WASHINGTON–As the international economic crisis heats up attention swivels to the financiers who are in danger of losing their fancy pants. It would be more appropriate, if admittedly not so politically pressing, if we reserved rather more leeway for action not just to aid the financiers and their billions, necessary though that may be “to save the system”, nor just to aid the new poor now being created in abundance, but to be able to give a lift to the old poor still weighted down under the debt accumulated from past financial crises. One United Nations estimate suggests that 20 million African children will die before the end of the millenium as a consequence of old albatrosses, unless the continent’s long-standing debt crisis is resolved.
Africa has attracted too little private capital for the crisis now besieging emerging markets in Asia, Russia and Latin America to have much direct effect on it. In fact the creditors in Africa are not footloose banks and investors but staid western government aid ministries and multilateral agencies such as the World Bank.
Years of African government mismanagement, wars, disease (malaria and AIDS in particular), and falling commodity prices have made the paupers of Africa deeply indebted. Ethiopia alone will pay $1 billion in debt service over the next four years. It has been said that every baby born in Mozambique owes $350 before it leaves its mother’s womb. The number of those dying as a result of debt-induced cutbacks exceeds by a magnitude of at least 15 the number of slaves who died during the passage to the Americas.
The International Monetary Fund and the World Bank have long had in place a plan to help 40 of the world’s poorest and most indebted countries. (This includes Asian countries like flood-ridden Bangladesh and Latin American backwaters, such as Bolivia, too.) The idea is to lift part of the debt, but only as countries satisfy some quite tough criteria–nothing less than six years of good economic and fiscal performance.
But six years is a long time to wait–and far longer, for example, than would-be members of the European single currency had to prove their credentials. Very few countries have become eligible. Of course, there is an imperative to make sure that once again aid is not wasted, but the human cost of waiting this long time is excessive.
Yet there are still many voices speaking for one slow step at a time–in Germany, Britain and the U.S. in particular, but also within the World Bank and the IMF.
The development economist Professor Michael Lipton argues that they are right to be cautious. More occasional help for Africa, he says, means less for relatively well-managed economies such as India and China which already get less support per head than Africa yet remain, in total numbers, the heartlands of poverty. However, he could have added that these two countries have been growing relatively handsomely and thus have the wherewithal to do more for the very poor themselves.
Others, such as Martin Wolf, the ex World Bank official and Financial Times columnist argues that debt relief gives most “to the countries that have wasted their money most completely”. Since they so grossly misspent their resources in the past, six years, he suggests, is probably not a day too long to wait. Then we’ll know if they are reformed characters.
Mr Wolf believes that the big challenge “is not debt, it is performance, or rather the lack of it”. There is truth in this. We do lack proof that these most highly indebted countries use debt relief resources specifically for alleviating poverty, sickness and illiteracy. There is evidence that it does get diverted to arms, public buildings, diplomatic representation and the pay-roll of over-bloated bureaucracies.
But what these doubters downplay is that many countries in Africa ARE changing for the better. The real question is how to use debt relief as a carrot to lead countries in the right direction. The human cost of waiting for copper-bottomed proof perfect by handing in a six year time-sheet is too high. As Oxfam has suggested those countries that will immediately commit the proceeds of debt relief to tackling poverty should get it.
Uganda, a pioneering country in so many ways since the overthrow of the dictators, Idi Amin and Milton Obote, has shown the way. One of the few countries to satisfy the six year criteria, it has ring-fenced debt relief so that other government interests have no access to it. The money released has to go on primary education and health care. And the government books are open for those who wish to track its performance. This is no small achievement when we know that less than 20% of traditional rich countries’ aid goes for such programmes (and a good deal less than 20% of most Third World government budgets).
Unfortunately, despite success in Uganda, the steam has gone out of debt relief in Africa. The fires need to be re-stoked. Finance ministers meeting in Washington this week at the IMF/World Bank annual meeting must use the occasion to look at the arguments with a fresh eye and act–the old poor must not be forgotten in the all-consuming debate on the world’s present debilitating economic crisis.
