, and governance. However, these have been

devised under World Bank-IMF conditionalities including stringent

structural adjustment policies. This should be seen against a background

of ongoing studies, encapsulated by the Meltzer Report, initiated by the

US government, to reform the Bretton Woods institutions with

intensification of such thrusts. Of course, the PRSP, and its notions of

wider participation, should not be de-linked from mounting inter and

intra state strife, exemplified by civil wars, rooted in historical,ethnic,

religious, and social tensions, which confront the lives of most

Africans. Such harsh realities thwart and disrupt well meaning notions

of embracing the ‘voices of the poor’and the fruition of

programmes.Hence, PRSP should be accompanied, and integrated,with

measures to infuse peaceful diplomacy, peace making and peace

keeping.

At the summit the G 7 leaders recognized that it was essential to speed

up the delivery of debt relief.7Thus, only 10 per cent of the total

promised debt relief of $100 billion, originally pledged by the G7 leaders

at Cologne in 1999, has been granted with only 9 countries in line to

receive such relief. However, it was the hope that by the close of 2000

another 12 countries would reach the Decision Point. But the G 7 leaders

firmly reiterated the stringent macro economic conditions to become

eligible for debt relief. Emphasis was placed on the need for indebted

countries to pursue Poverty Reduction Strategies, linking debt relief to

economic reforms and poverty reduction, in co-operation with the World

Bank and the IMF , underpinned by participation of civil society.

Indebted countries were also urged to reduce conflict which plagued

many. thwarting the pursuit of poverty reduction. Of course, some

developing nations may attach equal or more importance to national

sovereignty exemplified by security and military measures to protect

itself:for instance the nature of recent pronouncements of leaders of

Ethiopia in its war against Eriteria illustrate such a stance.

The need to reinforce poverty reduction through aid based on grants to

indebted countries was heavily reinforced by the G 7 leaders. The

summit also posed the urgency of controlling the spread of infectious

diseases including HIV/AIDS, Malaria, and TB. Adoption of

Information Technology in developing countries was highlighted by the

leaders to be critical in accelerating the integration of developing

countries into the world economy. However, the relationship between

debt relief, control of infectious diseases, and IT and its impact on

globalization was not coherent. These concerns were reinforced at the

Annual IMF-World Bank conference in Prague in September 2000 -

faster debt relief to a wider group of nations with concrete poverty

reduction policies against a background of street demonstrations which

criticised the ideological values espoused by these institutions.

MULTILATERAL AND BI-LATERAL DEBTS

In terms of multilateral debts, the share of the World Bank in the total

increased from 47 % in 1985 to 55% in 1996; over the same period the

share of its ‘soft lending’ agency, the IDA, increased from 26% to 46%

while that of its ‘hard lending’ agency fell from 20% to 9%; the share

of the three main regional banks [African, Asian and Latin American]

nearly doubled to 21%.Towards the close of 1995 among the key sources

of concessional multilateral lending the IDA emerged as the major one

with 58% of such debts , the three main regional banks accounting for

22%, and the IMF for 7% , while the remainder was shared by European

sources. The conditions of the World Bank loans -maturity and grace

periods- are dependent on the economic situation of recipient

countries:World Bank nonconcessional loans are for 10-30 years and

concessional loans over 40-50 years while IMF concessional loans are

for over 5 and a half years to 10 years, and non-concessional EU loans

are for approximately 5 years.

Bilateral debts, owed to governments, comprise export credit, grants and

tied and untied aid, the first often comprising 40-50 per cent to

stimulate developed country exports. Forgiveness of bi-lateral debts is an

important ingredient of the Initiative although outright cancelling of all

debts has been ruled out by the creditors- this is based on the need for

conditionalities which alone can ensure that economic reforms will be

pursued and that the nations under the HIPC can have access to loans in

the future. However, forgiveness of up to 90% and more where needed

for eligible debt by the Paris Club, and for countries not qualifying under

the Initiative, a unified 67% NPV reduction under the Naples terms, and

for non concessional rescheduling, have been put foreward. Hence, the

participation of governments under the Initiative can reinforce the

efforts of the multilaterals.

The experience of the UK and the USA indicates the nature of the

response of major governments in tackling bi-lateral debt relief.

The UK government took the decision to cancel bilateral debts for the

countries under the HIPC amounting to £ 5 billion including the debts

owed to the government's Export Credit Guarantee Department [ECGD].

This has been based on wanting to set an example which can be

emulated by other donors. It is closely linked to the scheme as it is firmly

asserted that the conditions of debt relief under the latter are sufficient to

guarantee that resources freed will be spent on social programmes and

to curb poverty.The critical link between debt relief and poverty was

stressed-a theme constantly emphasised by the Initiative. An opportunity

was taken to highlight the lead being taken by UK to lead international

efforts to reduce the debt burden of the poorest nations and to ensure

that ‘money saved will be spent on health and education services for

some of the poorest people in the world.’ Sharing the public

announcement about the UK government's plans with various sections of

civil society illustrates the enthusiasm with which efforts are being

made to embrace participatory principles. Plans to grant immediate debt

relief to three African countries are to be followed by relief to another

ten by April 2000, and about 25 nations by the end of 2000.

The steps taken by the UK government created the right mood.It

should, however, be recognized that about 40% of the bi-lateral debts

were owed to the ECGD-- loans through the latter were aimed to

subsidize the exporters of British goods as well as to support purchase

by buyers in developing countries and hence the mutual interest of

creditor and debtor was taken into account.

The US government has been making similar moves to grant debt relief

to countries under the scheme and other nations in a similar condition.

This should be seen against a backdrop of African bilateral debts to the

US: out of Total Debts of US $ 240, 632 Owed to Foreign Creditors

[1997] about US $ 8568 , or about 3.56 % of the total, was owed to the

US [1997] [Table 5]. Of course, this varied among the African countries.

A number of bills to usher in debt relief have tried to evolve a typology

of potential recipients countries: on the basis of their need for debt relief,

their economic, political and democratic record, and a range of

conditionalities, including the need to minimize expenditure on the

military, the exclusion of terrorist nations, and those which violate

human rights, while favouring measures which genuinely pursued

poverty reduction [health, education and social welfare] coupled with the

promotion of civilian control of the military, promotion of law and

equitable and democracy. This has been embodied in diverse bills which

mirror the attempt to establish a more comprehensive coverage of

sustainable development, conflict and human rights issues:the Jackson

Bill, the Waters Bill, the Campbell Bill, the Mack Bill, the Leach-LaFake

Bill, the Mckinney Bill, the Saxton-Kucinich Bill, and the Feingold Bill.

The conditionalities mirror a wider vision of ‘conditionality’ and may

offer insights for those shaping future debt relief programmes.

CASE STUDIES OF THE HIPC INITIATIVE

Case studies reveal the ways in which the major principle of interlinking

debt relief to poverty reduction by the Initiative are applied in the

selection, assessment, and monitoring of specific countries and provide

useful insights into the nature of the concerns which need to be

addressed in devising future programmes. Such countries would also be

eligible for bi-lateral debt relief. The formalities are subject to change

and will vary among the countries but some useful insights emerge from

the experiences discussed.[7]

The studies unfold the experience of countries granted debt relief or

scheduled to receive it in the near future and pose sensitive questions on

the terms and conditions on which debt relief is released, including

economic performance, the nature of the conditionalities and their

fulfilment, the use of debt relief for specific poverty programmes, and

the monitoring of debt relief to ensure that the goals of the latter are

met:embodied in transparency, accountability, and democratic

participation. Consistency in meeting these laudable aims is intrinsically

related to the recipient country's specific past and future

domestic-external political economy. Changes in the latter during

implementation of the Initiative may be beyond the control of individual

countries. This could have adverse implications for the expected

outcomes of the scheme.

