Stephen Vasciannie
THE BRITISH Chancellor of the Exchequer, Gordon Brown, has been leading a major effort in support of African debt relief. Hot on the heels of his personal success in the British elections, Brown, and by extension the British Government, has encouraged various so-called G-7 or G-8 countries (major industrialised States) to give commitments that would lead effectively to a write-off of US$55 billion of the international indebtedness of various poor countries.
Technically, what is proposed is not a write-off of African debt, but rather, a write-off of the debt of countries that have the misfortune to be counted among the Highly Indebted Poor Countries (HIPC). Alas, these are mainly African countries, so the initiative is being perceived as one of the ways of relieving deep-seated problems on that continent.
The current proposal, then, is for the G-8 countries, almost immediately, to write off US$40 billion owed by 18 highly indebted poor countries to the World Bank, the International Monetary Fund and the African Development Bank. Some countries may also be eligible for a write-off of US$11 billion in the future, and there may be further debt forgiveness of US$4 billion.
FAIT ACCOMPLI
Technically, too, the Brown initiative is almost, but not entirely in the bag. The G-8 countries will meet next month at Gleneagles, Scotland, with a view to finalising the arrangements. Chancellor Brown is optimistic; given, however, that each of the rich participating countries will be obliged to finance the scheme to the tune of between US1 billion and US$2 billion per year, one can expect further arguments in Gleneagles before the deal is done.
Debt forgiveness in the form of a write-off is not without its complications. To begin with, it cannot be presumed that rich countries are generally enthusiastic about providing substantial assistance to Africa. On matters concerning aid, we are all entitled to at least a little scepticism: relations between States are still governed in part by Realist - or realistic - conceptions of power and responsibility, so that strong countries often do not willingly give out money, or write-off indebtedness, without having their national interests in mind. Sometimes, these national interests do not accord fully with those of the highly indebted poor country.
AID OBLIGATION?
On a related point, rich countries have never fully accepted an obligation to provide international aid to poor countries, and in some cases have not accepted such an obligation at all. Though the United Nations has recommended that rich countries should contribute 0.7 per cent of their gross national product to international aid, this target is hardly ever observed.
But the tide may be changing. Western European countries have pledged that they will contribute 0.51 per cent of their gross national product to international aid by 2010, and that this will increase to 0.7 per cent by 2015. Britain's Financial Times suggests that the United States is the "stingiest donor among the wealthy countries", but this may be a bit harsh.
GROSS NATIONAL PRODUCT
The U.S., which gives 0.16 per cent of its gross national product to poor countries, comes in just ahead of Italy at 0.15 per cent. In fairness, too, America's annual US$19 billion international assistance amounts to more than 25 per cent of all assistance given.
Rich countries meeting at Gleneagles may also argue about the nature of the debt write-off. If this write-off is not accompanied by an increase in rich country contributions to the World Bank, the IMF, and the African Development Bank, the net effect will be to reduce the funds available at these institutions for future loans. The poorest countries will have no debt, but there will be smaller loan funds available for them, and for other developing countries - such as Jamaica - that are not in the HIPC category.
Apparently, there is some agreement that this will not happen, as the rich countries may commit themselves to make contributions to each lending institution that match the amounts of the write-off.
GOVERNANCE ARRANGEMENTS
But, even if new funds are made available to compensate for the write-off, other issues will remain. It is reported, for instance, that Germany and Japan have concerns about the carte blanche nature of the write-off. If all HIPC multilateral debt is written-off, the rich countries will have less influence over matters such as the reduction of corruption, a more equitable distribution of aid funds, and the improvement of governance arrangements.
Finally, although the debt write-off should be supported on humanitarian grounds, the moral hazard problem remains, together with its economic implications. If all indebtedness of the highly indebted is written off by multilateral banks, who will be anxious to lend money to these poor countries when they seek future loans?
Stephen Vasciannie is a professor at the University of the West Indies and a consultant in the Attorney General's chambers.
