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Shaping the Debate: Africa’s Debt Crisis and the G8

By Gerald Lenoir, Co-coordinator, Priority African Network

In July 2005, the world’s most powerful and wealthiest nations, the Group of Eight (G8), met at Gleneagles, Scotland, and agreed to 100 percent debt cancellation for some of the world’s poorest countries. While it was a major victory for debt cancellation advocates, reading the agreement’s fine print reveals the devilish details.

The G8—the United States, Canada, France, Germany, Italy, Japan, Russia and the United Kingdom—has consented to debt relief for fourteen impoverished countries in Africa and four in Latin America, extinguishing their obligations to the International Monetary Fund (IMF), World Bank, and African Development Bank (AfDB).

But in a joint statement on the Gleneagles declaration, representatives of some of the largest African organizations and national networks bringing together women’s, labor, researchers’, development, and advocacy groups declared:

Simply put, we are disappointed in the outcomes of Gleneagles. The resolutions fall far short of our expectations for a comprehensive and radical strategy to make poverty history in Africa...The debt package provides only 10% of the relief required and affects only one third of the countries that need it... Further, [the package is] still attached to harmful policy conditionality.

Conditions for Debt Relief

The debt being cancelled is a fraction of Africa’s total estimated external debt of $201 billion USD. Most of this crippling debt is illegitimate and odious, incurred after a period of foreign occupation or under corrupt regimes that used the loans for personal gain and repression. The people who suffered under those regimes received no benefit from the loans but are being held responsible for the debt.

Only countries that implement all of the harsh conditions of the IMF and World Bank’s Highly Indebted Poor Country (HIPC) program qualify for debt cancellation. HIPC requires governments to:

• balance their budgets, forcing them to cut spending and subsidies on basic public services such as health and education, making them less affordable to ordinary people;
• lay off thousands of government workers;
• privatize state-owned industries, which reduces tax revenue and often results in increased prices for essential goods and services;
• open their countries to unrestricted foreign trade and investment, subjecting local industries to competition from foreign multinational corporations and subsidized goods;
• promote cash crop or mineral export industries in order to earn foreign currency to pay back the debt, which adds no value to local production and makes them vulnerable to declining world market prices.

Nine more African countries are likely to complete the HIPC program and qualify for full debt cancellation in 2006 and 2007. Twenty-three African nations are completely left out.

Malawi is one of the nine countries seeking debt forgiveness in 2006. As a consequence, Malawi was compelled by the IMF and the World Bank to devalue its currency and reduce fertilizer subsidies to farmers. The Washington Post reported on the dilemma of one Malawian farmer whose corn harvest dropped precipitously from 50 to 60 bags a year to 10 bags a year because he could not afford the cost of fertilizer. The change in policy has led to a country-wide food shortage and a dependency on costly food imports.

African economies are being squeezed between the rock of HIPC conditions and the hard place of trade liberalization policies of the World Trade Organization (WTO). The Westerncontrolled WTO is demanding that poor nations drop subsidies for basic commodities, eliminate trade tariffs, and open their markets to “free trade.”

With unrestricted access to African economies, foreign companies flood their markets with cheap goods that wipe out local industries. Instead of supporting independence and development, WTO and HIPC mandates foster increased dependence and perpetual underdevelopment.

Debt and Global Apartheid

The HIPC program criteria “is itself a sign that debt cancellation is being treated as a question of charity and not global justice,” said Charles Mutasa, Executive Director of the African Network on Debt and Development (Afrodad). “The [G8] agreement does not address the real global power imbalances but rather reinforces global apartheid.”

Global apartheid describes the increasingly polarized relations between the Global North and the Global South. It reflects the racial, social, and economic inequality between the rich nations of the North and the impoverished nations of the South.

Forced to pay billions of dollars a year in debt service, African nations have had little to invest in economic development, job creation, education, health care, and community development. The result has been a downward economic spiral and a deterioration of social and health conditions.

In addition, the national sovereignty of African debtor countries has been seriously eroded, especially with regard to economic, industrial, and fiscal policies. Impoverished African nations have been subjected to a form of absentee colonialism. The G8 governments do not rule these countries directly but dictate their governmental policies through bilateral and multilateral lending, trade, and aid institutions. The big losers are the majority of the people in the debtor African nations who live in abject poverty.

Life After G8

Although the G8 debt relief scheme is seriously flawed, it has given the international movement for debt cancellation a major boost. In the United States, AFSC, Jubilee USA, and other organizations are educating and mobilizing the public to pressure the U.S. Congress to pass the Jubilee Act. The bill calls for 100 percent unconditional debt cancellation for 50 countries. Debt relief advocates will also continue to demand that the U.S. Department of Treasury, the IMF, and the World Bank establish new regulations for debt cancellation eligibility.

U.S. activists are working in tandem with groups in Africa, the rest of the Global South, and G-8 countries. The success of the worldwide movement could bring an end to debt slavery and a new beginning of economic and racial justice across the globe.

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