Ms Ylva Hernlund,
Thank you for providing these valuable links, particularly the Oxfam
contacts in Prague where I will travelimg to over the week-end to attend the
IMF/WB Annual Meetings.  It is my intention to consult with NGOs such as
Oxfam that are in the front-line of the Debt Relief campaign.
Sidi Sanneh


>From: Ylva Hernlund <[log in to unmask]>
>Reply-To: The Gambia and related-issues mailing list
><[log in to unmask]>
>To: [log in to unmask]
>Subject: Africa: Debt Update (fwd)
>Date: Thu, 21 Sep 2000 09:37:18 -0700
>
>---------- Forwarded message ----------
>Date: Thu, 21 Sep 2000 09:14:55 -0500
>From: APIC <[log in to unmask]>
>To: [log in to unmask]
>Subject: Africa: Debt Update
>
>Africa: Debt Update
>Date distributed (ymd): 000921
>Document reposted by APIC
>
>+++++++++++++++++++++Document Profile+++++++++++++++++++++
>
>Region: Continent-Wide
>Issue Areas: +economy/development+
>Summary Contents:
>This posting contains excerpts from a press release by Oxfam
>International with an analysis of the results of the Heavily
>Indebted Poor Countries (HIPC) initiative to date, released in
>advance of the IMF/World Bank meetings in Prague. Another posting
>today contains a press release from the Africa Fund and statements
>calling for debt cancellation from African-American religious leaders
>and elected officials. For the full version of the Oxfam press release
>and other related documents from Oxfam International, see
>http://www.oxfam.org
>
>+++++++++++++++++end profile++++++++++++++++++++++++++++++
>
>HIPC leaves poor countries heavily in debt:
>
>Oxfam International
>18 September 2000
>
>Oxfam International  ([log in to unmask]) is a network
>of eleven aid agencies working in 120 countries throughout the
>developing world: Oxfam America  ([log in to unmask]),
>Oxfam-in-Belgium ([log in to unmask]), Oxfam Canada
>([log in to unmask]), Oxfam Hong Kong ([log in to unmask]), Community
>Aid Abroad ([log in to unmask]), Oxfam Great Britain
>([log in to unmask]), Oxfam New Zealand ([log in to unmask]),
>Intermon Spain ([log in to unmask]), Oxfam Ireland
>([log in to unmask],[log in to unmask]), Netherlands Organization
>for International Development Cooperation (NOVIB) ([log in to unmask]),
>Oxfam Quebec ([log in to unmask]).
>
>Oxfam representatives are in Prague and available for interview or
>comment: Seth Amgott From Czech Republic 0602 849 881 From abroad
>+420 602 849 881 Arup Biswas From Czech Republic 0602 849 882 From
>abroad +420 602 849 882
>
>Heavily Indebted Poor Countries (HIPC) Initiative leaves poor
>countries heavily in debt
>
>Background
>
>The Heavily Indebted Poor Countries (HIPC) Initiative will figure
>prominently on the agenda of the IMF-World Bank annual meeting in
>Prague from 19-26 September. Nine countries are currently receiving
>debt relief under the Initiative. Current plans are for this number
>to rise to 20 countries by the end of the year. The stated aim is
>to leave heavily indebted countries with a sustainable debt
>profile, and to provide resources for poverty reduction. IMF-World
>Bank staff reports, prepared for the annual meeting, have cited
>large financial gains for the HIPCs amounting to over $28bn.
>
>Research carried out by Oxfam suggests these headline figures
>grossly exaggerate the real benefits of the HIPC Initiative. In the
>first in-depth analysis of the implications of the Initiative for
>government finances, the research suggests that the annual budget
>savings for most countries will be modest. Some countries -
>including Senegal, Tanzania and Zambia - will emerge from the HIPC
>debt relief process in the perverse position of paying more on debt
>servicing. Debt repayments will continue to absorb a
>disproportionately large share of government revenue, amounting to
>more than 15 per cent in six countries, and to over 40 per cent in
>Zambia, Cameroon and Malawi. All but three of the twelve countries
>reviewed in the Oxfam research will continue to spend far more on
>debt servicing than on health and primary education after they have
>received debt relief.