The net impact on the countries is embodied in the % reduction in debt

resulting from debt relief granted or scheduled to be shortly granted.

This is being constantly revised. For instance, up to recently sharp

variations emerge: 57% for Mozambique, 25% for Guyana, 20% for

Uganda, 14% for Burkina Faso, and 10% for Mali.

Uganda’s experience may offer insights into modes of implementing

debt relief; it was the first country to be granted such relief against a

backdrop of relatively strong growth [ 6 % per annum over the previous

6 years] with debt relief expected to make marked reductions in external

debts [20 %] supported by various forms of assistance by the World

Bank, under the Initiative, the management of budget savings from debt

relief through defined poverty programmes [ Poverty Action Plans], and

measures to have a firm grip on accountability supported by independent

audits, civil society, and Parliamentary scrutiny.

First, Uganda's good economic performance enabled it to regain its

former export stronghold and revive other exports [ coffee and tea],

develop infrastructure [ national road grid], and social infrastructure

exemplified by the launch of programmes of universal primary education

with doubling of enrolments.

Second, debt relief aimed to deepen the gains of previous economic

management; $ 650 million in debt relief was to be given from external

creditors under the Initiative which discounted to today's values was US

$ 350 million. This aimed to reduce Uganda's external debts by 20 %.

Thirdly, the forms of assistance under the Initiative included provision of

assistance in three ways: [a] an IDA grant in support of primary

education [equivalent to US $ 24 million in debt savings in today's

values]; [b] purchase and cancellation of of an HIPC Trust Fund of

outstanding IDA credits [US $ 205 million equivalent to US $ 84 million

in today's values]; [c] saving of IDA credits over 5 years through

earmarking of HIPC Trust Fund resources for this purpose [US $ 10

million equivalent to US $ 52 million in todays' values].

Fourthly, the management of the budget shows specific targeting of

budget savings from debt towards poverty alleviation embodied in the

national Poverty Action Plans. This embraced consultation and broad

national consensus over 2 years through a range of sectors: feeder roads,

agriculture, water supply, primary health and primary education. Indeed,

transfers to the latter was expected to finance universal primary school

enrolment to 5.3 million children since 1997.

Finally, the critical issue of transparency and accountability unfolds

measures to ensure that debt savings were used for specific poverty

programmes. This included reporting all financial flows on a quarterly

basis, an independent audit every year, and the incorporation of civil

society participation through NGO's, such as the Uganda Debt Network,

reinforced by Parliamentary scrutiny of new lending and ensuring that it

conformed with National Development priorities.

Uganda's case illustrates the attempt to establish a programme which

integrated identification, assessment, management and accountability to

maximize the impact of debt relief. Actual performance over time can

confirm the extent to which this vision will be realized.

In contrast, Mozambique, unfolds the case of a post conflict ridden

HIPC whose economic and social infrastructure has been severely

damaged by war with an urgent need for re-creating the basic economic

foundations to meet essential needs. Hence, the capacity of such a

country to fulfill the terms and conditions of the scheme pose a major

challenge. It is one of the world's poorest countries with 70% in

poverty.Debt relief aimed to reinforce the social benefits of ‘good

government management’ through the pursuit of economic stabilization

and structural reforms. Mozambique's performance aroused confidence

among the management. This was based on its rate of growth [8 % over

the previous 5 years], ‘impressive’ results of privatization, coupled with

an expansion by the government of health, education, and water services,

and roads; thus, primary school enrolment increased from 62% to 71%

over 1996-98, the coverage of key vaccinations rose from 56% to 77%

over the same period, and the number of primary classrooms, including

in the rural areas, increased by more than 60% over 1992-98. Alas,

recent flooding devasted the economy cancelling out previous gains.

Against this backdrop debt relief operations were the largest organized

by the international community under the scheme. Thus, the IDA and the

IMF agreed that Mozambique met requirements for receiving US $ 3.7

billion in debt relief from its external creditors under the HIPC effort

equivalent to US $ 1.7 billion in today's values. The relief granted by

these bodies set out to ensure that Mozambique reached the agreed debt

sustainability target and relief granted in the frame the country's record

of economic and social reforms. The IDA was to provide debt service

relief through purchase and cancellation and the IMF under the Initiative

would make a grant deposit to cover debt service falling to it. The goal

was to reduce Mozambiques's external public debt by about 68% from

about $ 2.7 billion to US $ 1 billion in today's values on top of debt relief

under traditional mechanisms. External Debt Service obligations were

expected to fall to an annual average of US $ 73 million in 1999-2005

compared to an average of US $ 169 million [due in the absence of the

Initiative and US $ 104 million actually paid in 1998]; by 2001 debt

service due was expected to fall to 8% of exports and 10% of

government revenues compared with 19% of exports and 23 % of

revenues actually paid in 1998. The government of Mozambique planned

to increase annual current spending on health and education from about

US $ 120 million in 1998 to US $ 175 million by 2001.

In spite of the considerable focus on Mozambique's debt relief problem

criticisms have been voiced on the extent to which debt relief would be

adequate to fulfil the delivery of essential needs such as a basic health

package. For instance, the Vice Minister of Planning and Finance, had in

the past [1996] that the Initiative would provide $ 15-$20 million a year

while the cost of delivering such a health package was $ 173 million a

year.

The Initiative is a step in the right direction but it needs to take into

account unexpected major disruptions which can throw a country into

chaos. Thus, the recent flooding in the country left half a million

homeless, the threat of epidemics caused by water born diseases, and the

destruction of thousands of acres of farmland, has reinforced the urgency

of debt relief schemes. The UK government decided to stop the

collection of its debt repayments emanating from growing concern

among parliamentarians and the general public about the morality of

collecting debt while the country was devastated by floods. It should be

stated that the UK is owed just $ 150 million by Mozambique out of a

total debt of over $ 5 billion and hence without further action by other

creditors including the World Bank and the IMF the debt burden will

seriously hamper the country’s reconstruction and long term

development. This illustrates the vulnerable nature of the economy and

the relapse of the country into the situation existing before the disaster.

Ivory Coast exemplifies the case of a country which had been exposed to

structural adjustment progranmes and was therefore complying with the

stipulated policy framework of the multilateral donors. Thus, it had

adopted IMF ESAF programmes to achieve a range of economic and

social obligations: [a] fiscal consolidation [b] deepening structural

adjustment reforms- promoting private sector development, FDI and

portfolio and [c] ambitious social development -poverty reduction and

well targeted and efficient public spending on education and health. Debt

relief and the allocation criteria included NPV of Debt: exports below

200% so that NPV Debt: fiscal revenues= 280% at Completion Point and

there was consistency with fiscal/openness criteria. The World Bank and

the IMF agreed to support debt reduction packages: total assistance by

its external creditors would aim to reduce the country's external debts by

US $ 345 million in NPV terms estimated to translate into debt service

relief close to US $ 800 million. The mechanisms to deliver this was

such that first, HIPC debt relief was to support wide ranging economic

and structural reforms- to keep it on the path of sustained growth,

financial stability, reducing poverty and improving living standards;

secondly, the World Bank was to provide its contribution in the form of

IDA Grants as opposed to nominal credits [USA $ 314 million tied to

specific adjustment operations through the Completion Point as part of

its lending programme to Ivory Coast over the next 3 years; thirdly, the

IMF would provide assistance at the Completion Point through a grant to

be used to pay debt service falling due to IMF- debt relief. The

Initiative aimed to free budgetary resources to enable increased

expenditure on primary health and education, rural development, and

poverty activities.

