Debt deal: a rigged hand?

G8 finance ministers last Saturday agreed to write off more than $40-billion in debts of 18 of the world's poorest nations in order to free up money for spending on social services like health and education. The 18 nations to benefit immediately are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia. But is the deal all it is cracked up to be?

Immediate reaction from government and international NGOs was positive, but doubts quickly began to emerge about whether the announcement was all it was made out to be. Apart from the amount being written off only making up a small amount of total debt owed, a major area of concern was in paragraph 2 of the statement made by finance ministers when they announced the deal. The paragraph makes clear that conditions will be attached to the deal. To qualify countries must eliminate "impediments to private investment, both domestic and foreign". These kinds of conditions attached to previous debt relief packages have been extensively criticized for causing more harm than good.

Below are some of the reactions to the debt deal from various civil society organisations and groupings:

* US lobby group Africa Action emphasized that dozens of other African countries continued to be trapped under a burden of illegitimate debt, which the G-8 plan still failed to address. Africa Action also rejected the G-8's embrace of the Heavily Indebted Poor Countries (HIPC) initiative as the framework for debt cancellation, noting the harmful economic conditions tied to this program. Ann-Louise Colgan, Director of Policy Analysis and Communications at Africa Action, noted: "We reject the G-8's affirmation of the harmful HIPC framework as the basis for future debt cancellation, when it is clear that the devastating conditions required by this program have deepened the debt crisis and exacerbated poverty across the African continent. The continued exclusion of countries like Nigeria and South Africa, who also carry massive burdens of illegitimate debt, is unacceptable as a matter of law and justice."

* Mozambique civil society issued a statement saying they were concerned about the price of debt cancellation in terms of the conditions that countries would have to adopt in order to qualify. The statement said the amount freed up by debt cancellation would not be enough in itself - more and better aid would also be needed and issues of trade and access to markets resolved.

* Debt campaigning group Jubilee South reiterated long-standing demands for unconditional cancellation of all debt. The organisation demanded the abolition of all IMF and World Bank policies and reparations for the costs of structural adjustment programs. Furthermore, Jubilee South said stolen wealth should be repatriated, while African leaders and policy makers should move away from destructive neoliberal policies and explore genuine people-centred development policies.

Jubilee South said the deal actually strengthened control over the economies of the countries targeted because in order to qualify for debt cancellation eligible countries would have had to have gone through the HIPC completion point, which involves the implementation of stringent free market reforms. Many commentators, academics, theologians and activists within the economic justice movement point out that the costs of Structural Adjustment Programmes and creditor imposed conditionality far outweigh the amount of debt to be cancelled, Jubilee South said.

* The Committee for the Abolition of Third World Debt noted that the financial burden of the operation on rich countries would amount to some 2 billion dollars a year, compared to 350 billion the G8 devoted to farming subsidies or 700 billion they spend in military expenditure. Rich countries would thus be willing to spend every year for the announced cancellation half of the amount the US spends every month on their continued occupation of Iraq. "The G8 decision represents a continuation of the HIPC initiative, which means the imposition of heavily neoliberal policies: privatisation of natural resources and of strategic economic sectors to the benefit of transnational corporations; higher cost of health care and education; a rise in VAT; free flow of capital, which leads to capital leaving the country as shown by several UNCTAD reports; lower tariff protection, which leads to thousands of small and middle producers losing their livelihoods because they cannot compete with imported goods."

* A joint political statement by NGOs worldwide describes as "extremely misleading" statements that the proposals represent 100% multilateral debt cancellation. "It covers only a limited number of countries, and only ones implementing harsh World Bank and IMF policy conditions." Demba Moussa Dembele, of the Forum for African Alternatives, Senegal, recalled that the hype surrounding previous G-7 announcements had not been borne out by the results on the ground. "We've heard this so many times. Africa has already paid enough. We do not owe anything". Neil Watkins, of Jubilee USA said: "The G-8 proposal for 100% debt cancellation for some poor nations to the IMF and other international lenders is an important first step, but the deal must be expanded to include all impoverished countries. Debt cancellation must come without subjecting these countries to devastating economic conditions".

* Please send comments to [email protected]