Press release
11 March 2005

Call for debt cancellation in report of Commission for Africa a good step, but immediate stop to debt payments is needed

The Social Justice Committee (SJC) welcomes the recommendations made in "Our Common Interest: Report of the Commission for Africa ," released today. The human rights NGO particularly welcomes the call to "cancel debt stock and debt service by up to 100 per cent," including both multilateral and bilateral debt.

We remain concerned that the Commission did not call for multilateral agencies like the World Bank to accept responsibility for these debts and to cease collecting debt payments immediately. Countries like Zambia, which has debt service obligations on the order of half a million dollars a day, need to be able to stop this outflow of badly-needed cash.

"What's positive is the desire to cancel multilateral debt, especially debt to the World Bank, Africa 's main creditor. The problem is that the Commission's recommendations retain the fundamental errors of current debt relief plans. Any new debt relief will be slow in coming and will be burdened by conditions," said SJC Coordinator Derek MacCuish.

The SJC continues to call for the complete and unconditional cancellation of the debts of sub-Sahara Africa, beginning with an immediate moratorium on all debt service.

"Wealthy countries are bogged down in a debate about resources. Our concern is the money flowing out of Africa, not how to keep money flowing into the World Bank," MacCuish said. "The Commission could have made the stronger recommendation to stop debt payments from African countries right now, rather than let this drag out for years to come."

Info: Derek MacCuish 514-933-6797

Excerpts from "Our Common Interest: Report of the Commission for Africa"

11 March 2005

9.4 How does debt relief fit in?

110 Recommendation: For poor countries in sub-Saharan Africa which need it, the objective must be 100 per cent debt cancellation as soon as possible. This must be part of a financing package for these countries to achieve the MDGs, as promised in Monterrey and Kananaskis. The key criterion should be that the money be used to deliver development, economic growth and the reduction of poverty for countries actively promoting good governance. Accordingly, work should begin immediately to establish a transparent debt compact to include all sub-Saharan African low-income countries, including those excluded from current schemes. It should cancel debt stock and debt service by up to 100 per cent, and cover multilateral and bilateral debt. As an urgent measure, financing should immediately be put in place to provide 100 per cent multilateral debt service cancellation, where this is necessary to achieve the MDGs.

111 The Enhanced HIPC Initiative has had a positive impact in reducing debt stocks in a number of African countries, 27 countries are currently benefiting from debt service relief, which over time has amounted to over US$50 billion, However, it should also be noted that some of the debt written off under HIPC could not have been repaid. In the case of this debt, debt 'relief' merely relieves the creditor of a balance sheet fantasy, and does not free up any actual resources for Africa, HIPC debt relief was intended to bring debt down from an 'unsustainable' to a 'sustainable' level; this language suggests an accounting dean-up on the balance sheet, There was an inconsistency between this ostensible criterion for relief and the discussion of how the relief should be spent by governments". In practice, the 'sustainable debt' levels that were set were not derived from convincing economic analysis, although for some countries, the enhanced HIPC initiative released real resources for new expenditure, Despite this, there is widespread recognition that the relief provided under the initiative has not been wide enough, or deep enough.

112 Several low-income countries in Africa have been unable to benefit from the enhanced HIPC initiative, including Nigeria , some non-H1PCs may require stock relief to relieve debts that are 'unpayable'. Beyond this, additional relief would be on debt that could have been repaid". To support reform, the criteria on which debt relief should be granted should therefore be similar to those applied for aid - the main resources transfer.

113 Future relief should also move away from the confusing language of "sustainability", which provides increasingly inappropriate guidance on the allocation of a resource transfer the deeper the debt write-off becomes. It must instead focus on a country's capacity to utilize resources effectively for poverty reduction and growth.

115 With gradually more countries receiving 100 per cent bilateral relief under the enhanced HIPC Initiative, and the accompanying relief from many Paris Club creditors, the emphasis must now turn to the servicing of debts owed to multilateral creditors ...

122 ... 100 percent multilateral debt service relief for all sub-Saharan countries would cost less that US$2 billion per annum and could be included with the aid package in each of the two stages of additional finance outlined above.