World Bank and IMF Fiddle While Africa Burns
Africa Action Warns of Exploding Debt Crisis; Issues New Recommendations for Creditors
For Immediate Release
Contact: Ann-Louise Colgan 202-546 7961
Washington, DC (September 25, 2002) -- Ahead of this weekend's Annual Meetings of the World Bank and International Monetary Fund (IMF), Africa Action denounced the failure of these institutions to respond to Africa's growing debt crisis, and issued the recommendations below for immediate action from creditors.
Africa Action's Executive Director, Salih Booker, said this morning: ''African countries are paying more to the World Bank and IMF than they can spend on the fight against HIV/AIDS. The current debt relief plan is an outright failure, and allows rich country creditors to continue to bleed African countries dry.''
Booker cited this week's report on the Heavily Indebted Poor Countries (HIPC) Initiative, which once again revealed the failure of this initiative to resolve the debt crisis in the world's poorest countries. In this report, the World Bank and IMF concede that the HIPC program is working for less than a quarter of those countries involved. UN Secretary General Kofi Annan reached this conclusion two years ago, when he called HIPC ''inadequate'', and urged a new approach to debt cancellation.
Africa Action's critique of the HIPC Initiative is available at:
Referring to the recent announcement by Nigeria, that it can no longer afford to pay its massive foreign debts, Booker said: ''Nigeria's plight is the latest indicator of the unsustainable nature of the continent's debts. All African countries need and deserve a fresh start, freed from the shackles of debt bondage.''
While current debt relief efforts in Congress center around amending the HIPC initiative, Africa Action today called for a new approach that moves beyond this failed framework.
Since the U.S. is the single largest shareholder at the World Bank and IMF, to whom most of Africa's debt is owed, Africa Action calls on Congress to take the following three immediate steps to address Africa's debt crisis:
(1) Authorize an inventory of the debts currently being repaid by African countries, in order to determine the legitimacy of creditor claims.
Examples of illegitimate debts would include: debts contracted by repressive regimes, where the money was used to strengthen the hold of these regimes; or debts contracted by formally democratic but corrupt governments, where the money was then stolen by senior officials for their own enrichment. Lending of this nature was prevalent during the Cold War, when geo-strategic interests often trumped development concerns. Indeed, debts incurred by dictatorships for the purposes of enforcing their rule may be considered "odious" in international law. Under this established legal principle, such debts are not considered to be the responsibility of the oppressed population or of subsequent governments. Odious debts may, according to legal precedent, be cancelled on the basis of international agreement. An inventory of African governments' outstanding debts should also include an investigation of those cases where a country's debt burden increased or was perpetuated as a result of conditions unilaterally imposed by creditors.
(2) Authorize a study to ascertain what would be the cost to creditors of the full cancellation of Africa's debts.
Recent studies indicate that the World Bank and IMF hold sufficient wealth on their own balance sheets to absorb the full costs of multilateral debt cancellation from their internal resources. Yet the World Bank and IMF continue to maintain that outright debt cancellation is a financial impossibility because it would critically undermine their future operations. Congress should commission an independent study to investigate the veracity of these claims and to accurately assess how 100% cancellation of Africa's debts would affect the World Bank and IMF, and other creditors. This study should include an analysis of the full costs of debt cancellation, how these costs might be borne, and by whom, and what the impact would be on creditors and debtors, both immediately and in the future.
(3) Call for a moratorium on debt repayments by African countries until a resolution to the continent's debt crisis has been found.
Until a credible and equitable new approach has been determined to resolving Africa's debt crisis, African countries should not be required to continue diverting desperately needed resources to servicing unsustainable external debts. A moratorium should be declared until such time as an inventory of these debts has been compiled and the costs of 100% cancellation have been determined, these two studies providing a foundation for moving towards a just resolution to the continent's debt crisis. In light of the question of illegitimacy hovering over much of Africa's debt, it is appropriate that debt repayments be suspended while the nature of the original debts and the validity of creditor claims are investigated.
- 194 World Financial Institutions