Changing domestic socio-political conditions in Ivory Coast may

impinge on the scheme and the thinking of its multilateral supporters.

The peaceful military coup in the country in December 1999 deposed

the former ‘democratically elected’ president on the grounds that in fact

the government was corrupt, and undemocratic, exemplified by the arrest

and detention of opposition leaders who challenged the government's

policies. It was, moreover, alleged that aid money had been diverted

towards non-developmental purposes.This suggests a less than

enthusiastic response to the latter including adjustment based schemes.

The coup shocked Africa watchers as Ivory Coast was considered to be

one of the most ‘stable’ political regimes in the region but the popularity

of the coup suggests that there was much truth in the problems identified

by the coup leaders who aimed to hold a genuinely democratic election

in October 2000 in which the deposed President would be allowed to

participate. Recent events in Ivory Coast, however, stemming from

attempts to assassinate General Robert Guei, and the disenchantment

with the economy since the coup, coupled with measures to disqualify

political parties from contesting the planned elections, the attempt by

Guei to declare himself the winner, and the turmoil during and after the

election, pose critical questions on the future of the nation.This

experience suggests that HIPC strategies need to make a more critical

review of the socio-political conditions in a country including its claims

of pursuing democratic values, and its relationship to past and future

economic programmes. Thus, debt relief is embedded in economic and

socio-political struggles.

HIPC INITIATIVE, POVERTY AND HEALTH

Debt relief can be used as a major instrument for poverty reduction by

confronting urgent needs. This is exemplified by the critical health

sector [8] to minimize old and new diseases.

The linkage between globalization, sustainable development, and health

policy can be symbolized by universal health concerns exemplified by

global health pacts [Health For All] and the ways in which this can be

shaped and steered by state and non-state forces. There are sharp

differences in the capacity of different regions, countries,

socio-economic groups to integrate into the changing world economy

and usher in human needs [health, nutrition and education] in the context

of the political economy of domestic-external policies. Health policy

impinges on growth, efficiency, and equity. Thus, investment in physical

capital leads to growth and increases in income. This can be taxed to

increase health expenditure and/or used by employees for purchasing

health products and services in the market. Debates persist on the

relationship between economic growth, health and poverty- but poverty

reduction remains a major instrument of health improvement. The

uncertainty of investment funds, the time span for growth to materialize

and its ‘trickling down’ to the poor, combined with a skewed

distribution of income, make it essential for the state to play a major role

in boosting Health Status. This is symbolized by Health Indicators:

longetivity, infant mortality,maternal mortality, levels of nutrition. The

health status of women and infants remains unacceptable and poverty,

malnutrition, and ill health are increasing for such groups. Improving

health status can increase human capital and hence growth. Good health

care can raise productivity with a more healthy work force and build

strong children and hence their absorptive capacity.

The Health Status indicators of the Initiative mirror that,though most

have improved their performance since independence,the levels are still

low compared with developed countries.There is also risk of this being

lowered under conditions of economic crisis, poverty and debt. Hence,

debt relief could be a major force in maintaining and lifting the levels of

Health Status. Indeed, debt relief by making resources immediately

available could be directly used for resolving both neglected, and urgent,

health problems: in indebted African nations the former is exemplified

by malaria and the latter by the spread of HIV/AIDS. This demands a

fuller grasp of health policy to ensure that Health Status indicators can

be improved in an efficient and equitable manner in the shortest time

span.

The main ingredients of health policy rest on the prevention and

eradication of different forms of old and new diseases and the

formulation, including financing, and targeting, and the practice of

delivery systems, encompassing the public, the private, including

domestic and foreign investors, including pharmaceutical companies,

and non-governmental organizations, combined with 'traditional' health

systems [eg. holistic Indian Auyvedic herbal treatment]. Thus,:

First, diseases include old and new contagious, non-contagious, tropical,

and vaccinable ones: major old diseases include malaria, TB, and polio,

the latter being vaccinable, and the main new threat is from HIV/AIDS,

for which a vaccine has yet to be developed but interventions to prevent

infections need to be implemented. ICT, Information and

Communication Technology, can also advance the diagnosis and

resolution of diseases.Malnutrition weakens the immune system and the

capacity to resist and combat diseases. Measures to improve the

nutritional status such as through food security can alleviate such

problems: the access to vitamin A, for instance, which is vital and

missing in the diets of poor people and especially children, can be made

available through a new variety of rice.

Second, it is essential to evolve relevant policies which can be targeted

towards poor and vulnerable socio-economic groups who possess limited

assets and political clout. These can be defined as the landless, the small

tenants, the small peasants, and urban ‘underclass’ children, the old, the

infirm, and the sick, especially in heavily indebted , conflict ridden, and

unstable political systems.

Third, delivery systems may need to be combined: public, private and

non governmental. The state in most countries has limited resources and

finance and has to pursue stringent budgetary policies, including pruning

essential social expenditures, to conform with SAP's and increasingly

therefore has to resort to the private sector, and NGO's and civil society,

including the church and other religious groups. The private sector is

being cautiously incorporated under such pressures, and while they may

play a supporting role, their primary motive is recouping their returns

and profits, and not philanthropy. Pharmaceutical companies, for

instance, are being harnessed by the state to fulfil immediate and longer

term aims of research and provision of essential drugs, and the rise in

mergers [eg.Beechams and Glaxo] may offer new opportunities to

reinforce such a strategy. However, given the nature of the wider

economic and social demands, the state has to be in overall control

including ensuring that major health problems are directly tackled. Thus,

the state should retain overall policy direction,and formulate the rules

and procedures, to ensure that health delivery systems conform to the

overall goals of lifting Health Status.

In this context, the identification of diseases, their economic and social

effects, health policy, and the role of debt relief, is illustrated by one

major new contagious disease- HIV/AIDS.

About 33 million people in the world are infected with HIV/AIDS and

about 24 million are in Africa and the numbers are sharply rising..

Indeed, 18.8 million in the world , with the majority in Africa, have died

of aids.In this context, the ‘Durban Declaration’ emanating from the

13th International Conference on Aids in Durban, South Africa,

captures the serious economic and socio-economic effects of the disease

and the urgency of finding a solution. Analysts believe that unless the

problem is forcefully tackled it is likely that over the next ten to twenty

years there will be unimaginable suffering in Africa with an estimated

fall by a third in GDP, a reduction in longetivity by 20 years,and undoing

of previous gains in health, education and development.

Many HIPC in Africa confront HIV/AIDS-exemplified by Uganda and

sub-regions such as Southern Africa; it is reported, for instance,

by the HIV/AIDS Research Division of the University of Natal that in

large provincial hospitals of South Africa up to 50% of the beds are

occupied by those with Aids. In this context, many African nations are

spending more than 40% of their export earnings on debt repayment;

Zimbabwe is paying 25% of its export earnings to service debt while an

estimated 26% of its population is infected with HIV/AIDS; Uganda

with a 1.7 million Aids orphans is spending about the same amount on

debt while Tanzania is spending nine times on debt repayments as on

health care and four times that on education.

