The issue of Africa's debts has been in the news for a month....just a few update

Debt Relief Is Only a Small Step for Poor Africa

Sat Feb 12, 9:51 AM ET

By Ed Stoddard

CHIROMO, Malawi (Reuters) - Malawi is $2.9 billion in debt but the
cash that was borrowed hasn't done Simao Aloni or his home village of
Chiromo any good.

Campaigners for debt relief argue that as a result, the people of
dirt-poor Malawi shouldn't be burdened with it.

The Group of Seven wealthy nations pledged on Saturday to help to rid
the world's poorest countries of their weighty debt, launching a
program that fell short of the immediate action demanded by Africa.

The compromise deal pledged only that the G7 would look at canceling
up to 100 percent of the debts owed to international institutions by
the poorest countries on an individual basis.

The misery of places like Chiromo highlight the urgency of the task
but also underscore a brutal fact: Debt relief will be only one small
step toward filling the chasm that exists between Africa and the rich

"If people see electric lights here, it's a novelty," said Aloni as
he washed dishes for his employer, a city businessman in Aloni's home
village of Chiromo on a camping trip.

His meager wages in the commercial capital Blantyre help to support
his family in Chiromo who, like almost everybody else here, eke out
an existence from fishing or subsistence farming.
Malawi's accumulated foreign debt -- which is equal to about 154
percent of its gross domestic product (GDP) -- has certainly not
been spent here.

Once a bustling trading town across the Ruo River from neighboring
Mozambique, Chiromo has sunk into squalid poverty.

The former police station is now a roofless shell. Inside, it is
overgrown with a riot of wild vegetation.

Roads that were once paved are now sand-tracks full of potholes.
Villagers living in simple brick or mud huts on the river banks have
no electricity. Most are clothed in rags.

Hand-hewn wooden canoes are the main mode of transport.

People who bathe or wash clothes in the river because they have no
running water run the risk of being eaten by crocodiles. These are
scenes that can be repeated endlessly throughout the world's poorest
continent, where much of the money that has been borrowed -- or
simply thrown at governments as aid -- has been squandered or stolen.


Despite decades of aid and borrowing, Africa has grown steadily
poorer, the income gap between places like Chiromo and the rest of
the world steadily wider.

The United Nations Development Program (UNDP) says that sub-Saharan
Africa's per capita GDP -- the economy's annual output divided by the
number of people -- was $469 in 2002 compared with $22,987 for the
affluent members of the Organization for Economic Cooperation and

According to the World Bank (news - web sites), in 2003, gross
national income in Malawi, a sun-drenched and fertile land that is
once again confronted with food shortages, was only $160.

Malawi's foreign debt is crippling and any relief would be welcome.
But much more than that needs to be done.

"The most powerful tool toward closing the disparities between Africa
and the rest of the world is market access. These countries must grow
their export base," said Robert Bunyi, Africa economist at South
Africa's Standard Bank.

Boosting exports is easier said than done.

Malawi's government has made cotton and textiles the linchpin of its
development plan as it attempts to diversify an economy heavily
dependent on tobacco and sugar exports.

The fact that it is pinning its hopes on a cotton-driven industrial
revolution, over two centuries after Britain's began, throws its
state of underdevelopment into sharp relief.

And the debt relief initiative coincides with an end to a curb on
clothing imports from developing nations to rich countries which is
expected to hit African textile producers hardest as they face stiff
competition from Asia.

American economist Jeffrey Sachs has recently argued that more -- but
well-targeted -- aid is needed to pull Africa out of its "poverty

Africa's extreme poverty, he argues, has led to low savings rates. As
a result, the level of capital is so small that it falls below the
threshold needed to start modern production processes.

In Chiromo, the people have nothing to save. And they are unable to
pay off debts incurred over decades that were squandered elsewhere.


