Group calls for debt swaps to ease burden



By Lewis Machipisa

19th October, 2001.


In Mozambique, one in four children dies before the age of five years due to
infectious diseases, yet the government spends four times more on debt
servicing than on health care.
Zambia spends 37 million U.S. dollars on primary education. In the same year
it devotes 1.3 billion dollars to debt payments.

Such grim statistics are found in much of African countries. Debt repayment
is proving to be the greatest obstacles to the continent's development and
poverty reduction.

Faced with such a problem, African groups on debt are now calling for a debt
swap initiative to ease the continent's crippling debt crisis.

Under the initiative, a creditor donates the debts to a non- governmental
organisation that then uses the money to carry our projects in the debtor
country.

''The debtor government's commitment remains but with the payment in local
currency at agreed rates and within specific timeframes,'' says Twisema
Muyoya of MWENGO, a Non-governmental Organisation (NGO) working in the area
or international trade and development.

''Instead of money going to pay debt, can't it be diverted and comes back to
develop local communities,'' says Muyoya.

''If the programme is right, the debt being converted become a development
resources as relief is not provided to the government but to the development
process and the people,'' adds Muyoya. ''Resources mobilised from debt swaps
will have to be applied in strategic areas in order to maximise impact.''

According to the Africa Forum and Network on Debt and Development (AFRODAD),
Sub-Sahara Africa's debt to both multilateral and bilateral creditors stands
at around 370 billion U.S. dollars.

It continues to rise, not because of any significant additional borrowing
but mainly as a result of the cost of servicing the debt.

Every day in 1999, 128 million dollars was transferred from the poorest
countries to creditor nations in debt payments, according to AFRODAD. Of
this, 23 million dollars was from sub-Saharan Africa. Zimbabwe for example,
paid a third of this amount in 1999.

''In these circumstances, it is simply not possible to speak of any
significant measure of development, for as long as African countries are
obliged to allocate so much of their lean resources to debt servicing,''
says Eunice Mafundikwa of the African Forum and Network on Debt and
Development (AFRODAD).

''It cannot be denied that Africa's debt crisis is one of the major causes
for the economic crisis facing the continent today,'' says Mafundikwa.

Of the 41 countries classified as Highly Indebted Poor Countries (HIPCs), 33
are in sub-Sahara Africa. It is also these very poor countries that not only
owe the most but also have the least capability to repay the debt.

According to the United Nations, ''up to 40 percent of African countries'
government revenue is now being allocated to servicing foreign debt to the
detriment of health, education and other essential social services.''

For example, sub-Saharan Africa spends twice as much as on debt servicing as
on basic health services. It also spends 6.1 percent of Gross National
Product (GNP) on education and five percent of GNP on debt servicing.

''The west's response to the debt problem has been to hatch up plan after
plan, initiative after initiative. But none of these have adequately
addressed the problem and the bulk of the crisis remains unresolved,''
observes Mafundikwa. ''The result is the deterioration of services and more
indebtedness.''

''Debt cancellation is therefore, the only effective way to end poverty and
put Africa on the path to continued development,'' says Mafundikwa.

According to the UN Economic Commission for Africa (ECA), ''Africa's debts
are too high to afford and debt relief on a more inclusive and more
effective basis than hitherto remains essential to the continent's ability
to meet minimum development needs''.

Approximately 30 percent of new aid money in sub-Saharan Africa is directed
away from social services and redirected towards servicing debt payments to
mainly the World bank and the International Monetary Fund (IMF).

Sub-Saharan Africa governments owe foreign creditors an average of almost
400 dollars for every person on a continent where the average annual wage is
less than 400 dollars per person.

If each of Zimbabwe's 13 million people, for example, were to pay back the
debt owed by the government, each would pay 667 U.S. dollars, according to
Simba Munyanyi, of the Zimbabwe coalition on debt and development (Zimcodd).

According to Munyanyi, over the past three decades, the public debt has
grown in size and impact, making it one of the three main external factors
that constrain Africa's development.

In a new book on the social effects and politics of public debt in Zimbabwe,
Zimcodd blames structural adjustment programmes for the rising debt.

For Africa, the debt crisis provided a rational for bail out strategies
through the International Monetary Fund and the World Bank designed
structural adjustment programmes, prompting some debt restructuring
proposals by creditor nations.

But, after dozens of such programmes in sub-Saharan Africa, the volume of
total external debt as a percentage of export income tripled from 102
percent in 1978 to 326 percent in 1986. It also tripled as a percentage of
gross national product from 243 percent to 74.4 percent, according to Zimcodd.

By 1997, sub-Saharan Africa owed creditors 235.4 billion compared with 84
billion dollars in 1980, making the countries bankrupt.

''The loans by IMF and World Bank added to the debt burden on top of very
strict economic programmes in order to reschedule debts or lend more money
to bankrupt government,'' says Zimcodd.

''We also have to look at the legitimacy of the debt we are paying. Some of
it was accrued under military dictators who have long died and current
governments have to pay for it. Is that fair?'' wonders Muyoya.