The previously rising trends in such indicators have been overtaken by

pessimistic expectations about the affects of HIV/AIDS. The human

costs of Aids are frightening. Annual AIDS related fatalities hit a

record 2.6 million last year. The most devasting impact of AIDS has

been in Africa: 85% of all AIDS deaths have taken place in at least five

African countries, over 20 % of adults are HIV positive, and the highest

rates of new infections are often among young women who will soon

become mothers. Moreover, thousands who are HIV positive actually die

of other major contagious diseases, exemplified by TB, which in turn can

spread to people who are not HIV positive. Other contagious diseases

including TB, malaria, diarrhea and respiratory diseases are posing major

threats killing almost 6 million people each year. The social and

economic impact of the public health crisis is leading to a sharp decline

in life expectancy in many Africa countries reversing previous gains.

Countries have lost 10-20 years of life expectancy due to HIV/AIDS

reversing years of investment in human capital. In southern Africa, for

instance, it is expected to drop from a high 59 in the early 1990’s to 45

within the next 5-10 years- a level not seen since the 1950’s. Indeed, life

expectancy is falling mainly because of rising mortality among prime age

adults. A larger share of working age adults in a population leads to

faster economic growth and hence the loss of the most productive

members of society has disproportionate economic consequences.

Health care budgets are overwhelmed by the heavy burden of caring for

those infected with negative effects on those who are already

impoverished; they are being forced to sell their assets and defer

expenses for essentials like education to pay for costly medical care

worsening their poverty while the death of both parents, which emerges

when AIDS strikes the family, has led to a sharp increase in the number

of orphans-over 11 million in the world with all but one half million in

Africa. Young women are specially vulnerable.They may find it difficult

to cope and once infected face abandonment. In this context the Initiative

provides a powerful and effective mechanism for increasing the

resources available to the poorest countries and using them for urgent

needs such as combating HIV/AIDS.

The PRSP, prepared by countries under the Initiative, should incorporate

analysis of the adequacy of budget resources and policy reforms

allocated to basic health care. Aggregate social and health care statistics

for the latter do not reveal regional variations and inter country

differences in HIV/AIDS. For instance, it is estimated that in southern

Africa the majority of Aids are in the 20-49 age group: the lowest rates

are in the 5-14 age range; the 0-4 group shows significantly higher

numbers of infection, an indication that infants are being infected either

in the womb before birth or while being taken care of by infected

mothers while women seem to be exposed to the disease earlier than

men. HIV/AIDS can deprive the labour market of valuable inputs while

orphaned children of parents whose death was caused by it suffer

economic and social hardship and poverty.The problem can be

compounded by those with the disease giving birth to children who too

carry the disease. However, the priority to this disease may vary between

nations in relation to other immediate and long term health and poverty

related concerns.

The plight of those confronting HIV/AIDS is captured at the household

level: illustrated by findings in Ivory Coast, Uganda, and Tanzania.

UNAIDS studies reveal that in the urban areas of Ivory Coast families

with a member sick from Aids cut in half spending on their children’s

education and reduced food consumption by about 40% as they had to

cover health expenditures which soared to four times the usual level.

Studies in Abidjan, the largest city of the Ivory Coast, Uganda’s Rakai

district, and Tanzania’s Ziwa Magharibi region, show that families cope

with these losses largely with cash and kind transfers from other

families-reflecting a support infrastructure and the interdependence of

African society. Relatives take in many of the orphan children and so the

cost of their care is largely unregistered on government balance sheets

but urbanization and migration of labour are undercutting extended

family structures that have shouldered childcare. Orphans suffer several

disadvantages when they are cared by relatives including not eating as

well as other children and are not given the same opportunities to go to

school.

In summary to maximize the use of resources released by debt relief for

improving Health Status it is imperative that health policy should

encapsulate the following:

i. failure to provide services which have the greatest impact on the major

concerns of illness and death.eg malaria, respiratory diseases, diarrhea,

childhood diseases [eg.polio], parasitic diseases; new diseases such as

HIV/AIDS have been the main cause of adult deaths in Africa in 1995

and it should be recognized that about 68% of those infected with this

disease, about 21 million, are in Africa.These should be supported by

measures to reduce malnutrition

ii. health care is the least resourced and of the poorest quality at the

village level: private trade going to urban hospitals based curative care

motivated by profits concentrating on middle and upper middle classes

who can pay.

iii. inefficiency in the provision of health services: allocative and

technical [ie.failure to combine inputs to provide health intervention at a

low cost].

iv. poorly trained staff at the primary health care level.

v. need for combination of traditional health systems with the modern

sector.

LIMITS OF THE HIPC INITIATIVE

Criticisms of the scheme emerged at various stages of its evolution.

These impinged on a cumbersome process of assessing revenues,

appraisal, agreements, and limits of the Initiative unfold a key

observation- that it basically aimed to cancel nominal debts of $ 100,000

which could not be repaid by the debtor nations-not being serviced

[ie.paid]. Moreover, no new resources were to be made available for

poverty reduction.Hence, cancelling what poor countries cannot repay

can be seen as an accounting transaction and was not a substitute. In

spite of all the debates and discussions backed by the desire to help 41

countries to exit from unsustainable debts and confront poverty, only a

handful of countries have so far been given debt relief. Against this

backdrop discussions on cancelling debts, leaving aside its long term

implications for procuring new credit, may remain a pipedream.

The roots of the debt crisis and its manifestations through the 1980's

suggest the need for collective action beyond simply restoring balance of

payments equilibrium. This requires ushering in fundamental domestic

and external reforms. Linking debt relief to poverty reduction is only an

initial stage which has to be widened and supported by complementary

policies. HIPC policies cannot be divorced from the unbalanced and

unequal power relationships between developed and developing nations

and the world economy and the ideological differences between

international institutions. This impinges on the weak bargaining power

of developing nations and their representation in these institutions,

exemplified by the UN, which campaign on their behalf but lack

financial and political clout. Hence, the prevalence of unbalanced

creditor-debtor relationships suggests that it may be difficult to establish

equitable agreements on debt relief. Compliance with norms,such as

SAP, needs to be re-worked, with participation by inter-governmental

and non governmental institutions and other civil society groups on

equal terms in negotiating transactions, devising interventions and

monitoring future HIPC programmes.

The stages of assessment unfold a number of formalities in establishing

inclusion or exclusion of countries in the process of granting debt relief:

reviews, appraisal, agreements, allocating debt relief, preliminary

reviews [ie.countries being considered], and ineligibility. This highlights

the intricate and painstaking steps to select the most relevant ones, and

the final delivery of relief. This is underpinned by the intensity of

problems stemming from the unsustainability of debts, the inability to

resolve them through conventional measures, and the pursuit of

adjustment based policies devised by multilateral agencies. The net

impact on the countries is embodied in the % reduction in debts asa

result of debt relief. This shows sharp variations..

The case studies of countries granted debt relief or scheduled to receive

it in the near future pose sensitive questions on the terms and conditions

on which relief is given, including economic performance, the nature of

the conditionalities and their fulfilment, the use of relief for specific

poverty programmes, and monitoring to ensure that the goals of the

latter are met:embodied in transparency, accountability, and democratic

participation. Consistency in meeting such laudable goals is intrinsically

linked to the recipient country's specific past and future

domestic-external political economy. Changes in the latter during

implementation of the Initiative may be beyond the control of individual

countries. This could have adverse impact on the expected outcome of

the scheme.

The goals of collaboration between donors, borrowing governments, and

civil society, moulded by ‘participatory’ ethos, offer hope of a more

democratic vehicle for consultation, dialogue, and feedback into devising

and practicing debt relief packages embracing local capacity and

desires. This, however, cannot be divorced from the context of the

political economy of a country prior to, during, and after implementing

the Initiative, and its effect on different groups of the poor and

vulnerable not only to articulate and voice their demands during

consultations but also influence and shape policies at the local and the

national level.