>
>The picture that emerges from the Oxfam research raises fundamental
>questions about the adequacy of the enhanced HIPC Initiative. While
>the Initiative will significantly reduce both the stock of
>unpayable debt and the amount that countries would have to pay
>without debt relief, it does not go far enough. Far deeper levels
>of debt reduction are needed to leave governments with the capacity
>to finance basic services. Oxfam recommends that a 10 per cent
>ceiling should be set on the proportion of government revenue
>allocated to debt servicing.
>
>Part of the problem with the existing HIPC framework is its narrow
>perspective on debt sustainability. Repayment capacity is currently
>defined primarily in terms of the debt-to-export ratio. Oxfam wants
>to see a more poverty-focussed approach to debt sustainability in
>which human needs figure more prominently. It argues that more
>weight should be attached to the budgetary burden of debt and the
>diversion of public finances away from poverty reduction
>initiatives.
>
>As a group, the heavily indebted countries suffer from some of the
>deepest and most pervasive levels of poverty in the developing
>world. Over half of the population lives below the $1-a-day poverty
>line, one-in-six children die before the age of five from
>poverty-related diseases, and almost 50 million children are not in
>school. To demand that governments in these countries spend more on
>debt servicing than on the basic health and education needs of
>their citizens is economically irrational, morally unacceptable,
>and at variance with the HIPC Initiative's proclaimed goals of
>providing a poverty-focussed debt relief framework.
>
>The enhanced HIPC Initiative
>
>The enhanced HIPC Initiative adopted by the Boards of the IMF-World
>Bank at the 1999 annual meeting, following the Group of Seven
>summit in Cologne, aimed at accelerating and deepening debt relief.
>Under the reformed framework, which marked a step forward, the
>threshold targets for net present value of debt-to-exports has been
>lowered to 150 per cent.
>
>Much has been made by the World Bank, the IMF and the wider
>creditor community of the generosity of the new HIPC Initiative.
>Headline figures suggest that the amount of debt relief provided to
>a group of 32 countries will double to $28bn (in net present value
>terms), reducing the average debt-to-export ratio by 41 per cent to
>138 per cent at decision point, and to less than 100 per cent by
>2005.
>
>Comparing post-HIPC Initiative debt servicing with the amount that
>countries would have to pay in the absence of debt relief points to
>significant benefits. For the nine countries expected to have
>reached decision point, total debt service relief amounts to $9.1bn
>- three times the amount projected under the original HIPC
>Initiative. This figure will rise to $20bn if the target of debt
>relief for 20 countries by the end of the year is achieved.
>
>Documents prepared for the annual meeting in 2000 highlight
>dramatic improvements in the debt profile of the HIPCs. The
>debt/GDP ration is projected to fall from 47 per cent to 28 per
>cent, and the debt service ratio from 15 per cent to 9 per cent.
>Scheduled debt payments will fall by $800m.
>
>Such indicators have been used to present a positive picture of the
>enhanced HIPC Initiative, notably for media consumption.
>Unfortunately, they tell only part of the story. In particular,
>they fail to capture the impact of debt relief on government
>revenue and budgets. Despite repeated requests from non-government
>organisations IMF-World Bank staff have failed to provide any
>assessment of the proportion of government finance that will be
>diverted to debt servicing after debt relief. ...
>
>The debt relief deficit
>
>In an attempt to assess the real implications of the HIPC
>Initiative for government budgets, Oxfam has analysed post-HIPC
>debt service projections for 13 countries. Eight of these countries
>have reached their decision point and benefit from assistance under
>the enhanced HIPC framework. Another four are expected to received
>enhanced HIPC support this year. The potential budgets effects of
>debt relief were captured by taking the average annual level of
>debt repayment projected for the three years after countries reach
>decision point. This figure was then compared with government
>revenue in the decision point year.
>
>The findings suggest that the benefits of the HIPC Initiative in
>terms of reduced debt servicing will be significant for a small
>group of countries, negligible for a larger group, and non-existent
>for several:
>
>* Increased debt servicing for three countries. Zambia, Tanzania
>and Senegal all face an increase in debt service payments. The
>largest increase will be in Senegal, where debt service payments
>will almost double to $171m, reflecting the large pre-HIPC
>Initiative gap between scheduled and actual payments. In Zambia an
>increase in repayment to the IMF will raise annual debt servicing
>by $75m, or one-third.
>
>* Limited benefits for four countries. Debt service payments will
>fall by less than 20 per cent for Burkina Faso, Honduras, Guinea,
>Malawi, and Mauritania.
>
>* Significant savings for five countries. Debt servicing will fall
>by 30 per cent or more for Bolivia, Cameroon, Mozambique, Rwanda
>and Uganda.
