After long delays, Ethiopia is granted ‘Topping Up’

 

Cheers went up in nef’s offices in London when news arrived on 20^th April, 04, that Ethiopia had finally been granted the additional $700 million debt relief promised by creditors as far back as the autumn of 2003.  The news was significant not only for Ethiopia, but for other HIPC countries waiting in the pipeline, for the decision on Ethiopia was precedent-setting. While Jubilee Research at nef holds that in order to reach the MDGs, Ethiopia should be granted total debt cancellation, all those who campaigned on the country’s behalf during the past weeks were greatly relieved that creditors had honoured their own limited commitments. That they did so is a tribute to Jubilee Research at nef whose staff had co-ordinated international civil society pressure on the US, Germany, Japan and Russia. Hiding behind bureaucratic smokescreens, these creditors had deliberately delayed Ethiopia’s appearance before the Boards of the World Bank and IMF in attempts to block the large sums of “additional” debt relief recommended by their officials .[i]

To sum up: On April 20^th Ethiopia finally reached Completion Point under the Heavily Indebted Poor Countries (HIPC) Initiative[ii] and received ‘topping up’ debt relief. This makes it the 13^th country to reach Completion Point, and the third to receive topping up, the extra debt relief deemed necessary by the World Bank for countries that have suffered ‘a fundamental change in their economic circumstances due to external shocks, or “exogenous developments”’.[iii]

Ethiopia will now receive debt relief for US$3.3 billion in nominal terms. In Net Present Value[iv] terms, this means that the total debt relief amounts to US$2 billion, of which US$1.3 billion was agreed at decision point while an extra US$0.7 billion were granted as topping up. Despite this, Ethiopia will still be paying an average of US$116.7 million per annum between 2003 and 2013, and US$217.9 per annum till 2023. This is a terribleburden for a country where nearly half the population are living below the poverty line and 13 million people were in need of food aid in 2002/2003. Moreover, it means that according to the World Bank and IMF calculations, it will still be using more than 5 per cent of its government revenues to service its debt in the run up to the Millennium Development Goal deadline of 2015. [v]   

In March, Jubilee Research enlisted the help of four All Party Groups in the UK House of Commons (the APGs for Africa, Ethopia, HIPC and Overseas Development). Together they drew up an Early Day Motion,[vi] signed by almost 150 MPs, demanding that the Government bring pressure on Ethiopia’s creditors to stop delaying the country’s debt relief. These MPs also wrote to the representatives of the creditor countries said to be holding up debt relief, to call for an end to the delays.

Jubilee Research at nef  then arranged a meeting at the House of Commons, with the UK Chancellor, Gordon Brown, and Bob Geldorf of Data, as speakers. During the meeting Jubilee Research pointed out that Completion Point for Ethiopia had been held up for six months because of creditor objections to its topping up application, and that this set a dismal precedent for other topping up applicants – one that might well result in deserving countries deciding not to apply for topping up in case their Completion Point was delayed in a similar way. Since such an outcome would make a nonsense of the whole purpose of the topping up procedure, Jubilee Research asked the Chancellor what practical action he proposed to take to ensure that it was avoided, and requested him to use his influence to deter creditors repeating the blocking process in future. We have followed up this request with a letter pressing for a definitive answer to this question.

Overall, the meeting generated a great deal of fresh interest among parliamentarians and the public in the whole issue of poor country debt, and emphasised yet again how important it is to address this question in all debates about sustainable development.