Recent criticisms of the Initiative have highlighted its slow delivery.

For instance, the three debtor nations which won billions of dollars in

debt relief did not have access to the latter for months.Thus, about $ 2.1

billion in total for Bolivia, Uganda, and Mauritania was meant to provide

extra cash to pay for health, education and other poverty reducing plans.

But this was held back until creditors sorted out how to pay their shares.

Such delays have aroused much concern about the effectiveness of the

enhanced version of the Initiative. Doubts are emerging about the ability

of the G7 countries to meet the debt relief promises announced at the

Cologne summit. This persists after the G7 summit in Japan in July

2000. Steps have been taken to reduce delays:for instance it is reported

that the US had pushed its partners to delay Uganda’s completion

point-the date when promises turn to cash- for a few months to ensure

that the money saved would be prudently used. The World Bank is also

cautious of taking action on debt forgiveness which might jeopardise its

credit rating and increase the costs of borrowing from other member

states.

The leaders of the industrial nations acknowledge that the promises

made in Cologne to implement debt relief for the majority of countries

had fallen short of expectations: exemplified by the pronouncements at

the July 2000 G 8 summit in Japan. Leading NGO’s, moreover, continue

to question the basis of debt relief and the pressures on government

budgets to make debt repayments even after relief with adverse effects

for essential health and educational needs.[9] The debates continue to be

echoed while dissatisfaction over debt relief and globalization surface

at major international venues: the Annual IMF-World Bank meeting in

Prague in September 2000 against a background of demonstrations and

protests by activists in the city. World statesmen, too, such as Nelson

Mandela, the former President of South Africa, have emphasised the

urgency of ensuring that globalization does not marginalize the poor and

the vulnerable and that the fight against injustice and poverty should be

the major challenge in the new millennium.[10]

LESSONS OF THE HIPC INITIATIVE

Debt relief has captured the imagination of international and domestic

policymakers and those who earnestly wish to urgently tackle poverty.

This has been the culmination of moves to resolve the debt crisis which

has plagued many developing countries stemming from over-optimistic

expectations of creditors and borrowers in an era of easy access to

money unrelated to the long term consequences of such behaviour. The

epoch exposed the inability of developing countries to cope with the

external burden of debts in the frame of vulnerable open economies

shaped by historical and political forces. This stressed the urgency of

major surgery to revamp basic economic relationships far beyond simple

measures to restore balance of payments equilibrium : establishing a

strong domestic/internal and external sector to firmly place such

countries on a path of sustained economic growth.

Structural adjustment policies aimed to restore balance of payments

equilibrium, stimulate growth, and eventually accommodate safety

measures to minimize adverse welfare effects of such thrusts, while

retaining firm belief in neo-liberal market based solutions to

development. The mixed results, controversies, and anxieties aroused by

such approaches have not diminished but keep re-surfacing against a

background of initial confidence, and subsequent doubts, about their

impact on long term growth and development. This should be seen in the

context of pressures to rapidly integrate developing countries, including

indebted, least developed, and marginalized ones, into a globalizing

world.

Against this backdrop debt relief could be a major force in enabling the

transition of many developing countries from an indebted to a debt free

economy, reduction of basic poverty, and sustainable development- an

exit not from mere unsustainable debts but from unsustainable lives.

This vision is shared by the thinkers and the practitioners of debt relief

schemes but debtors still confront obstacles which could block the

laudable goals.

The origin, formulation, finance, conditionalities, and eventual delivery

of debt relief, have been modified to make delivery ‘faster, broader and

deeper’ in response to criticisms from inter-governmental, non

governmental, and other members of civil society. However, major

shortfalls have surfaced, including the basic motivations driving the

terms and conditions of acceptance and performance of potential

recipients based on severe conditionalities through strong stabilization

and adjustment policies, and the cumbersome stages in choosing the

most eligible coupled with the long term viability of such schemes,

without supporting measures, in lifting countries out of poverty. This can

ensure that they do not slip back into debts. In terms of concrete action

it is essential to analyse more fully the implications of debt repayments

for government budgets and essential public expenditure, such as health

and basic education, before and after debt relief, and whether

meaningful reduction in poverty can emerge.

Debt relief has the potential of establishing the basis for sustainable

development. The lessons from the controversies over adjustment

policies should be incorporated in future modifications to the Initiative

while the most urgent health and education problems need to be

overcome:old diseases such as malaria and new and major ones such as

HIV/AIDS.Account,too, should be taken of unexpected disasters, such

as floods and famines, which may retard and setback previous gains

reinforcing the need for swift delivery and the use of debt relief.

Policy makers should ensure co-ordination between domestic and

external policies to reinforce and build on the gains from debt relief:

acceleration of trade reforms to facilitate developing country exports,

relieving supply constraints, increasing aid flows, creation of conditions

to encourage inflows of FDI in relevant sectors, and boosting domestic

savings coupled with sectoral and human development

programmes.Unquestionably, such efforts need to be accompanied by

diplomatic moves to curb inter and intra state conflicts to create peace

and stability.[11]

NOTES

1.The emergence of globalization has aroused critical and conflicting

debates on the future of the nation state ranging from its imminent

collapse to its continued importance, albeit in a revamped form, in

guiding policies. This cannot be divorced from minimizing post coldwar

rivalries and the emergence of new inter and intra state anxieties and

uncertainties.

2. Debt relief strategies, apart from the basis, size, and allocation of

relief for specific poverty reduction programmes, need to be placed in

the context of the relationship between the external and the domestic

[internal] economy. This has critical implications for shaping integrated

policies on both fronts and ensuring that countries do not fall back into

debt and are able to retain and boost rates of growth.

Most international gatherings have emphasised the urgency of debt

relief and the need to incorporate it within long term policies.The United

Nations Millennium Summit in September 2000, the largest gathering of

world leaders, encompassed the future role of the United Nations in a

globalizing world with the goal of implementing three

‘freedoms’-freedom from want, freedom from fear, and freedom from

unsustainable environments; the first emphasises the provision of basic

needs and the urgency of debt relief. The July 2000 G7 meeting in Japan

of world leaders from the major industrial countries underlined the

importance of debt relief in the frame of globalization. This theme was

reified at the September 2000 Annual IMF-World Bank meeting in

Prague against a backdrop of rising oil import prices which could

exacerbate the balance of payments of indebted oil importing

developing nations. This heightens the urgency of implementing debt

relief. In a report in early October 2000, UNCTAD, United Nations

Conference on Trade and Development, emphasised that not only was

debt relief too late and too slow but that the magnitude was too little. It

urged rich countries to double their foreign aid, which had dropped by a

third over the past decade, and open up their markets for exports from

poor countries.

The problems of the indebted countries could be compounded by the

recent rise in oil import prices.

Tables 1 to 10 capture the nature of the relationship between the

external and the domestic economy in Africa focussed on the indebted

countries.This includes, first, indicators on the overall economic

condition, based on national income, the external sector, including the

nature of net resource flows, the structure of external debts, and

Foreign Direct Investment, and the domestic or the internal economy,

including aspects of basic needs, exemplified by health and education;

secondly, the execution of the HIPC Initiative, including the nature of

assessment, modifications, and relief granted to specific countries, are

shown..

3. Table 1 shows basic indicators on Sub Saharan Africa including the

HIPC. Inadequate rates of growth of exports result in inability to keep

pace with the mounting external debts. Most of the countries reveal low

or even negative rates of growth over 1986-96, with some exceptions

such as Mauritius, with ODA per capita per being critical.Indeed, out of

% of total average inflows ODA accounted for 90.6 % [1990-96] while

FDI accounted for only 5.8% ,although more recently the rate of inflow

of the former has been slowing down while that of the latter has been

rapidly increasing.