>
>One of the aims of the HIPC Initiative is to release resources that
>could be used to reduce poverty from debt servicing. Given the
>limits imposed on revenue raising capacity by low average incomes,
>and the huge scale of unmet basic needs, this is an important
>objective.
>
>The data derived from the Oxfam research strongly suggests that
>unsustainable debt will remain a formidable obstacle to poverty
>reduction efforts. Debt servicing will continue to absorb a large
>share of government revenue in most countries, amounting to
>
>* 40 per cent of total revenue in Zambia
>* 25-35 per cent of the total in Cameroon, Guinea, Senegal and
>Malawi
>* 15-20 per cent in Honduras, Mozambique, Tanzania and Mauritania
>* 13-14 per cent in Burkina Faso and Mauritania
>
>Implications for public investment in basic services and human
>development
>
>The limited budget savings provided through enhanced HIPC
>Initiative debt relief means that some of the world's poorest
>countries will continue to transfer far more to their creditors,
>than they are able to invest in basic services. ...
>
>[In summary]
>
>* there are eight countries in which debt service payments will
>exceed the budgets for health and education
>
>* in five of these countries (Zambia, Tanzania, Senegal, Mauritania
>and Cameroon) debt repayments will exceed the combined health and
>education budgets after debt relief.
>
>It is difficult to square these public-spending outcomes with a
>genuine commitment to a poverty-focussed debt initiative on the
>part of the donor community. As a group, the heavily indebted
>countries are massively off track for achieving the human
>development targets set for 2015. These include the halving of
>extreme poverty, universal primary education, and a two-thirds
>reduction in child mortality. If current trends continue, each of
>these targets will be missed by a wide margin. ...
>
>The prospective scenario for individual heavily-indebted countries
>underlines the enormous human development costs implicit in the
>debt service projections summarised above.
>
>Burkina Faso. Under the HIPC Initiative, Burkina Faso will continue
>to allocate around 13 per cent of government revenue to debt
>servicing, or around $40m per annum. This amount may appear small
>from the industrialised world. But in a country where almost one in
>four children die before the age of five from poverty-related
>diseases, spending on debt will represent double the spending on
>health. Debt servicing will also exceed the education budget, even
>though Burkina Faso has among the world's lowest school enrolment
>and adult literacy rates. Fewer than a quarter of girls attend
>school.
>
>Zambia. In the three years after HIPC debt relief Zambia will be
>allocating around 40 per cent of government revenue to debt
>servicing - one of the highest levels in the world. These resources
>are urgently needed for investment in poverty reduction. Zambia is
>one of the countries worst affected by HIV/AIDs. Nearly 13 per cent
>of children are orphans (the highest rate in the world), and child
>mortality rates are rising. During the 1990s the proportion of
>children suffering from chronic malnutrition has risen from 39 per
>cent to 53 per cent. As in other HIPC countries, poor health and
>education indicators are linked to wider patterns of deprivation,
>with over half of the population living below the extreme poverty
>line.
>
>Senegal. The newly elected government has committed itself to
>ambitious reforms in health and education as part of a renewed
>national commitment to poverty reduction. However, its capacity to
>deliver on the commitments made will be compromised by foreign debt
>servicing. Average debt repayment will be equivalent to double the
>combined health and primary education budgets. There is now a real
>danger that debt servicing will undermine the Quality Education for
>All programme that aims to achieve universal primary school
>enrolment by 2008. Although aid flows will partially compensate for
>debt servicing, development assistance for education will represent
>less than half of government debt repayments.
>
>Malawi. One of the few HIPC countries to have made rapid progress
>in education: expenditure on education has doubled as a proportion
>of GDP to 5 per cent, with a major redistribution in favour of
>primary schools. Free education was introduced in 1994, leading to
>an increase in enrolment of around 3 million by 1997. Health
>spending has also increased. Despite these positive budget trends,
>Malawi faces immense problems. There is an urgent need to improve
>the quality of education and to increase the rate of transition to
>secondary school. Several key health indicators - such as infant
>mortality - have stagnated, partly as a consequence of HIV/AIDs.
>Almost 5 million people live below the poverty line. With foreign
>debt absorbing around one-quarter of revenue, government capacity
>to address these problems will inevitably be curtailed.
