Exposing the G7 lies
By Eric Toussaint
Was last month's G7 Summit (bringing together the United Kingdom, United States, France, Japan, Italy, Canada and Germany) in Cologne a move towards cancelling poor countries' debts? Don't believe all you're told!
At the summit, a petition of approximately 17 million signatures collected all over the world asking for the cancellation of poor countries' debts was handed to the heads of state of the seven richest countries in the world. The latter announced on June 18 that the problem of the poor countries' debt burden had been solved: 90% of the debt would be written off. This claim, however, is untrue.
What is the real situation?
The announced cancellation amounts to a maximum of US$25 billion, about 1% of the total Third World debt (which totals US$2030 billion, not including the former Eastern bloc, according to the latest World Bank report, published in April) — a drop of reduction in an ocean of debts.
Seen against the total debt of the 41 poorest countries, the measures announced deal with no more than 12% of their debts, which come to US$205 billion. The 41 most highly indebted poor countries by World Bank criteria are: Angola, Benin, Burma, Bolivia, Burkina Faso, Burundi, Cameroon, Congo, Ivory Coast, Ethiopia, Ghana, Guinea, Guinea Bissau, Equatorial Guinea Guyana, Honduras, Kenya, Laos, Liberia, Madagascar, Mali, Mauritius, Mozambique, Nicaragua, Niger, Nigeria, Uganda, Central African Republic, Democratic Republic of Congo, Rwanda, Sao Tome and Principal, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Chad, Togo, Vietnam, Yemen and Zambia.
Only seven of these would actually qualify for debt reduction according to the present criteria: Bolivia, Burkina Faso, Ivory Coast, Guyana, Mali, Mozambique and Uganda. The majority of the world's poor live in India, Indonesia, Brazil, Bangladesh, Pakistan and Mexico — none of which are concerned by debt reduction measures.
Furthermore, at best it will take three to six years for the announced sums to be reached. In the short term, to "benefit" from the measures, the poor countries will have to fulfil draconian conditions (more severe "structural adjustment programs").
Probably only 20 of the 41 countries which could benefit from the reductions will qualify for them. (The Democratic Republic of Congo, Sudan, Liberia, Sierra Leone and Angola will definitely not). Candidate countries will have to apply harsh austerity measures for three or even six years. These will reduce the purchasing power of the poorest citizens because of increased taxation combined with rising costs of basic commodities; resulting in ever more limited access to health care and education for the majority in the South. In these countries, 50% or more of the population already live below the threshold of absolute poverty (in cases such as Mozambique and Rwanda, it's more than 70%).
The measures announced constitute an extension of the Highly Indebted Poor Countries initiative taken in 1996 by the World Bank, the IMF and the G7. Have the HIPC measures improved the circumstances of the populations concerned? They have not. The World Bank itself admits this, and advocates patience.
If the standard of living hasn't improved, has there at least been an improvement in the economic situation of those countries? Are they paying out less in annual debt repayments? No, they're not. On the contrary, those countries have to repay more than they receive.
In 1997, the rich countries lent US$8 billion to the poorest countries, while the latter repaid US$8.2 billion, i.e., US$200 million more. The International Bank for Reconstruction and Development of the World Bank group and the IMF get more from the poor countries in repayments than they lend!
For the future, the World Bank has just announced that, despite the promised debt reduction measures, the amounts to be repaid will not decrease. Worse still, some countries will have to repay more than before (for example Mali and Burkina Faso).
The G7 has put the IMF and World bank in charge of overseeing the implementation of structural adjustment policies. According to the G7 statement, these plans should bring about improved health care and education, but how can such improvements be envisaged within the narrow framework of austerity budgets?
After debt reduction, Mozambique will still have to devote more than 40% of its budget to debt repayments. In such conditions, how can there possibly be improvements in the provision of health care for the population?
It is time to stop plundering these countries.
Public development aid has reached an all time low. It has dropped by 33% since 1990 while the amounts repaid by the entire Third World have not ceased to increase. In 1998, the Third World taken as a whole repaid US$250 billion, whereas public development aid barely scraped past the US$30 billion mark.
This means that the Third World transferred eight times as much to the rich countries as it received from the "generous" public development aid.
According to the World Bank, between 1987 and 1998, worldwide, the number of people living below the absolute poverty line (on less than $1 per day) increased from 1200 to 1500 million.
In fact, as is shown annually by the World Report on Human Development, produced by the United Nations Development Program, it is not the West that is helping the South — it is the population of the South which transfers considerable wealth to the holders of capital in the West, at the cost of intolerable suffering and sacrifices. This transfer is effected through two basic mechanisms: debt repayment and unfair trading.
A new debt crisis has erupted as prices of products sold by the Third World on the world market have dropped considerably while the interest rates applied to service debts have risen. In other words, the Third World countries are earning less and repaying more. On the other hand, the leading industrialized countries are making savings on the cost of importing raw materials from the Third World and the interest rates on their own public debts have dropped since the Asian economic crisis.
The Third World populations have already repaid more than enough. The external public debts of the Third World countries must be totally written off. To prevent corrupt and dictatorial regimes in the South from taking advantage of this cancellation, their holdings in rich countries must be frozen and, after due investigation, returned to the populations of the Third World countries via development funds run democratically in each country.
Other complementary measures must be taken including the cessation of structural adjustment programs and the introduction of taxation of financial transactions.
[Abridged. Eric Toussaint is president of the Committee for the Cancellation of the Third World Debt and author of Your Money or Your Life, Pluto Press, London, 1999.]