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Rich countries put conditions on debt relief
The G8's debt scam

By Lee Sustar | June 24, 2005 | Page 16

THE WORLD'S most powerful countries have long used debt to dominate the world's poorest countries. Now they're using debt "relief" to accomplish the same thing.

The news that 18 poor countries, mainly located in sub-Saharan Africa, would have $40 billion in debt written off allowed finance ministers of the Group of Eight (G8) industrialized countries to pose as global anti-poverty crusaders--with celebrity activists Bono and Bob Geldof praising their generosity.

In reality, the deal--whose full details haven't yet been disclosed--will require further steps by the 18 countries to carry out economic "reforms." That means deregulation, privatization and concessions to foreign traders and investors with the aim of "opening" their economies.

In fact, "openness" is precisely what has worsened Africa's economic plight, according to the organization Christian Aid. "Two decades of [economic] liberalization have cost sub-Saharan Africa roughly what it has received in aid over the same period," the organization stated, reporting that free-trade policies left sub-Saharan Africa $272 billion worse off over that period.

What's more, the debt cancellation applies to loans only with the International Monetary Fund (IMF) and World Bank--not to loans made by the World Bank's affiliates, the Inter-American Development Bank or the Asian Development Bank. As the Brussels-based Committee to Abolish Third World Debt pointed out, those regional banks hold much of the debt of countries in the Highly Indebted Poor Countries (HIPC) debt relief program, which are the targeted recipients of the debt relief. "The [G8] initiative can solve neither the issue of the debt nor the issue of poverty since it bears on only 2 percent of the external debt of developing countries," the committee pointed out in a press release.

Even if the program expands, as expected, to cover another nine countries for a total of $55 billion in cancellation, it's still a tiny amount in view of the debt crisis.

The measure would cost rich countries only about $1.5 billion per year to compensate the IMF and World Bank for debt relief--and U.S. officials say they'll deduct that amount from already miserly levels of U.S. foreign aid.

"Total annual U.S. aid for all of Africa is about $3 billion, equivalent to about two days of Pentagon spending," wrote Jeffrey Sachs, the former free-market economist who is now an anti-poverty adviser to the United Nations. "About $1 billion pays for emergency food aid, of which half is for transport. About $1.5 billion is for 'cooperation,' essentially salaries of U.S. consultants. Only about $500 million a year--less than $1 per African--finances clinics, schools, food production, roads, power, Internet connectivity, safe drinking water, sanitation, family planning and life-saving health interventions to fight malaria, AIDS and other diseases."

Even business writers weighed in on the paltry level of the proposed debt relief. "By international investing standards, the write-off is a drop in the bucket," wrote Reuters' correspondent Jeremy Gaunt. "The amount pales, for example, in comparison with the roughly $850 billion in U.S. mutual funds managed by Pimco, the world's largest bond fund."

Nevertheless, many organizers of the "Make Poverty History" campaign have welcomed the debt relief plan as a "first step"--as they plan a rally at next month's G8 summit in Gleneagles, Scotland.

Others in the global justice movement, however, are highly critical of the Non-Governmental Organizations (NGOs) like Oxfam, which collaborated closely with British Prime Minister Tony Blair on debt issues. The critics point to the G8's statement that revealed the strings attached to the debt relief--calling on developing countries to implement policies to "attract investment," achieve "macroeconomic stability" and oversee the "elimination of impediments to private investment, both domestic and foreign."

This is a familiar recipe of free-market, neoliberal policies that have devastated poor countries in Asia, Africa and Latin America.

It's this agenda that prompted a warning from three South African activists--poet and social justice campaigner Dennis Brutus, author Patrick Bond and anti-debt activist Virginia Setshedi. In a recent article, they described the campaign around the G8 as swept up by "media buzz, fashion statement, celebrity chasing and the NGO's proximity to power." Hailing the G8 debt relief plan as a victory "concedes that the vast populations of lower-middle income countries will suffer under indefinite debt peonage," they wrote.

That's why a range of global justice organizations will use the Gleneagles counter-summit protest not to declare victory, but to denounce the G8 initiative for the public relations scam it is--and step up the demand for complete abolition of the debt.

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