WHAT HAVE RELIEF INITIATIVES ACHIEVED AND WHAT REMAINS TO BE COVERED

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WHAT HAVE RELIEF
INITIATIVES ACHIEVED AND WHAT REMAINS TO BE
COVERED?

• By Charles Mutasa
• Executive Director, AFRODAD
• November 20, 2007

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Introduction Background

• Debt Relief has been extended through two
  vehicles- HIPC (I II) MDRI
  
• HIPC seeks to ensure that debt savings go to
  country owned poverty alleviation priorities.
  
• To date 22 countries completed HIPC process
  benefited, 18 of them are in Africa of the
  remaining 8 are on interim debt relief 10 are
  potentially eligible for debt relief
  cancellation.

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MDRI Beneficiaries

• 22 Countries that have received 100 IMF/World
  Bank debt Cancellation (21 as of July 1, 2006)
  
• Benin Mauritania Bolivia
• Mozambique Burkina Faso Nicaragua
• Cambodia (IMF only) Niger Cameroon
• Rwanda Ethiopia Senegal
• Ghana Tajikistan (IMF only) Guyana
• Tanzania Honduras Uganda
• Madagascar Zambia Mali Malawi .

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Debt relief Achievements

• Mozambiquedebt service payments have fallen by
  around two-thirds (1998-2002) , in 2002 net
  school enrolment rate increased to 62.6 percent
  cpred to 44 percent in 1997).
• Other e.gs include cutting infant, child
  maternal mortality rates
  
• Access to clean drinking water in some places,
  access to immunisation etc.

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Debt relief Achievements questions?

• Benefits to MDRI countries are significantly less
  than expected (No adequate donor funding to fully
  compensate IFIs for their share of MDRI relief)
  
• Debt Relief does not necessarily translate into
  increased education and health expenditures.
  
• Should be additional to ODA (Monterrey
  Declaration), but donor countries are cheating
  by including it in reporting, thereby inflating
  their aid figures

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• Increased school enrolment without quality
  education and more health centers without doctors
  or medicine should not be an end in itself- The
  Issue has to do with putting wealth creation on
  the fore front.
• What is the importance of reducing inflation to
  below 10 when there are no hospitals and when
  people are jobless?
  

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Issues not properly addressed?

• Limited by HIPC I and HIPC IIs deficiencies.
• - Debt sustainability remains a highly
  ambiguous, manipulatable, political notion.
  
• - Exclusion of domestic debt from DSA Vs debt
  distress assessment.
  
• - conditionalities (IMF gate-keeping
  over-rigid fiscal macroeconomic frameworks
  e.g. wage ceilings)
  

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• Anti-free riding policy greater IMF
  surveillance Vs newly emerging lenders (punitive
  measures for the newly solvent states WB
  competing with other creditors)
• -Extensive supervision of countries borrowing
  policies?intrusion into domestic affairs Vs
  sovereignty.
  
• -run counter to ownership alignment principles
  of the Paris declaration.

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Scope coverage ------We have Some Debt relief
but not enough

• -Only 3/19 multilaterals involved ? cases of
  creditor litigation
  
• Private sector debt not covered
• Domestic debt not considered
• Too limited in terms of beneficiaries it covers
  compared to those in need- Middle income
  countries sidelined (Kenya Angola).
  

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• Vulture funds threat e.g. Zambia
• Going through the HIPC surgery before relief is
  too rough Vs fast track MDRI treatment (at
  completion debts eligible for relief could be
  partially/fully paid up).
• Debt Relief counted as aid (aid flows declined in
  2005 2006)
  
• Too aid dependent with no exit strategy.
• No policies for prudent debt management curbing
  graft.

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• No special arrangements/provision for post
  conflict states.
  
• Odious illegitimate debts ignored/forgotten
• Lack of coherence in global development policies-
  Aid, Trade Debt Relief

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Has Debt Relief brought Sustainability?

• This should not be limited to the financial
  ability to service and pay back loans, but also a
  countrys ability to fulfil its obligations which
  include provisions of economic, social and
  cultural rights. (Multi-indicators required for
  DSA)
• Debt Relief beneficiaries are still in need of
  policy space to meet their human development
  needs
  

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Underlying Challenges

• Domestic resource mobilization
• (increased savings, higher tax revenue capital
  flight)
  
• Improving Effectiveness absorptive capacity of
  development aid
  
• The problem of International trade as a vehicle
  for resource mobilization
  
• Ability to attract private capital flows
  including remittances?high value added sector
  employment.

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There is urgent need for

• Increased investment in human physical
  infrastructure
  
• A considerable widening of the policy space that
  has been restricted by years of adjustment.
  
• Economic diversification sustained economic
  growth
  

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Key Recommendations

• Debt cancellation must be outright
  irrevocable-include all poor countries
  creditors
  
• Debt relief must be subject to conditionality
  that promotes the objective of the relief
  operation itself-creation of fiscal space for
  human rights achievement.
• New lending architecturegrant-loan mix
• Resolve Debtor-creditor inequality r/ns

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• Donors must ensure that adequate resources are
  available for all HIPCs that can progress through
  the process without delay.
  
• Extend debt relief to middle income countries not
  meeting the HIPC threshold.
  
• Recognize the necessity of Debt Audits, inclusion
  of Odious illegitimate Debts
  
• Call for a Transparent and Fair Arbitration (FTA)
  Mechanism
  

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End of Presentation

• Thank you
• for your attention