Submission to the International People's Tribunal on the Debt,
Porto Alegre, Brazil 2–3 Feb. 2002
Almost three years after representatives of the Jubilee 2000 Debt Cancellation campaign presented their petition to the G–8 leaders in Cologne, the plight of heavily indebted poor countries remains no better. In fact, a strong argument can be made that they are worse off. Meanwhile, hundreds of development organizations around the world seem to have lost sight of the big picture, preferring to involve themselves in meaningless negotiations with the IMF and World Bank and their supporting governments. Strong words? Let's look at what is happening.
At Cologne the G–8 governments responded to the call for debt cancellation with immediate promises of debt relief. They promised to cancel debts of billions of dollars owed by the countries covered by the Heavily Indebted Poor Countries (HIPC) initiative. More countries were to be made eligible for debt relief and some time and debt level restrictions would be relaxed. In what it represented as a positive move, the IMF and World Bank introduced a new scheme, the Poverty Reduction Strategy Paper (PRSP) which each debtor country would write up to demonstrate how any debt relief received would go to help that country's poor.
To many, all of this sounded just great – finally the debt burden would be lifted off of the backs of the world's poor. The reception of PRSP's was also positive. After all, who wants the rich to run off with the money and the poor to be left in the lurch? However, the response was far from unanimous and organizations such as the SJC denounced the whole scheme. Much of the debt relief – the so–called billions of dollars – is money that would not, and could not, be paid out by impoverished countries anyway. Structural Adjustment Programs (SAPs) still had to be rigidly followed and the new PRSPs, theoretically drawn up by the affected country, have to be judged acceptable by the IMF and World Bank staff and directors.
We must also note that neither the G–8 nor the IMF and World Bank have admitted to any responsibility whatsoever for the plight of these poor countries. Many of the lenders had acted irresponsibly if not criminally. Western governments armed and supported several dictatorships, if not actually placing them in power. The West raised interest rates to astronomical levels in the early 1980s, making repayment of debt impossible. IMF and World Bank programs pushed on the poor countries were often ill–conceived and damaging. All of these factors are conveniently glossed over and ignored by the creditor countries and institutions.
So, where does that leave us now? A quick glance at some of the world's poorest countries – those where the word "poverty" is totally inadequate given the destitution and misery of so many people – demonstrates that they have not received any of the promised relief from the IMF and World Bank because they have failed to live up to the old SAPs. In particular, countries like Mali, Benin, Chad, Burkina Faso, Malawi, Nicaragua and Honduras (see below) have been too slow for the IMF's liking in privatizing hydro–electric, telecommunications, and water systems, or haven't cut back enough in public spending. As a result the debt relief they were to receive has been held back even though these countries are among the world's poorest.
From the earliest days of the various Cancel the Debt campaigns we realized that the cancellation of debt by itself would not solve poor countries' economic problems. It was always abundantly clear that a major change in global economic relationships was necessary. Yes, debt relief is imperative if poor countries are to have a chance but it must be accompanied by a more just economic system.
What has become more apparent ever since Cologne is that for the IMF, the countries that run it, and the corporations that benefit from it, collecting debts is only a secondary concern. What is more important is that countries remain indebted. Indeed, the stated purpose of the World Bank and IMF–run HIPC Initiative debt reduction process is to get impoverished countries to a level of "debt sustainability" in which they continue to make payments to the full extent possible given their economic situation. And so long as they remain indebted, the creditors, whether they be countries or institutions, can interfere in their internal operations. This indebtedness of most of the world's nations has become a means by which the creditors can plunder their resources.
Under the mantra that the private sector is more efficient than the public, the IMF and World Bank are facilitating the complete takeover of the poor countries' resources by the major corporations. In theory, privatization means simply changing control of companies and resources from the public to the private sector. In practice, this means turning control of a country's economy over to foreign interests. When Honduras is told that it must privatize its telecommunications sector in order to get debt relief, it does not mean that Honduran corporations will now control Honduras' telephones. No, it will be a conglomeration of foreign corporations that will reap the harvest. Ghana's water supply is not being taken over by a Ghanaian company but rather by French ones.
Some day in the not–too–distant future, the IMF and its friends will start giving some debt relief to the poor. They will do it, not because of the goodness of their hearts but because the debt will have served its purpose and is no longer required. The indebted nations themselves will be little more than empty shells, their economic lifeblood sucked dry.
If this were not bad enough, there is another alarming development. Many of those organizations within the international development community that one would expect to be denouncing the IMF's latest moves, seem to have been co–opted into playing games with the PRSP process. The ploy that the IMF and World Bank are successfully using is that these PRSPs are "democratic". The indebted countries themselves, their civil population and the international development community are all invited to have a say what form these PRSPs will take. Never mind that the main components of structural adjustment – like privatization, budget cuts and public spending – remain unaffected, out of the reach of public input. The IMF and World Bank continue to set the ground rules, and make the final decision as to what is acceptable or not.
Given another framework this might be laudable. In the present context, where the creditors continue to enforce a regime of SAPs, it is akin to fiddling while Rome burns or rearranging the deck chairs on the Titanic.
Twenty years have passed since the international "debt crisis" brought about by Mexico's and Brazil's threat to stop debt payments, mainly to private lenders. It is twenty years since the IMF and World Bank then came to the aid of the private banks and shoved their "structural adjustment" programs down the throats of the world's poor. Twenty years of SAPs, HIPCs and PRSPs! And what do we have? More debt, privatization, a surfeit of coffee, bananas, cocoa and other "Third World" products available for peanuts and.... lots and lots of hungry people.