Table 2 shows the aggregate net resource flows into the HIPC over

1992-96 and in 1997 emphasising the dependence of countries on

official flows and a drop in the overall level, with some exceptions [eg

Uganda]; Table 3 uncovers the second position occupied by FDI,

although this has been growing, and the limited importance of private

flows [portfolio and bonds] with some exceptions [eg.Ivory Coast].

Table 3 reveals that over 1992-96, compared with 1987-91, FDI has

increased by 60% although this is lower than the inflow into all

developing countries marked by an increase of 189% . It also emerges

that over this period there was a sharp rise of FDI inflows into the

HIPC illustrated by an increase in Uganda from a negative to a sharp

positive growth by 19,796% , a 263% increase in Mozambique, and a

888% increase in Equatorial Guinea. This should take into account the

very low or even negative inflows in the base year. Such inflows show

the interaction between promises or actual debt relief and the inflows of

FDI into indebted countries and its significance for long term growth

for the economies. It should be stated that intra African trade have been

limited. This increased from 8.07 % over 1990-96 to 10.44 in 1997

with variations between different sub regions of Africa.

4.Tables 4 to 5 reveal critical features of African debts over

1990-1997: rising levels of total external debts, including short and long

term, the types of creditors to whom it is owed [ official, financial, and

private], and the burden of debts symbolized by various criteria of the

relationship between debt and export income and income. Table 5

reveals the specific debt problems confronting some of the major HIPC,

including Ivory Coast, Mozambique, Burkina Faso and Ethiopia, and

that the bulk of the debts are owed to foreign creditors. External debts

clearly have adverse effects on the economy in terms of absorbing a

major share of the national income to service debts and diverting

resources from basic health and education.eg. in the Ivory Coast debt

servicing as a % of GNP was 14.40 while that on education as a % of

GNP was a mere 1.50.

5.Tables 6 to 7 reveal the nature of the basic needs of health and

education which prevail in the HIPC. On health it is clear that life

expectancy is still relatively low, with significant levels of malnutrition;

mortality rates of those <5, and infant mortality rates have tended to

decline but the levels are still high. Education levels too show that

there is much scope of raising levels of literacy, including among those

in the 15-24 age group, and the need to increase levels of enrolment and

the years in school.. This should be seen against a background of

differences between countries, rising life expectancies, and dropping

mortality rates after 1960, when many African countries gained

independence, coupled with rising levels of literacy, and primary and

secondary school enrolment. But these indicators have tended to decline

after the 1980’s and in the early 1990’s in the context of rising external

indebtedness among African nations.

6.Tables 8 to 10 reveal the types of assessment under the HIPC Scheme,

the modifications which were introduced and the relief given to specific

countries. In essence, the combersome nature of the processing of debt

relief emerges and the significance of such support in terms of the

impact on reduction of debt ranging from 57% for Mozambique to only

6 % for Ivory Coast. The assessments are subject to continuous change

as more countries become eligible for debt relief.

7. See Tables 8-10 on the assessment of the HIPC Initiative and actual

and potential recipients.

8.See Table 6 on health indicators in the HIPC.

9.In a recent report, for instance, in September 2000, Oxfam, a leading

NGO, has argued that debt repayments continue to absorb a

disproportionate percentage of government revenues posing major

problems for meeting basic health and education needs. They call for

greater focus on ‘human needs’ rather than evaluating repayment

capacity on the basis of simple debt: export ratios.Oxfam suggests

that in 6 countries debt repayments absorbed over 40 % of government

revenues and that in all but 12 countries more was spent on debt

servicing than on health and primary education, and that it is advisable

not to spend more than 10 % of government revenues on debt servicing.

Analysts at Harvard have also argued that the debt burden falls heavily

on the budget and that the resource transfers from debt relief is not

adequate for basic health and education. Cancelling of old debts coupled

with a sharp increase in new loans is strongly recommended.See Centre

for International Development, Harvard University, 1999. China, a major

Asian developing country, has recently [ early October 2000]urged

at a major China-Africa summit in Beijing that developed nations cancel

the debts of African nations and as a gesture has cancelled debts of 1 $

billion owed by the latter to China. This may be an insignificant amount

out of the total debts of over $300 billion owed by Africa to developed

nations and multilateral bodies but China’s increasingly important role

in the global economy may inject fresh ideas into the debt relief debate.

10. This was stated by Nelson Mandela at the Labour Party Annual

Conference in Brighton in late October, 2000.

11.Debt relief,too, can be a major incentive for peace and

reconstruction- a point stressed by the British Chancellor of the

Exchequer.

TABLES

TABLE 1 B ASIC INDICATO RS

Population Land Area Gnp per Av annual Life School

[mid 1996] [thousand capita % growth Exp at birth enrolment

[millions] of sq km] dollars 1 986-96 Primary

1996 1995 1980

Sub

Saharan

Africa 599.9 23628 481 -1 5 2 79

Burkina

Faso 10.7 274 220 -0.1 49 1 8

Cote

d'Ivoire 14.3 318 620 -2 55 7 9

Ethiopia 58.1 1000 110 0.4 4 9 27

Mali 10.1 1220 240 0.1 50 26

Mauritania 2.3 1025 470 0.7 5 1 37

Mauritius 1.1 2 3690 4.9 71 9 4

Mozambique 16.6 784 90 3.2 47 99

Nigeria 114.4 911 240 1.7 53 1 05

South Africa 42.4 1221 3140 - 0.9 64 85

Tanzania 30.5 884 130 1.2 51 93

Uganda 19.7 200 290 3 42 5 0

TABLE 1 [continued]

School Total Net ODA Per Capita

enrolment

Primary Secondary

1992-93 1980 1992-93 1995

Sub Saharan 73 13 25 31

Africa

Burkina 39 3 9 47

Faso

Cote d’Ivorie 69 19 25 87

Ethiopia 27 8 11 16 /

Mali 30 8 8 56

Mauritania 69 11 15 102

Mauritius 106 50 59 20

Mozambique 60 5 7 68

Nigeria 90 16 29 2

South Africa 115 0 77 9

Tanzania 70 3 5 30

Uganda 67 5 11 43

Source: Based on African Development Indicators, 1997.The World Bank.

_____________________________________________________________________________

TABLE 2: AGGREGATE NET RESOURC E FLOWS [LONG TERM]

[US$ million, unless otherwise indicated]

HIPC’s Aggregate net Foreign direct investment Portfolio equity

resource flows

[excl.IMF]

Annual Annual Annual

average average average

1992-96 1997 1992-96 1997 1992-96 1997

HIPC’s 16, 473 14, 660 2,694 4,068 408 -20

Angola 757 247 262 350 0 0

Benin 216 150 5 3 0 0

Bolivia 786 1,248 246 530 0 0

Burkino 320 246 0 0 0 0

Faso

Burundi 225 108 1 1 0 0

Cameroon 409 171 13 45 0 0

Central 135 81 - 2 6 0 0

African

Republic

Chad 212 183 15 15 0 0

Congo Demo. 162 103 1 1 0 0

Rep.

