Eye of the Needle The Africa debt report (a country by county analysis)

Kwesi Owusu - John Garrett - Stuart Croft
Jubilee 2000, November 2000

It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God
New Testament, St. Matthew 19:24

The authors would like to thank William Bapere, Anita Beugre, Sarah Clarke, Tarela Diffa, Colin Ellesmere, Joe Hanlon and Wanja Njehu who have provided important and timely research for this publication.

Introduction

Africa's economic development in the new millennium has been dominated by the debt crisis. Foreign indebtedness now poses a fatal impediment to Africa's development and the future prospects for many countries are daunting. At the end of 1998, annual debt service payments from Sub Saharan Africa, the world's poorest region, to the richest countries amounted to $15.2 billion or 15% of exports. The total debt currently stands at $231 billion.

United Nations Secretary-general, Kofi Annan highlighted the seriousness of Africa's debt crisis in a recent letter to the industrialized countries. He pointed out that in many countries, up to 40%of government revenue was now being allocated to servicing foreign debts to the detriment of health, education and other essential social services. He warned that if the escalating debt crisis was not speedily resolved, the determination of the UN and the international community to half world poverty by 2005 would become a pipe dream. The United Nations has also revealed that worldwide 11 million children under the age of five died in 1998, most from preventable causes. World debt and the policies applied with respect to it are a major factor in these deaths.

The Eye of The Needle goes to press at the end of a year of unprecedented pressure on the rich creditor countries to provide effective leadership on the debt crisis. The expectations around HIPC2, the international mechanism for giving debt relief to poor countries, have failed to not materialise, with as little as $12 billion delivered out of a pledge of $100 billion. This is at a time of unprecedented accumulation of wealth and riches in the west.

Jubilee 2000's report, Shadowy Figures, shows that the IMF, the World Bank, the Inter -American Development Bank and the Asian Development Bank can all write off 100% of the debts owed to them by all HIPC countries, and all bar the World Bank could finance this write -off from their own resources. The African Development Bank could realistically afford to draw on up to $1 billion of its own resources without impairing its credit rating. Why there has so far not been an effective response to the continent's predicament, in the face of the escalating health and social crisis in many countries is one of the critical questions facing the international community today.

The Eye of the Needle provides essential profiles on the most indebted countries in Africa and shows the consequences of the debt burden on the continent's social and economic development. The statistics are the most up to date and provided on a country by country basis. They make it clear that the resolution of the debt crisis is critical to lifting Africa out of economic stagnation and unleashing the great potential of its people.

Summary of debt data for Sub Saharan Africa

1. For every $1 received in aid grants in 1999, Sub Saharan Africa paid back $1.51 in debt service.

2. Sub Saharan Africa owes $231 billion to creditors, that is $406 for every man, woman and child in Africa.

3. Sub Saharan Africa bears 9 per cent of the developing world's debts, but has only 5 per cent of the developing world's income.

4. Since 1996, Sub Saharan Africa has paid the IMF $1.2 billion more than it has received from the IMF.

5. In 1999, Sub Saharan Africa paid $15.2 billion in debt service. This works out at $42 million a day.

6. Sub Saharan Africa spends over twice as much on debt service as on basic health care.

7. Sub Saharan Africa spends 6.1 % of GNP on education and spent 5.0 % of GNP on debt service. If Africa's debt were cancelled it could almost double its spending on education.

8. Since 1990 debt service has risen from $10.9 billion to $15.2 billion, a rise of 39 per cent.

9. Sub Saharan Africa's terms of trade has worsened steadily since 1980, as commodity prices have fallen. The effect is to make SSA 40 per cent worse off in terms of its trade relations with the rest of the world.

10. If Africa's export prices had kept pace with import prices since 1980, Africa could have repaid its debt twice over.