Paris Club lobbies to block debt relief for Bolivia

 

The Paris Club, the secretive cartel of creditors who meet regularly to discuss the debts of the poorest countries, has been lobbying to prevent Bolivia receiving up to an extra $400 million debt relief. Acting in tandem with the French government, the French tresor, which administers the group, has sought to put its own finances and those of other western creditors ahead of the indisputable poverty and need of the Bolivian government and people.

The situation has arisen because of the decision by the Japanese Finance Minister, Mr Kiichi Miyazawa, to begin to cancel the Japanese government's overseas aid debt. This is a very significant move, welcomed by Jubilee 2000 Coalition's director Ann Pettifor, who wrote to Mr Miyazawa to congratulate him. She also urged resistance to any efforts from other creditors to dilute this humanitarian gesture.

Ann Pettifor said:

“Japan must be encouraged to resist the French tresor and give more relief to Bolivia. It is scandalous that when OECD governments talk about transparency and openness, they are plotting behind closed doors to cheat the poorest countries out of extra debt relief. This cartel of creditors must be brought to account.”

Japan is the largest bilateral creditor to Bolivia, which is the second country to have reached completion point in the HIPC initiative. The key decision for Mr Miyazawa is whether he allows the country's overseas aid debt to be considered in the process of burden sharing amongst creditors. If it is considered within the process, then Bolivia's debt will be reduced to the IMF and World Bank recommendation of 217 per cent (in net present value terms) of exports. However, if he decides to provide the cancellation of debt unilaterally and after the bargaining process is complete, then Bolivia's debt will be reduced to 202 per cent of exports. This could deliver up to $400 million extra debt relief.

An argument is therefore likely to develop at the meeting of the Paris Club on October 27^th. This argument will illustrate yet again how hopelessly out of touch the creditor nations are with the realities of poverty in debtor countries. The Bolivian government considers that 70 per cent of its 8 million citizens are unacceptably poor. The United Nations Development Programme (UNDP) reports that 37 per cent of the population are without access to safe water, 42 per cent without access to sanitation, and there is an under-five child mortality rate of 102 per 1000 live births.

Sascha Pichler of EURODAD (European Network on Debt and Development) said: “Bolivia is a desperately poor country that is already spending more on debt service than on health and education. The Paris Club of creditors should be supporting Japan's gesture to ensure Bolivia gets maximum debt relief.”

BOLIVIA: background facts Bolivia's total external debt in 1996 was US$5.174 billion. This is 81% of GNP. The country paid debt service of $413 million in 1996, more than it spent on either health or education. Bolivia is one of the first countries to have been through the HIPC process. It reached its decision point in September 1997 and its completion point in September 1998. Basic facts, 1996: Population 7.5 million GNP $6.4 billion Total Debt Stock $5.174 billion Present value of debt $3.344 billion Debt Stock per capita $699 Present value of debt per capita $452 GNP per capita $864 Debt service $413 million Debt service per capita $55.8 Debt service/GNP 6.5% Health/GDP (1990) 2.4% Education/GDP (1993/94) 5.4% Statistics from Global Development Finance 1998 Debt service in 1996 was $413 million, or Bolivianos 2096 million. With government revenue estimated at Bolivianos 8977 million, the government is paying 23 % of government revenue just on servicing the external debt. The latest figures available from the United Nations Development Programme show that health spending was 7.1% of total government spending, and education was 18.5% of total government spending. Clearly more is going on debt service than on the essential health and education programmes. This is very damaging on Bolivia's progress in development. When the Heavily Indebted Poor Countries Initiative was launched it was described as “groundbreaking” and “good news for the poor”. The reality is that Bolivia, even after it receives its HIPC assistance will still be paying very large amounts in debt service. This money would be much better spent on investment in the country's infrastructure and health and development programmes. Drugs There is a clear link between the high level of external debt and the state of the country's drug industry. Foreign exchange earned by the sale of illicit drugs provides much needed hard currency for the service of Bolivia's debt. The government is unlikely to take tough action when there is a pressing economic need for foreign exchange. In Bolivia it is estimated that over 10 per cent of the workforce are involved in the drugs industry, with some 60 000 farmers cultivating coca leaf, and thousands more involved in harvesting, selling and transportation. Net income per hectare of coca is 13 times more than that for corn and over three times more than for cocoa. The export of cocaine is estimated to make up between 28 and 53 percent of value of Bolivia's total exports.