AFRICA-EUROPE FAITH AND JUSTICE NETWORK
RESEAU FOI ET JUSTICE AFRIQUE-EUROPE

174, rue Joseph II
B-1000 Bruxelles - Belgique
Tel. 32-2 234 6810 Fax 32-2 231 1413
aefjn@aefjn.org http://www.aefjn.org

AEFJN is a network of 41 catholic religious and missionary Institutes with members in Africa and Europe, promotes equitable economic relations between Africa and Europe, providing information and analysis on economical policies that affect Africa adversely and seeks to influence positively the policies of national governments and the European Union Institutions.

DEBT
June 2005

The G7 Finance Ministers' 100% multilateral debt cancellation, proposed in London on Saturday 11 June 2005, is good news for 18 highly indebted poor countries (HIPC), of which Mauritania, Senegal, Mali, Niger, Burkina Faso, Ghana, Benin, Ethiopia, Uganda, Rwanda, Tanzania, Madagascar, Mozambique and Zambia. The Finance Ministers recommend to the members of the G8 Summit of July 6th to 8th in Scotland, that the multilateral debts owed by these countries to the World Bank, the IMF and the African Development Bank be cancelled.

The G7 Finance Ministers' Conclusions on Development, London 10-11 June 2005, can be downloaded from: http://allafrica.com/stories/printable/200506120017.html. Here is our first evaluation of the London Proposal:

The London proposal is an improvement on previous proposals
The agreement takes in account some of the arguments advanced by debt campaigns

- Debts to International Financial Institutions owed by African countries, which had still been excluded from the G8 April Finance Ministers debt plan, are now included.

- Debt stock will be cancelled, replacing the UK proposal whereby only debt service would be written off for 10 years.

- The $40 billion debt cancellation packet will be funded by: (1) the rich nations' pledge to cover over 10 years the 18 countries' $16 billion in debt repayments; (2) by raising significantly their Public Development Aid in the next 3 years, the G8 members promise to cover after 2008 the full cost ($18 billion) of the loans owned to the World Bank and the African Development Bank; and (3) some $6 billion will be paid by the IMF from its own "existing resources" (read: revenue from part of their undervalued gold reserves).

- The cancellation promise is also be valid for another 9 countries that will reach the HIPIC programme's "Completion Point" within a year to a year and a half. This means that Guinea Bissau, Sierra Leone, Guinea, Congo DR, Chad, Cameroon, Malawi, Gambia and Sao Tome would profit from the proposal, representing a total of debt cancellation to $5.1 billion for 23 African countries. Eleven other severely indebted low income countries (among them e.g. Nigeria) and be considered if and when they are able to meet with the HIPC Conditions.

- The Franco-German proposal for a voluntary tax on plane tickets to replenish the Public Development Aid was supported by the UK and is mentioned in the London Proposal. The EU Finance Ministers gave the EU Commission the green light to examine the possibility to extend this voluntary tax to other EU member states.

If the London proposal provides a respite from poverty's pressure, some points do raise concern:

- Only countries that have completed the HIPC programme are being considered, even if research shows that at least 62 poor countries worldwide need full debt cancellation if they are to meet the Millennium Development Goals in 2015.
- Keeping to the HIPC programme criteria as a standard for judging the much criticized conditions of liberalisation put down by the World Bank and IMF attached to the HIPC programme, remain in place.
- There is no mention of a transparent international instrument in which all stakeholders - debtors and creditors - have a say to discuss a lasting solution to the Debt Crisis.

Some reactions:

- Centre for Policy Studies Johannesburg (RSA): If you're talking about stabilizing Africa, you've got to focus on countries like Nigeria, Sudan, Congo and Angola, which pull regional weight. None of those was included in the initial round, mostly because they are considered too corrupt and not complying enough with IMF-World Bank requirements.

- Tanzania's Finance Minister Mramba: We are grateful, but unless we are careful, we will go down to where we started. These (14 African countries) have economies only on a very low base and we do not have enough money to go around. Donors should focus more on grants instead of loans. It's like the first rains, you need a lot more to be comfortable before you get the first crop! Tanzania needs to achieve 8-10% growth in the coming 3 years to tackle poverty. Last year, the economy grew by 6.7%, but average per capita income is just $330 par year.

- Ugandan Financial official: Uganda uses annually $120 million to service debts that could be injected in our economy. We have to continue borrowing money, creating new debt, as we seek to develop agriculture-based economies vulnerable to climatic conditions and fluctuating commodity prices. Uganda's per capita income is around $250, and the number of Ugandans living on less than $1 a day increased to 38% in 2003 from 34% in 2000, despite huge amounts of aid.

- Jean Somers, Irish Debt Coalition: This shows that we can have an impact on powerful and remote bodies like the G8. We must keep up the pressure to make sure we get a betel deal on debt, on aid and on trade justice.

- Martin Powell, World Development Movement: We welcome that new resources have been found for this debt deal, and that all debt stock of these countries owed to the IMF, World Bank and African Development Bank will be cancelled. We see this approach as a template for the debt cancellation needed by many more poor countries.

Towards the G8 Summit of July 6th 2005

The Finance Ministers' London Proposal is a recommendation to the Heads of State and Governments that will meet at the G8 Summit of July 6th to 8th near Edinburgh in Scotland. Normally, the G8 Summit should follow the recommendation of the Finance Ministers.

In the running up of the July Summit, National Debt Campaigns will still attempt to influence the G8 Summit members, asking to include more countries for immediate debt cancellations in the London Proposal and calling for the international and transparent debt arbitration mechanism. We encourage our antennae and members to join these campaigns.

As a Network however, we suggest that we concentrate on a common letter-action for the G8 Summit supporting the very important Declaration of the African Union's Ministers of Trade, made at Cairo on 9th June 2005, criticising the EU's approach at the negotiations for Regional Economic Partnership Agreements (EPA).

Thank you
for your commitment and work in favour of debt cancellation!
Religious and missionaries where present!
The action, as decided at the Cologne Antennae meeting last April, to pressure the G7 Finance Ministers in London has given a good result. But more can and must be done

Luc Coppejans, MAfr
AEFJN, Bruxelles, June 2005.