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World Bank says West failing on debt relief (BBC) Eurodad Debt Listserve Stefan Armbruster BBC News Online business reporter 13/01/03 The head of the World Bank's debt relief programme has blamed the contradictory policies of the industrialised world for failing poor countries. Vikram Nehru, the manager of the Highly Indebted Poor Countries (HIPC) arm of the World Bank, told BBC News Online that developed countries were damaging the debt relief programme. "A case can be made that trade policies which seek to protect domestic producers of commodities in the developed world end up hurting poor countries which are receiving debt relief through another programme," said Mr Nehru. The developed countries are the key donors to the World Bank lending programmes. "I still believe there is scope for improving this (HIPC) programme," he said. Disadvantaged HIPC "forgives" the debts of poor countries in exchange for economic liberalisation, which often involves privatisations, the removal of trade barriers and reduction of domestic subsidies. The debt relief is tied to the level of the countries' exports, which are usually basic commodities whose prices have crashed on the world markets in recent years. The US and European Union are leading backers of the World Bank and its programmes, but despite this maintain heavy subsidies for their own agricultural sectors. Such subsidies allow US and European farmers to overproduce and swamp the world markets with their produce, at the expense of poorer farmers from developing countries. 'Intolerable' debt Twenty-six of the world's poorest countries are at various stages of the HIPC programme and have had $42bn cut from their books, leaving them to service about $22bn, according to the World Bank. However, Uganda and Zambia have recently complained that despite HIPC they still have "unsustainable" and "intolerable" debt levels. "I don't think the HIPC programme can be faulted," said Mr Nehru. He blames these countries' lack of financial discipline and the international commodity markets for increasing their debts again after completing HIPC. "A significant part of the increase has be due to increased borrowing and a decline in export levels due to a decline in commodity prices on international markets," he said. More is less The HIPC programme aims to reduce debts to 150% of a country's export earnings. Uganda, which was held up as an model for other countries to follow after becoming the first to qualify for HIPC, is back above that level after completing the programme. Its foreign debt has grown from $3.4bn in 1998 to $3.8bn last June, even though the country has received more than $1bn in debt relief. "I think you have to interpret Uganda's figures with some care," said Mr Nehru. "Uganda's current debt-export ratios are below what they were before they joined but I absolutely agree are higher than where they were after they received irrevocable debt relief." No responsibility? Provisions have recently been introduced to give additional relief to HIPC countries when there are unanticipated or shock declines in commodity prices. But once countries like Uganda leave the programme, if their main foreign currency earning export crashes, then they are on their own. "The level to which debt is brought down once a country has gone through the HIPC programme recognises that countries... are likely to exceed [those debt levels], sometimes temporarily or for longer periods," said Mr Nehru. "To expect the HIPC programme to resolve that is unwarranted and unneeded, but it is certainly an issue that needs to be addressed," he said.
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