>
>Tanzania. Having entered the HIPC Initiative this year, Tanzania
>will continue to allocate over one quarter of government revenue to
>debt servicing for the next three years. This represents more than
>public spending on health and primary education in a country with
>over 2 million children out of school, and with 186,000 under-five
>child deaths each year.
>
>Wider problems
>
>Inadequate levels of debt relief is just one of the problems
>associated with the HIPC Initiative. Despite repeated pledges from
>creditors, the pace of implementation remains far too slow. There
>are also growing concerns about gaps in the Initiative.
>
>There are several reasons for the slow pace of implementation. In
>some cases, unrealistic conditions have been set under the IMF
>programmes that eligible countries must comply with in order to
>receive debt relief. In Honduras, for instance, debt relief has
>been held up because of IMF insistence on more rapid progress in
>the country's privatisation programme. In other cases, weak
>management appears to have been responsible. Malawi could have
>received debt relief in May had IMF and World Bank staff completed
>their debt sustainability analysis earlier. The delay may cost
>Malawi around $50m in interim debt relief, if it enters HIPC in
>November as planned.
>
>Several countries potentially eligible for debt relief are affected
>by conflict. Earlier this year the British Chancellor Gordon Brown
>outlined an initiative aimed at using debt relief as an incentive
>for peace and reconstruction. The recent cease-fire in the war
>between Ethiopia and Eritrea provides an important opportunity for
>the creditor community to put this commitment into practice.
>Failure to provide Ethiopia with debt relief will leave the
>government facing chronic public financing problems. Scheduled debt
>service payments amount to 60 per cent of export earnings.
>
>HIPC initiative eligibility currently extends to a group of around
>40 low-income countries. That group does not include Nigeria, which
>is Africa's largest debtor. Nor does it include chronically
>indebted lower-middle-income countries such as Jamaica. The next
>phase of HIPC reform needs to develop strategies for extending the
>debt relief remit to other countries where unsustainable debt
>threatens poverty reduction efforts.
>
>An agenda for reform
>
>The enhanced HIPC Initiative is failing to realise its potential.
>Urgent reforms are needed to deliver on the commitments made by
>creditors to provide a permanent exit from the debt crisis. Failure
>to act will undermine efforts to link debt relief to national
>poverty reduction efforts.
>
>During the annual IMF-World Bank meeting in Prague Oxfam is calling
>for:
>
>* A new approach to debt sustainability. It is fundamentally
>unacceptable for countries suffering widespread extreme poverty to
>spend more on debt servicing than they invest in the health and
>education of their citizens. No country emerging from the HIPC
>Initiative should be required to allocate an amount equivalent to
>more than 10 per cent of revenue to debt servicing. IMF-World Bank
>debt sustainability analyses should include projections for the
>amount of government revenue to be allocated to debt servicing.
>
>* Immediate debt relief to countries which commit to a 'Poverty
>Fund' in the Interim Poverty Reduction Strategy Paper (PRSP): There
>is an urgent need to accelerate implementation of the HIPC
>initiative, and to strengthen the linkage between debt relief and
>poverty reduction. Current approaches have become unduly
>bureaucratic, causing delay in the provision of debt relief. New
>approaches to eligibility are urgently needed. At the decision
>point governments should be broadly on-track with their
>macro-economic programmes. But the key requirement for entry into
>HIPC should be the development of a poverty action fund, detailing
>how debt relief finance will be allocated to poverty reduction
>initiatives. Implementation of the fund would be monitored by
>government, civil society and donors. Obvious priority areas would
>include health, education, rural roads, water supply and employment
>generation programmes. Such an action fund was pioneered in Uganda,
>where a Poverty Action Fund helped to finance Universal Primary
>Education, basic health and rural feeder-road programmes. The use
>of debt relief to eliminate charges for basic education and health
>is one option with potentially large human development returns.
>
>* Immediate and generous debt relief for Ethiopia. There is now a
>real opportunity for using debt relief to underpin the peace in
>Ethiopia. Having already been assessed under the original HIPC
>Initiative framework, Ethiopia should immediately be reassessed and
>provided with debt relief geared towards poverty reduction.
>
>* The extension of the HIPC framework. IMF-World Bank staff should
>review the debt sustainability of countries such as Nigeria and
>Jamaica not covered by the existing HIPC framework, but facing
>chronic debt problems.
>
>************************************************************
>This material is being reposted for wider distribution by the
>Africa Policy Information Center (APIC). APIC provides
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>and international policies toward Africa that advance economic,
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