Congo Rep 188 211 5 9 0 0

Cote d’ Ivorie 685 -213 -15 50 8 1 8

Equatorial 131 33 110 20 0 0

Guinea

Ethiopia 780 530 6 5 0 0

TABLE 2 [continued]

HIPC’s Aggregate net Foreign direct investment Portfolio equity

resource flows

[excl.IMF]

Annual Annual Annual

average average average

1992-96 1997 1992-96 1997 1992-96 1997

Ghana 896 671 122 130 19 0 4 6

Guinea 326 263 10 1 0 0

Guinea Bissau 67 78 1 2 0 0

Guyana 145 298 96 90 0 0

Honduras 327 506 47 80 0 0

Kenya 317 73 11 20 9 12

Lao PDR 235 347 58 90 0 0

Liberia 112 93 14 15 0 0

Madagascar 275 792 12 14 0 0

Malawi 367 222 1 2 0 0

Mali 316 302 10 15 0 0

Mauritania 227 183 8 3 0 0

Mozambique 860 765 33 35 0 0

Myanmar 239 242 125 80 1 1 -2

Nicaragua 549 372 50 162 0 0

Niger 228 247 2 2 0 0

Rwanda 467 509 2 1 0 0

TABLE 2 [continued]

HIPC’s Aggregate net Foreign direct investment Portfolio equity

resource flows

[excl.IMF]

Annual Annual Annual

average average average

1992-96 1997 1992-96 1997 1992-96 1997

Sao 37 17 0 0 0 0

Tome

Principe

Senegal 476 406 33 30 0 0

Sierre Leone 134 107 - 2 4 0 0

Somalia 423 75 1 0 0 0

Sudan 296 140 0 0 0 0

Tanzania 806 763 70 158 0 0

Togo 121 84 0 0 0 0

Uganda 611 722 78 180 0 0

Vietnam 1,562 2,621 910 1, 800 1 83 -9 4

Yemen ,Rep 469 271 301 5 0 0 0

Zambia 579 395 56 70 0 0

TABLE 2 [continued]

Private Flows Bank & Trade Official Flows [including

Bonds Related Lending grants]

Annual average Annual average Annual average

1992-96 1997 1992-96 1997 1992-96 1997

HIPC’s 74 -33 132 -333 13,174 10,977

Angola 0 0 185 -374 310 27 1

Benin 0 0 0 0 211 147

Bolivia 0 -3 19 213 521 508

Burkino Faso 0 0 0 0 320 2 46

Burundi 0 0 -1 0 226 107

Cameroon 0 0 -14 -29 410 15 5

Central African 0 0 0 0 137 7 6

Republic

Chad 0 0 0 0 197 168

Congo Dem.Rep 0 0 -1 0 16 1 102

Congo Rep. 0 0 35 0 148 20 2

Cote d’Ivorie 0 0 - 4 -436 68 8 1 54

Equatorial Guinea 0 0 0 0 2 2 13

Ethiopia 0 0 -47 23 821 501

Ghana 50 0 29 27 506 468

Guinea 0 0 -3 -24 319 286

Guinea Bissau 0 0 0 0 67 7 6

TABLE 2 [continued]

Private Flows Bank & Trade Official Flows [including

Bonds Related Lending grants]

Annual average Annual average Annual average

1992-96 1997 1992-96 1997 1 992-96 1997

Guyana 0 0 -8 -5 57 213

Honduras 25 -30 23 33 232 4 23

Kenya 0 0 -121 -119 418 16 0

LAO PDR 0 0 0 0 178 257

Liberia 0 0 0 0 98 78

Madagascar 0 0 -6 -1 268 7 79

Malawi 0 0 -9 -1 375 221

Mali 0 0 -1 0 306 287

Mauritania 0 0 4 -2 215 181

Mozambique 0 0 2 2 824 72 8

Myanmar 0 0 19 102 83 62

Nicaragua -2 0 -18 -16 519 2 26

Niger 0 0 -23 -14 249 259

Rwanda 0 0 0 0 465 508

Sao Tome & 0 0 0 0 37 17

Principe

Senegal 0 0 -16 14 459 362

Sierra Leone 0 0 -6 0 142 1 03

TABLE 2 [continued]

Private Flows Bank & Trade Official Flows [including

Bonds Related Lending grants]

Annual average Annual average A nnual average

1992-96 1997 1992-96 1997 1 992-96 1997

Somalia 0 0 0 0 423 75

Sudan 0 0 0 0 296 140

Tanzania 0 0 -1 -15 736 620

Togo 0 0 0 -6 121 90

Uganda 0 0 -11 -1 545 544

Vietnam 0 0 129 287 339 62 7

Yemen Rep 0 0 2 0 166 221

Zambia 0 0 -36 9 560 316

Source: Global Development Finance, The World Bank, 1999. Note: a =Grants

exclude technical cooperation grants.

_____________________________________________________________________________

TABLE 3

RECENT FOREIGN DIRECT INVESTMENT FRONT RUNNERS

BY COUNTRIES:

SELECTED INDICATORS IN SOME HIPC COUNTRIES

[1987-91 & 1991-96]

[ millions of dollars & %]

Average FDI Inflows FDI Inflows Change

per year per $1000 [%]

Change GDP

1987-91 1992-96 [%] 1 987-91 1992-96

Africa 60.1 96.1 60 6.7 1 0.4 54

[average]

Average 212.1 61.3 189 8 .2 1 7.3 111

[all developing

countries]

Mozambique 9.2 33.3 263 6 .8 23. 5 247

Uganda -1.4 77.6 19796 -0. 1 15.9 18816

Equatorial 11.1 109.7 888 82.9 689.8 732

Guinea

TABLE 3 [continued]

Ratio of FDI FDI Inflows Change [%]

Inflows to Gross per capita

Fixed Capital

Formation 1987-91 1992-9 6

1987-91 1992-96 [%]

Africa 3.3 5.9 77 5 7 39

[average]

Average 3.5 6.8 98 8 20 164

[all developing

countries]

Mozambique 1.2 3.6 201 1 2 2 28

Uganda -0.1 10.3 15175 0.0 4 16 672

Equatorial 30.2 285.2 845 3 2 2 82 778

Guinea

Source: UNCTAD, Foreign Direct Investment in Africa, 1999.

_____________________________________________________________________________

TABLE 4: AFRICAN EXTERNAL DEBTS

[$ Billions]

1990 1994 1995 1996 1997*

Total 284.8 305 322.2 324.3 315.2

Outstanding

Short Term 34.5 49.5 57.9 63 50.9

Debt

Long Term 250.3 255.4 264.4 261.3 264.3

Debt

Total To

Official Credtors 193 225.6 232.7 232.4 223.6

Total To

Financial

Institutions 50.4 42 39.9 35 .1 2 7.3

Total To 41.3 37.4 49.6 56.8 64.2

Other Private

Institutions

Ratio of Debt Service

Payments to Exports of

Goods & Services [%]:

Debt Service 26.3 22.3 18.7 19.4 21.7

Ratio

Interest Payment 10.3 9.6 8.9 8 .6 9.6

Ratio

Amortization Ratio 16 12.7 9 .7 10.8 12.1

Total Debt: GDP 62.5 66.7 60.2 55.7 50.9

Ratio

Total Debts:Exports 231.8 249.2 227.6 211.6 194.2

of Goods & Services

Source: The African Economy, 1997.The African Development Bank. *=estimate

_____________________________________________________________________________

TABLE 5: AFRIC AN DEBT:SELECT HIPC COUNTRIES

Gross national Total debt Total debt Total debt Foreign

product owed to foreign owed to the US repayments debt as %

[$ US billions] creditors [$ US millions] in 1997 of country’s

[$ US millions] [debt serv ice] economy

[$ US millions] [as % of

GNP]

