Drop the Debt
Editorial, New York Times

Published: September 24, 2005

In July, the world's richest nations agreed to cancel about $40 billion in debt owed to international lenders like the World Bank and the International Monetary Fund by 18 of the world's poorest countries. It is a long-overdue step that would allow countries like Mozambique, Ghana, Nicaragua and Bolivia to spend about $1 billion more per year on schooling and health.

But only two months later, the promise is imperiled. It needs to be approved by the governing boards of the lending institutions. Both the World Bank and the I.M.F. have important meetings this weekend on the subject, and both lenders have indicated that they may end up giving debt cancellation a thumbs-down.

France supported the plan last summer but is now backing away. Belgium, the Netherlands and Scandinavian countries are also objecting, in part because they had no say in the original decision. The dissenters argue that debts should be canceled little by little, as countries meet new I.M.F. conditions for economic reform. But most of these poor countries have already done substantial reforms. They are on the list because they are relatively well governed.

The dissenters' other objection is that debt cancellation would cut the interest payments that in part finance the World Bank's cut-rate loans and grants to poor countries. In July, rich countries agreed to cover the losses. But their pledges are not binding, and their track record on keeping such promises is poor.

This is a real problem, but the solution is not to keep handing the bill to the world's Burkina Fasos. Debt cancellation today helps more people than new loans tomorrow.

But there need be no trade-off. One solution is for the United States Congress to pass a bill backed by the Bush administration that would authorize Washington to pay its entire share. Or the I.M.F. could sell some of its gold reserves, a step that would be painless. But Washington has blocked this as a way to finance debt relief in response to clever lobbying by gold producers.

Right now, African countries spend four times as much on paying back their debts than they do on health care. They are trapped into making ever-escalating interest payments that never touch the principal. Nigeria, for example, borrowed $5 billion, has paid $16 billion and still owes $32 billion. Canceling these debts should wait no longer.


2005 Annual Meetings Boards of Governors
World Bank Group
International Monetary Fund

September 23, 2005
The Times
Fears for deal to write off $40bn of Africa's debts
From Gary Duncan in Washington

THE $40 billion (£22 billion) deal brokered by Tony Blair to cancel debt owed by Africa's poorest nations is at risk of unravelling, campaign groups said yesterday.

Finance ministers from the world's richest nations, meeting in Washington this weekend, will seek to finalise the funding needed for the debt cancellation to go ahead.

The plan has prompted concern that the nations may not provide all the cash needed to prevent the write-off of African debts owed to the World Bank eating into the Bank's resources.
The Group of Seven (G7) leading economies and other Western governments are expected to top up funding for the World Bank's International Development Association (IDA), the biggest international aid institution, to make up the losses from the debt cancellation.
But there are worries at the Bank and among campaigners that the shortfall may not be offset fully.
Some rich countries outside the G7 are also unhappy over the debt-cancellation deal agreed at the Gleneagles meeting this summer, protesting that they are being told how they should spend their money on aid. Belgium and the Netherlands argue that insufficient extra funding is being committed for the IDA.

Paul Wolfowitz, President of the World Bank, cast doubt yesterday on prospects that a final agreement can be clinched at the International Monetary Fund and Bank annual meetings this week.
"We are committed to getting it done, and we expect real progress at these meetings," he said. He added: "It's a challenge to get that many countries together for a consensus. We have to get a consensus that we have the commitments necessary that this debt cancellation deal does not come at the expense of IDA, and does not come at the expense of developing countries."
Mr Wolfowitz, the former US Deputy Defence Secretary, said that he was encouraged that the Bush Administration had backed congressional legislation that would pledge US support to make up the lost funds.
The IDA is the World Bank's main lending arm. If it loses resources from the debt cancellation deal, campaigners and poorer nations fear it will be less well equipped to provide assistance for development in Africa and elsewhere.
Although Mr Blair and his fellow leaders from the G8 (the G7 nations plus Russia) trumpeted the $40 billion debt write-off after the Gleneagles talks, the details were left to be worked out over the rest of this year, including who should pay and how.
Britain's Chancellor will play a central part in this process today and over the weekend in talks with fellow G7 finance ministers and IMF and World Bank officials, and when he chairs a meeting of the IMF's ruling international monetary and financial committee tomorrow.

September 11, 2005
Geldof fury as G8 leaders step back from Africa aid
Maurice Chittenden

BOB GELDOF will attend the United Nations summit in New York this week in a bid to stop the G8's aid-for-Africa programme unravelling.
The Dublin singer will also be fighting to safeguard his reputation as the voice of the continent's poor, amid growing criticism of his role at the G8 summit in July.

Some activists say he has become too close to Tony Blair and Gordon Brown and that he misrepresented how much aid was being promised in giving the G8 "10 out of 10" in the aftermath of the Gleneagles summit. Analysis of the $25 billion (¤20 billion) a year announced in July shows that only $8 billion of it is new money. The rest had already been announced by the G8 governments.
Charities working in Africa, many of which are now critical of Geldof, accuse the G8 of double accounting and massaging the figures, saying much of the total "aid" package is made up of a supposedly separate debt cancellation programme announced at Gleneagles.
According to the charities, only an additional $1 billion will be available next year.
The UN summit in New York was due to discuss aid and the implementation of its "millennium development goals" to end poverty. But America has submitted 750 amendments, which effectively seek to bury mention of the targets.
Geldof has been invited to the sessions and will have lunch with Kofi Annan, the UN secretary-general. He is not allowed to speak in the forum but is expected to unleash his anger outside if there are attempts to reduce the amount of aid.
But the UN is only the first hurdle for Geldof. Leaked documents from the World Bank suggest its development committee meeting later this month may want to place more conditions on African countries before they are approved for debt cancellation. The documents say the total cost of debt cancellation could be lowered by $10 billion if "fully disbursed credits (money already provided and spent) only are included in the G8 proposal".
In addition, a group of European countries, including Belgium, Switzerland, the Netherlands and Norway, which are not part of G8 but control 17% of the votes at the International Monetary Fund, have tabled proposals questioning whether debt should be cancelled at a single stroke. They argue that African leaders could then go back on their promises to be more democratic and to use aid to help the poor.

Blair persuaded the G8 leaders to put their commitment in their own handwriting at Gleneagles, but some now seem less keen. George W Bush, distracted by the aftermath of Hurricane Katrina, has said there is no new money for Africa.
Japan has decided that cancelling debts from oil-rich Iraq will count towards its debt-relief programme to poor countries. Two other G8 countries, Germany and Italy, have said they might not be able to reach their commitments unless their economies grow. The three countries signed up at Gleneagles for 40 years but are now saying they can only commit for three.
Peter Hardstaff, the head of policy at the World Development Movement, said: "We were conned at G8 . . . it is not looking as good as (Geldof) painted it."
Many activists were upset by the way Geldof rounded on a South African campaigner and called him a "disgrace" for daring to question the deal at a Gleneagles press conference.
There was also anger that Geldof's Live 8 events, put together in a few days and watched by up to 2 billion people across the globe, stole the thunder of a Make Poverty History march by 225,000 people that had been planned for months. John Hilary, the director of policy and campaigns at War on Want, said: "At the end (Geldof) was acting as a spin doctor for Blair and the other G8 leaders."
Not everyone is as critical. Steve Tibbett, the head of policy at ActionAid said: "There is a definite fear that some of the gains and consensus that has built up is under threat.