Britain to pay Ghana debt worth 80 million dollars

   LONDON, Feb 15 (AFP) - Britain on Tuesday announced
plans to pay 10 percent of Ghana's multilateral debt,
at a cost of 79.9 million dollars (42.3 million
euros), as London forged ahead with an ambitious bid
to tackle African poverty.
   "The British government is to pay 79.9 million
dollars of Ghana multilateral debt between 2005 and
2015," a Treasury statement said.
   Following a Group of Seven (G7) agreement early
this month for proposed 100 percent debt relief to the
world's poorest countries, Britain swiftly announced
it was taking immediate action on debts owed to it by
developing countries, including Ghana.
   Britain, as current president of the Group of Eight
industrialised nations -- the G7 plus Russia -- wants
the world's richest donor countries to take over a
proportion of developing nations' debt owed to them
through the World Bank and African Development Bank
and service it themselves.
   Britain has pledged to pay 10 percent of the total
of this debt by 2015, on behalf of countries with good
governance and established poverty reduction
strategies. In addition to Ghana, the treasury has
reached agreements on 10 percent debt write-offs with
Mali, Tanzania and Mozambique.
   The move followed a statement early this month by
finance chiefs from the G7 nations, Britain, Canada,
France, Germany, Italy, Japan and the United States,
expressing readiness to provide 100 percent debt
relief for the world's poorest nations.


Friday, 4 February, 2005, 19:58 GMT

US rejects UK plan to boost aid

The US rejection is a blow to Mr Brown's global vision

The US remains opposed to a UK proposal to boost aid for the world's
poorest countries, saying it is unnecessary.

Chancellor Gordon Brown is using the G7 meeting of finance ministers
and central bankers to call for the $100bn International Financing
Facility (IFF).

Before the meeting, US Treasury Under-Secretary John Taylor
dismissed the plan outright, saying the US wanted to switch money
from loans to grants.

The UK, which has support from other G7 countries, is trying to get
US support.

The G7 ministers will discuss the proposals at the two-day London
meeting, due to conclude on Saturday.

On Friday night, former South African president Nelson Mandela
backed Mr Brown's plan when he urged the finance chiefs to write-off
African debt and provide an extra $50bn a year in aid for the next

Mr Mandela, who on Thursday addressed an anti-poverty rally in
Trafalgar Square, was a guest at a working dinner attended by the

In his opening speech, Mr Brown also called on the world's seven
richest nations to remove barriers to global trade, and to promote
global stability and growth.

Ahead of the G7 meeting in London, which kicks off the UK's one-year
presidency of the G7 club, he called on them to "rise to the global

In other developments:

Ministers want to use the meeting to tackle the issue of the Chinese
yuan, which is pegged to the dollar, and is seen by some as forcing
other currencies - particularly the euro - to bear the brunt of the
falling dollar

Ministers not only from China but also from India, Brazil and South
Africa are at the meeting in order to ensure that the biggest non-
industrialised economies are also represented

The US wants to stress its view that the other six G7 countries need
to loosen regulations so as to encourage faster growth

The UK is calling for an increased pace of debt relief for poorer

In a keynote speech, US Federal Reserve chairman Alan Greenspan said
the US is on track to stabilise its massive trade deficit

Parallel discussions - organised by the UK Treasury - on advancing
enterprise are also taking place.

EU trade commissioner Peter Mandelson urges ministers to put trade
on an equal footing with aid and debt relief in their bid to tackle
poverty in Africa.
Cold water

Mr Taylor - deputising for Treasury Secretary John Snow, who is
unwell - has been particularly vocal in the past in dismissing the

"Not only does the IFF not work for the US, we don't need the IFF,"
he told reporters while heading for the meeting on Friday morning.

He also poured cold water on another UK idea: to fund debt relief by
revaluing and selling part of the International Monetary Fund's gold

And he reiterated his own preferred option, of switching
international aid from loans to grants. The US argues this will
prevent countries becoming burdened with new debts, while critics
say it will rapidly drain available aid coffers.

Non-governmental groups were unsurprised by the response.

"This is what we expected from the US," said charity ActionAid's
policy officer, Romilly Greenhill.

Oxfam Senior Policy Advisor Max Lawson said: "By throwing down his
cards before the G7 meeting has even started, US Treasury Under-
Secretary John Taylor has shown a dangerous unwillingness to
compromise. If a deal on debt is not reached here, it is the world's
poorest who will suffer."


On China, Mr Taylor said he was looking forward to a "candid"
discussion about the yuan and wanted Beijing to "move as quickly as
possible to a flexible exchange rate".

China, for its part, showed little sign of budging.

Chinese newspapers have suggested that there is a "mature" consensus
for "fine-tuning" the yuan's dollar peg.

But the governor of China's central bank gave away no clues on
future exchange rates at a press conference on Friday, which he used
to reiterate China's willingness to work with international bodies
like the G7 to "keep the global economy more balanced".

The meeting concludes on Saturday.

BBC News.