Burkina 2.60 1297 N/A 52 29

Faso

Cote d’ 10.20 15690 317.88 1 369 1 41

Ivorie

Ethiopia / 10078 89.21 99 1 31

Guinea 0.30 921 N /A 9.70 2 53

Bissau

Mauritania 1.10 2453 6.60 114.0 1 69

Mozambique 2.40 5991.0 53.21 1 04.0 1 71

Tanzania 6.60 7177.0 36.76 1 61.0 72

Total for Region 210,632.0 8 568.16

_____________________________________________________________________________

TABLE 5 [continued]

Expenditure on Debt Service [as % of GNP] Expenditure

on Education [as % of G N P]

Burkino Faso 2.20 1.50

Cote d’ Ivorie 14.40 5

Ethiopia 1.60 4

Guinea Bissau 3.90 /

Mauritania 10.90 5.10

Mozambique 4.10 /

Tanzania 2.20 /

Source: based on Jubilee 2000, USA. The data is drawn from diverse sources including

The World Bank, The World Development Report, 1999, The World Bank, Global

Development Finance, 1999, The World Bank Data Base on Line, 1999, The

Department of the Treasury and the Office of Management and Budget, Report on

Debt and Scheduled Debt Service Owed to the US Government by Foreign Official

Obligations and US Government Guarantees of Private Loans to Foreign Official

Obligators as of December 31, 1996, Washington, DC.

_____________________________________________________________________________

TABLE 6 BASIC INDICATOR S: HEALTH

HIPC Life Expectancy % Malnutrition Mortality Infant Mortality

Country At Birth Among Children Rate < 5 Per Rate [deaths per

1000 1000

live births]

Progressive

1990 1997 %

Change

Uganda 43 32 173 104 9 9 -5

Mozambique 45 47 183 150 1 35 -10

Bolivia 61 30 88 81 66 -19

Guyana 64 27 77 64 58 -9

Ivory Coast 54 24 137 95 87 - 8

Burkina Faso 46 33 171 10 5 99 -6

Mali 50 31 236 136 118 -13

Ethiopia 49 55 184 124 107 - 14

Average 52 34 148 / /

HIPC

Minimum 37 17 49 / /

Maximum 69 47 263 /

TABLE 6 [continued]

HIPC Maternal Mortality Ratio [per 1000] Overall Index A f rican HIPC

Of Health Outcomes Stan dard

[ World Standard]

UGANDA 1200 -0.85 -0.50

MOZAMBIQUE 1500 -1.52 -1 .34

BOLIVI A

650 -0.1 1.89

GUYANA / / /

IVORY COAST 810 0.28 1 . 14

BURKINA FASO 930 -0.57 - 0 . 09

MALI 1200 -0.90 -0.51

ETHIOPIA 1400 -1.56 -1.33

AVERAGE H IPC 909 -0.22

MINIMUM 160 -1.88 1.99

MAXIMUM 1800 1.82 2.80

Source: Based on tables in the World Health Report, WHO, 1999 which in turn draws on

World Bank data.

_____________________________________________________________________________

TABLE 7: BASIC INDIC ATORS: EDUCATION

Adult Primary School Survival rate Illiteracy rate of

illiteracy gross life to grade 4 15-24 year old [%]

rate [%] enrolment expectancy [%]

rate [%] [years] 1990 1997

Uganda 38 73 5.6 63 30 23

Mozambique

60 60 3.5 62 52 44

Bolivia 17 95 9.8 99 7 5

Guyana 2 94 9.5 / / /

Ivory Coast 60 69 5. 9 94 50 4 0

Burkina 81 38 2.9 87 76 70

Faso

Mali 69 35 2 73 56 42

Ethiopia 65 31 2.1 79 58 49

Average 43 77 6 76

HIPC

Minimum 2 29 2 45

Maximum 86 135 9.8 99

TABLE 7 [Continued]

Progress Net enrolment Progress Overall index of A frican

[% change[ in primary [% change] Education H IPC

education Outcomes: stan dard

[world standard]

1990 1997

Uganda 3 / / / -0.46 0.03

Mozambique

2 47 40 2 -1.26 -1

Bolivia 9 / / / 0.97 1.59

Ivory 2 47 55 3 -0.17 0.32

Coast

Burkina 1 27 31 4 -1.41 -1.2 5

Faso

Mali 1 18 28 8 -1.72 /

Ethiopia 1 30 28 3 -1.52 -1.3 8

Average -0.27

HIPC

Minimum -1.72 -1.64

Maximum 0.97 1.59

Source: Based on tables in the World Health Report, WHO, 1999 which in turn draws on

World Bank data.

_____________________________________________________________________________

TABLE 8 MODIFICATIONS TO HIPC

CRITERI A INITIAL PLANS MODIFICATIONS

NPV Debt:Export 250% 150%

NPV Debt:Revenue 280% 250%

Export:GDP 40% 30%

Revenue:GDP 15%

Decision Point 3 Years 3 Years

Fixed Completion Point 3 Years Replaced by Non -Fixed

Floating Completion Point

Cost of HIPC $12 Billion [NPV] $27 Billion [NPV]

Source:HIPC Website;N PV=Net Present Value

_____________________________________________________________________________

TABLE 9 TYPES OF ASSESSMENT UNDER HIPC

REVIEWS APPRAISAL AGREEMENTS

14 HIPC's 12 Qualify for Debt Relief 7

Packages Under Countries Have Agreed

Existing Framework on Debt Reduction

Packages

[$ 3.4 billion in N PV Terms

or $ 6.8 billion

in Debt Service Refo rm over

Time

DEBT PRELIMINARY REVIEWS IN ELIGIBILITY FOR DEBT

RELIEF COMPLETED RELIEF

GRANTED

Ethiopia, Guinea Bissau, N icaragua, B enin, Senegal under New

Tanzania, Mauritania Framework will be

[Debt Relief to Ethiopia & Guinea re -considered /Debt

Bissau held back due to Sustainability through

armed conflict] Traditiona l Packages]

Uganda,

Bolivia

Ivory Coast,

Guyana

Source:HIPC Website.Note this assessment is being constantly revised; by July 2000

more countries became eligible for debt relief.It is expected that by the close of 2000 about

20 countries will reach the D ecision Point.

_____________________________________________________________________________

TABLE 10: RELIEF U NDER H IPC INITIATIVE

Total % Reduction As sistance

Debt Relief in Debt in present value

Country Decision Completion nominal t erms at the

Point Point [millions of US dollars] Completion Point

[All Creditors] [IMF]

[millions of US] [millions o f

US

dollars] dollars]

Uganda April 1997 April 1998 650 2 0 3 47 69

Bolivia Sept.1997 Sept.1998 7 60 13 448 2 9

Burkina Sept.1997 Apr.2000 200 14 115 1 0

Faso

Guyana Dec.1997 early 1999 5 00 25 253 3 5

Cote d' March 1998 March 2001 8 00 6 3 45 2 3

Ivorie

Mozambique Apr.1998 June 1999 2900 5 7 1 442 105

Mali Sept.1998 Dec.1999 250 1 0 1 28 1 4

Total 6060 3078 285

Source: HIPC Internet Website

--------------------------------------------------------------------------

REFERENCES

African Development Report, Human Capital Development, African

Development Bank, 1998.

BBC Africa Service, ‘Focus on Africa’, Daily BBC World Service

Programme, London.

Centre for International Development, Implementing Debt Relief for the

HIPC, Harvard University, Harvard, August 1999.

Christian Aid, Forever in Your Debt.Eight Poor Nations and the G 8.

Millennium Debt Relief for Eliminating Poverty,

Debt for Aids E Mail Group, ‘Mozambique floods spark UK debt

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