A rallying Cry for Debt Forgiveness

Joint article by Ann Pettifor and Professor Jeffrey Sachs

Things have changed in Washington. Two years ago, the burden of debt on 700 million people in the poorest countries would have merited no more than a diary piece in Emerging Markets.

This year is different. Late-night manoeuvrings to get the World Bank and other G7 creditors to contribute more towards a debt relief fund; talk of rebuking Japan for threatening to cut off funds to countries that dare to apply for debt relief; Gordon Brown's Interim Committee announcement on Sunday - these are signs that some international financiers are facing up to economic reality and moral imperatives. At the same time, there are disturbing hints that the more things change, the more they stay the same.

We want to measure the achievements of these annual meetings against the Pope's appeal - addressed to us personally last Thursday in Castelgandolfo - for urgency. Does Gordon Brown's announcement amount to what the Pope called for: "a decisive step towards definitively resolving the debt crisis"?

We fear not. We know that many of the poorest countries will not benefit at all. The Fund and the Bank will continue to use arbitrary and analytically flawed criteria for defining both the countries in need of relief and the amount to be cancelled. We are confident, on the basis of their record, that this relief will not be deep enough, nor will it include all of those in real need. The agreement does not yet respond to the reality of needs in highly

indebted nations.

In conversations with us, the President of Tanzania, President Mkapa, expressed his eagerness to reduce poverty, but explained the obstacles. There are 20,000 schoolteachers in Tanzania that his government cannot afford to pay, waiting to take up their posts. There is a desperate need for anti-malarial drugs, to deal with the debilitating effects of new malaria strains, but these are unavailable or simply unaffordable. Currently,

President Mkapa must devote 35 per cent of recurrent government revenue to servicing debt. This is more than his government spends on health and education. In the 1998/99 budget year, for every dollar spent on health, the Tanzanian government spent four dollars paying debt service to the West. At the same time, as part of its program to 'reform' the health service, the IMF required Tanzania's poorest citizens to pay more for access to anti-malarial drugs and health treatment.

The Cologne deal could and should have been settled in Cologne. It is an important step towards the Pope's call for a 'definitive resolution' - but it is only a step. The drawn-out wrangling since June and the unedifying late-night scramble to come up with the funds to pay for it is depressing in the context of unprecedented prosperity and fabulous wealth in the West, with historically high stock market values and budget surpluses. Set this against

increasing economic degradation and impoverishment in the poorest countries, where 700 million people live and die.

We do not share Gordon Brown's confidence that this deal is done. The Administration and Congress are moving slowly and the request from the Administration to Congress is wholly inadequate. If this is to be progressed, the President needs to give it his highest priority. We know that many Congressmen will baulk at the prospect of channeling funds to a debt relief scheme that places the IMF center stage. The IMF's performance in

Russia and South East Asia has not inspired confidence in US Congressmen. Furthermore, by locking poverty reduction into the IMF's already overcrowded list of conditionalities, the Development and Interim Committees are locking out other institutions better qualified. The World Health Organization, UNAIDS, UNDP and UNICEF have far more experience of poverty reduction programs, but have had their budgets cut. Even changing the name of the Extended Structural Adjustment Facility - miraculously reinvented as the Growth and Poverty Reduction and Growth Facility - may not be enough to convince Congress that the IMF will not recreate the mistakes of the last 20 years.

We want the world's leaders to go much further. First, they must set a timetable. It has taken nearly 20 years to get the issue on the agenda. There is no indication from this week's agreement of a realistic timetable. We want debt cancellation delivered, not just agreed, by the end of the year 2000. We want the full cancellation, not partial relief, of all the unpayable debts of the poorest countries. We want governments and their peoples to own and control their own programs for recovery and development. Not the IMF and

World Bank. We want indebted nations to be able to draw on the expertise of a range of institutions, like the WHO and UNICEF, not just the IMF and World Bank.

The G7 have not got there yet. We call on them to meet again, before the new millennium. They might choose a venue in Africa. They should meet with their counterparts, the leaders of indebted nations, and hammer out a deal.

Finance ministers may think they have signed off on the debt deal this week. But Jubilee 2000 supporters in 60 countries around the world will be clear that the world's leaders have climbed only halfway up the summit. Much more needs to be done. The creditors can afford it. The most impoverished need it. And the Pope's impassioned call cannot be satisfied by late-night quick fixes and name changes in Washington.

Joint article by Ann Pettifor, Director of Jubilee 2000 Coalition, and Professor Jeffrey Sachs, Director of the Harvard University Center for International Development.

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