Mozambique parliament demands total and unconditional debt cancellation

“Total and unconditional cancellation of Mozambique's foreign debt” was called for in a statement issued by the Mozambican parliament at the end of a special parliamentary conference on foreign debt, 4-5 December 1998, in Maputo.

The call was backed by all three parties in parliament, and came after Deputy Finance and Planning Minister Luisa Diogo told parliament that “we conclude that the HIPC initiative will not produce any significant impact on the volume of future [debt service] payments”. Debt service in the three years before HIPC averaged $111 million per year; after HIPC it will average $100 million. This is still “unsustainable”, she said, and thus the government also calls for 100% cancellation.

`An act of justice'

The parliament's deputy speaker Abdul Carimo ended the conference by calling HIPC “ridiculous”. He concluded that “at the very least, total debt cancellation is an act of justice.”

In a background paper prepared for the conference, Parliament's Working Group on Debt cited the Germany debt settlement of 1953. “We ask, what is the justice and sustainability” of demanding that Mozambique and other poor countries pay five times as much?

The working group pointed out that Mozambique is one of the very poorest countries in the world, with indicators far below even the African average. Only 30% of the population has access to clean water; only 40% has access to health services; only 24% of women can read and write.

Carimo warned that while “total debt cancellation today would permit miracles in building national capacity, but granting it a few years in the future would be nearly irrelevant.”

“Initiatives of western countries are always late in relation to the real needs of developing countries,” Carimo said. “Preventive medicine is always more effective an curative, but for the economies of developing countries the west only uses curative medicine.”

Call for help from other parliaments

Mozambique's parliament also called for united action by all southern African parliaments to work for cancellation all the foreign debt of all poor countries, and it called on “parliaments of creditor countries to influence their governments and the Bretton Woods Institutions to totally cancel the foreign debt.”

The Mozambican Debt Group, a coalition of more than 20 Mozambican civil society organisations, called especially on Germany and Portugal to take further action. “Germany remains a serious obstacle to debt cancellation” the group said, while Portugal, Mozambique's former colonial power, has a responsibility to take “show leadership in Europe through the outright cancellation of Mozambique's debts. We reject the nation that, given the historical relations between the two country, Mozambique `owes' Portugal.” But the debt group goes on to praise Switzerland, Sweden, Norway, Finland and Great Britain for the leadership they have shown on the debt issue.

(Mozambican debt group report on creditor positions)
(Comunicacao do Grupo Mocambicano da Divida)

In response, Luc Dhoore, vice president of AWEPA, the European Parliamentarians for Africa, promised that AWEPA would “act as a lobbying group for the cancellation of the debt.” AWEPA, based in Amsterdam, was formerly the Association of West European Parliamentarians for Action Against Apartheid and has 2000 members in European parliaments.

(For more information on AWEPA actions on Mozambique's debt, contact, Tamme Hansma on awepaluso@antenna.nl or awepa@antenna.nl)

Conditionality rejected

The final statement of the conference specifically called for cancellation “without conditions” because of conditions imposed as part of HIPC. The HIPC “final document” requires that before debt is actually cancelled (“completion point”), presently scheduled for 1 July 1999, Mozambique's parliament must pass legislation to increase health service charges five-fold. Many members of parliament are opposed to this; they noted that 70% of the population is below the poverty line, and that large an increase will deny access to health services for many of the poorest people.

Parliament stressed that “resources released by debt cancellation should be preferentially applied to the social sectors.”

“The argument that without the debt, Mozambique will not maintain fiscal and monetary discipline is not valid, because Mozambique – even with the cancellation of debt – will continue to need foreign aid and that will be used, as it always has been, to pressure the government to maintain fiscal and monetary discipline,” Deputy Speaker Abdul Carimo said.

Indeed, “cancelling the debt is not to start a new process of debt and abandoned economic programmes. Just the opposite is true – cancelling the debt allows the economic programme already under way to be reinforced,” Carimo said.

Furthermore, “economic and social development are unsustainable if the institutions of the country are not solid. Money released by debt cancellation makes it possible to reinforce the justice system, education and health.”

Carimo also pointed out that to avoid a new debt trap, the new draft constitution now being debated in parliament bans variable interest rate international loans and requires that parliament approve all foreign loans taken by the government. (Uganda's constitution already has a similar restriction.) (text of constitutional article)

Aid or debt relief

Members of parliament were highly critical of countries that want to give aid but not cancel debt. Carimo commented that “we live in an absurd situation, because the international community is willing to finance development projects but not help us to release the funds which are absolutely indispensable to correctly use and maintain the infrastructure they create.”

Indeed, aid was partly to blame for the debt crisis, according to the parliamentary speaker Eduardo Mulembwe. Many programmes financed by credits failed, he said, because they were “pushed by the donor or creditor – they were `supply driven'” and forced a dependence on foreign technical support that led to failure.

Many MPs stressed the responsibility of the creditors. Deputy Speaker Abdul Carimo noted that “irresponsible western banks” gave loans even when they knew that the borrowing countries could never repay. And when poor countries are in debt, they “fall into the web of the International Monetary Fund and World Bank” and are forced to accept policies imposed by those bodies that widely seen as wrong.

The conference

The “International Conference on Mozambique's Foreign Debt” on 4-5 December was called by parliament. Most MPs attended. Opposition leader Afonso Dhlakama, president of Renamo but not a member of parliament, also attended to give his backing to the demand for total cancellation. The final declaration was unanimously supported by the MPs present and by all parties.
(Maputo declaration – excepts)
(Declaracao de Maputo – excertos)

Most of the speakers were MPs. As well as Luisa Diogo and Luc Dhoore, non-parliamentary speakers included Joseph Hanlon and Kofi Klu of Jubilee 2000, the World Bank resident representative James Coates, Constantino Gode and Otilia Pacule of the Mozambique Debt Group, and representatives of local trade unions. Members of parliament of southern Africa and Europe also attended.

Speaking for the largest trade union federation (OTM-CS), Pedro Joaquim Manjaze said: “we pardon criminals and give them amnesties. Surely we can give an amnesty to those countries made poor by colonialism, and give a pardon to poor children?”

Filimone Meigos, speaking for the journalists union, warned that debt might cause political instability. He said that because of debt and adjustment policies, the north of the country was not being developed, and there was a real danger of a secessionist movement in the north.

World Bank representative Coates told the conference that more than half of all money allocated to HIPC countries so far had been allocated to cancel Mozambique's debt next year. More debt could not be cancelled because HIPC was the maximum that the creditors could afford, he said.

But the five MPs who spoke after Coates all rejected his views. Carlos Moreira Vasco said: “My belly is full of statistics about debt. The World Bank representative says the Bank has done all it could do. This just shows the lack of will. My constituents in Nampula province want the export earnings from the cashew nuts they produce to be used to import raw materials for clothing factories or to improve the roads, not to pay the debt. We must cancel the debt.”