FACT SHEET ON DEBT FOR AFRICA REGION

Introduction:

            The Debt crisis was triggered by an abrupt increase in interest rates in international loans. For example Brazil had to pay 6.25% on its external debts in 1979 and it sored to 24% in 1981. This abrupt rise of interesst rates was direct result of the changes in monetary policy in northern countries when they decided on “monetarism” as their official policy.

That debt crisis needs to be noted, led to a shift and more powerful role of the World Bank and IMF in the south. Countries that had borrowed money were forced to accept austerity conditions demanded by the IMF before their debts could be rescheduled. Besides borrower countries increasingly needed to get the “seal of approval” from IMF if they were to be eligible to borrow from any other source.

By 1985, it became clear that inspite of the austere measures, the debt crisis could not be contained so Structural Adjustment Programs (SAPs) were introduced to mostly Sub-Sahara African countries. SAPs introduced a strict anti-inflationary monetary policy, privatisation of public enterprises, dismantling of foreign exchange controls and more flexible labour markets. It also reduced the public sector by eliminating subsidies, and government withdrew its involvement in price setting and increased it rule in creating and enabling environment for foreign investment.

In 1997, World Bank and IMF launched the Heavily Indebted Poor Countries (HIPC) an initiative that promised debt relief for 41 low income countries as long as they continued to apply SAPs. HIPC initiative only proposed to write off debt that was for the most part uncollectable.

When HIPC I and HIPC II failed to achieve the expected results, Poverty Reduction was grafted on the SAPs. Each debtor country is now being asked to follow guidelines prescribed by the World Bank and IMF to produce Poverty Reduction Strategy Papers (PRSPs). The focus has now shifted to poverty reduction from funds freed from debt relief. PRSPs have become another conditionality that is additional transfers responsibility to civil society to monitor their governments while distracting attention from total debt cancellation while maintaining structural adjustment measures in its policy matrix. It needs to noted that in 1996 when PRSPs were mooted debt service reduction G1 HIPC had amounted to not more than US$ 1.1 billion. Over the same period the 41 countries had paid a total of US$ 35 billion in debt servicing. The World Bank it self conceeds in its lastest report of 20^th April, 2001 to the board that many countries after relief, are likely to end up as severely indebt and unsustainable as they were before relief.

REGIONAL and NATIONAL EXAMPLES

In response to the Jubilee South Campaign, IMF claims that its programs for low income countries have progressively strengthened the integration of social spending into program design. IMF claims that during SAP period of 1994-98 there was an 80% increase in public spending on education and health care. The actual situation is that African countries’ expenditure rose only by 20% per year after being at continuously for 15 years. At this rate it will take until the year 2010 to restore spending on education and health to the level of 1985!

Zambia spends four dollars on debt service for every one dollar on health while infant mortality rate rises. In Uganda, the government spends US$3 per person annually on health and education and US$ 17 per person annually on debt repayment, while in every 5 Ugandan children die of preventable diseases before reaching the age of 5 years!

Between 1990 and 1993, Africa Region did pay US$ 13.4billion annually to its external creditors more than its combined spending on health and education. Yet the African burden continued to rise so that in 1994 alone it increased by 3.2% to US$ 312 billion!

The resultant fall in hospital attendance because of user fees has led to increased unpaid labor provided by women especially for HIV/AIDS patients. Similarly the rising cost of child birth has increased to maternal mortality rate. This was evident even as far back as 1993 for example Ghana where the UNICEF report cites figures as high as 1,000 deaths to 100,000 births! That is further execrated best illustrated by the high Doctor patient ratios. In Uganda for example the ratios are 1 Doctor to 24,000 patients.

In Zambia 72,000 people lost their jobs in SAP induced retrenchment and by 1996, their was a report that 3 million part-time child laborers out of a total population of 9 million! Female participation in informal sector increased from 40% in 1980 to 57% in 1986 as has since grown. During that same period, there was a nine-fold increase in the 12-to-14 year age group working in the informal sector.

In Zimbabwe, inspite of the austere SAP measures the foreign debt stood at Zimbabwe dollars 36.5 billion by 1996 of which Z$ 2 billion was scheduled for debt repayment. In the same year, real wages had declined by 40% and inflation was rising at 23%

In education, total spending in Sub-Sahara Africa fell in real terms between 1980-1988 from US$ 11 billion to US$ 7 billion. A review of 26 countries shows that a decline in spending per pupil from US$ 133 to US$ 89. Even more serious is the drop in enrollment rates from 71.1% in 1980 to 66.7% in 1990. On average, only 37% of girls enrolled in primary in 1990 and this figure drops after 7-8 years of schooling.

After HIPC I and HIPC II the picture in Uganda is as follows:

Mozambique indebtedness has been compounded by annual disasters, the floods of the 1999, destroyed 141 schools, spread malaria, caused dysentery and cholera and destroyed roads. By 1999, Mozambique was cited by the World Bank as the fastest growing economy, but it is also said to have huge financial obstacles and in adequate resources that block its path towards long term healthy development.

During the 1990’s, Mozambique debt reached 594% of its GNP. Yearly payments of US$ 57 million surpassed the dollar on primary health of US$ 20 million and education of US$ 32 million combined.

Then there is the ordious debt or money borrowed to finance Apetheid related activities in South Africa and this states as far as Tanzania. All those examples call for total debt cancellation.

Preamble:

Be reminded that debt is a manifestation of the neo-liberal world order that mandates the international banks to push loans to borrowers without the democratic inputs of Parliaments and civil society. Debt is an instrument of northern domination over Africa.

Recommendations to Government:

1.      Call for total debt cancellation

2.      Push for total halt to implementation of SAPs even as disguised in PRSP policy matrix.

3.      Call for total fulfillment of the ODA target of 0.7% GNP by developed countries.

4.      Call for reparations to compasate for economic, social, and environment debt incurred by the people of Africa. Carry out loan audits.

5.      Enhance civil society capacity and involve them in debt negotiations and monitoring of poverty reduction funds.

6.      Ensure Parliaments over sees new foreign loans that the government contracts.

7.      Endorse the repudiation of illegitimate foreign debt and work towards debtors’ cartel.