IMF refuses to re–start debt relief program for Nicaragua, despite starvation and economic crisis; delays debt relief to many other crisis–stricken impoverished countries.
20 Dec 2001
Dear friends,
We had hopes that we would be able to update you on Nicaragua debt relief situation with the news that the IMF had found its way clear to re–start the program, but that is not the case.
From what we have heard, there was a lot of reaction by people within the IMF when they got so many messages expressing concern that Nicaragua's debt relief was on indefinite hold. Many people were rightly troubled that the IMF could punish the country because the government didn't follow demands to cut spending and sell off public services. We thought we could get a victory on this one, but we were wrong.
As the Canadian Executive Director wrote us, "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 IMF is doing the same thing to neighbouring Honduras, which has also been hit hard by drought, failing food crops and economic shocks.
But there is even more bad news. In countries throughout Africa, many of them suffering lengthy periods of drought and increased hunger in a context of widespread poverty, the IMF is delaying debt relief as a way to force its demands of budget cutting and privatization.
Here is a short summary of the situation, followed by suggested actions you can take.
* The PRGF is 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 (like the World Bank, Inter–American Development Bank, and wealthy countries). The whole story, including the context of starvation and economic crisis that hit Nicaragua this year, is available at the Social Justice Committee web site
| 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). |
Please write to your local newspaper, and to the IMF and World Bank to express your thoughts.