Meanwhile, the world looks on.
Some of the evidence
As we begin the year 2002, the IMF is denying debt relief to impoverished nations around the world, including many African countries, despite contexts of crisis. Eight of the sixteen most impoverished countries on the United Nations' Human Development Index of 2001, are being denied debt relief by the IMF. These eight African countries, along with Nicaragua and Honduras, are suffering the exacerbating impact of drought and falling food crops.
Debt relief is conditional on privatization of public services (e.g. water, electricity, telecommunications, transport) and natural resources (oil, gas, mining). Failure to comply means no debt relief.
As the debt relief "completion point" moves farther into the future for most of these countries, the IMF continues to force compliance with corporate rule and ownership, through demands of cuts to government spending and increased privatization.
For example, throughout 2001 Nicaraguans were starving because of drought and the collapse of coffee export prices. Yet the IMF is not satisfied with the government's efforts to cut the budget, build up foreign reserves and privatize public services. IMF documents released Oct. 2 indicate that the HIPC debt program for Nicaragua would not move forward until the country complies with fiscal, monetary and privatization conditions.
Mr. Ian Bennett, the IMF Executive Director representing Canada, justified the IMF action this way: "Unfortunately, Nicaragua veered significantly away from the policy targets that it had agreed to ... Nicaragua's authorities could not provide assurances that government spending could be controlled. It was therefore with regret that the IMF had to suspend the PRGF*."
(The PRGF is an abbreviation for the "Poverty Reduction Growth Facility," the new name for the structural adjustment program. Without IMF approval, granted through the PRGF process, the whole debt relief program is halted–not only for the IMF but for almost all other creditors, such as the World Bank, the Inter–American Development Bank, and wealthy countries.)
The IMF is implementing the same policies in neighbouring Honduras, which has also been hit hard by drought, failing food crops and economic shocks. The delay in debt relief in Honduras is due to delays in privatization of the public sector, banking sector and public administration.
In the past year, these countries have experienced crises in droughts and crop failures, and as a result, increased starvation and poverty. The IMF is thus taking advantage of these desperate conditions to privatize resources and enforce conditions by which corporations can reap profits from those who are already suffering the most. The United Nations' Human Development Index (HDI) ranks 162 countries in terms of quality of life, with the lowest being Sierra Leone at 162. African countries that have been subject to delays in debt relief are represented by the following ranks on the HDI:
- Niger – 161
- Burkina Faso – 159
- Guineandash;Bissau – 156
- Chad – 155
- Mali – 140
- Rwanda – 152
- Malawi – 151
- Benin – 147
Summary of some country cases, their social context, and delays in debt relief:
| Country | Context | Debt Relief Delays |
| Niger | Human Development Index: 161 (lowest = 162, Sierra Leone) Life expectancy at birth (years): 45 Drought, large cereal shortage. Decline in economic production. Refugees from neighbouring conflicts. |
Delays in following structural adjustment demands in 2000 and early 2001 put debt relief
off–track. The government has begun opening up petroleum industry, privatizing water, electricity and telecommunications, and cut spending to get it started again, but 'completion point' not imminent. |
| Burkina Faso |
Severe drought and poor cereals harvest coupled with a rise in oil prices exacerbated the poverty
level |
Debt relief delayed as IMF and World Bank demand a "strict limitation of nonessential outlays," cuts to
public sector wages, increased taxes, privatization of the telecommunications company (ONATEL) and electrical
company (SONABEL). |
| Guinea–Bissau |
HDI: 156 Life expectancy: 45 |
No discernable progress in debt relief process since acceptance into HIPC Initiative program in Dec.
2000. |
| Chad |
HDI: 155 Life expectancy: 44 Poor weather conditions and food shortages. Chad now faces its worst famine in a decade. Intensified rebel fighting in the north, which led to an increase in defence spending, an energy crisis and a lack of foreign investment |
Delays in starting debt relief process as Chad fell behind in following structural adjustment demands, including lifting of price controls in petroleum, reform of civil service, and privatization of water, telephones, roads, electricity, cotton sector. Chad denied a scheduled start to debt relief in Dec 2000; completion point still unknown. |
| Mali | HDI: 140 Life expectancy: 51 Drought, widening hunger, impacts of neighbouring conflict. |
Debt relief delayed because of slowness in privatization. Government is now moving to privatize cotton, telecommunications, the railway, raise water & electricity tariffs, raise petroleum taxes to satisfy PRGF requirements. |
| Rwanda | HDI: 152 Life expectancy: 40 11.2% of adults infected with HIV |
IMF and WB congratulate measures to tighten fiscal and monetary policies and civil service reforms, but delay debt relief because of spending still above PRGF targets. |
| Malawi | HDI: 151 Life expectancy: 40 Drought, increase in oil prices. |
Debt 'completion point' delayed, as government is criticized for the lack of speed of the privatization of the public industries, such as Malawi Telecom. |
| Benin | HDI: 147 Life expectancy: 54 |
Debt relief completion point delayed due to the slowness of privatization. IMF and World Bank are demanding faster privatization of all public sectors, including water, telecommunications and electricity. |
| Honduras | HDI: 104 Life expectancy: 66 Drought. Economic crisis due to collapse in world coffee prices, and dependence on the US. |
Delay in debt relief due to delays in privatization of the public sector, banking sector and public administration. IMF and World Bank demand faster privatization of electricity and reform of the civil service, cuts in public wages (result: government limits teachers' salary increase). |