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Contributions from
the Column
Books and Media
The making of Global Finance
HIPC Debt Relief - Myths and Reality
Humankind and sustainable solidarity
Security sector reform
Poverty and human rights abuses
03/2005 |
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Debt relief:
well-informed and worth reading
Jan Joost Teunissen, Age Akkerman (Eds.):
HIPC Debt Relief. Myths and Reality.
The Hague, FONDAD 2004, 145 pages,
Euro 12.50, ISBN 90-74208-23-1
Since the late 1980s, the Forum on Debt and Development (FONDAD) established in the Netherlands has been known for its research on the levels of debt in the South. The Forum has now taken stock of the HIPC Initiative in this very readable publication, which claims to throw light on the myths and realities surrounding the multilateral debt relief initiative.
The volume contains six different articles. Of these the first one, written by British analyst Matthew Martin, does the greatest justice to its proclaimed objective. The well-informed, straightforward article on the HIPC Initiative is backed up by other useful viewpoints, from the perspective of indebted governments (Florence Kuteesa and Rosetti Nabbumba from Uganda, and Mothae Maruping on Southeast Africa), the IMF (Wayne Mitchell, Martin Gilman), World Bank (Amar Bhattacharya) and a creditor government, the Netherlands (Geske Dijkstra).
Although Martin’s article is a revised edition of a presentation given in 2003, it is the most extensive and unambiguous evaluation of the HIPC currently available. Martin, an adviser to HIPC governments, knows the process from the inside out. He describes the mechanisms of HIPC and compares them with previous processes. He endorses the Initiative’s call for countries to be relieved from debt at a truly sustainable level. He also reveals the factors which have been mainly responsible for the widespread failure of the Initiative.
That Uganda, the “model” country (both for HIPC-I of 1996 and HIPC-II, the „Cologne Initiative“, of 1999) is now in debt to the tune of 307 per cent of its annual export income instead of 150 per cent as provided for under HIPC, points to critical structural deficiencies in the Initiative. These include the World Bank’s overly-optimistic expectations of income and its grossly-underestimated levels of fresh borrowing by many HIPC states. Add to this various features which have received too little consideration in the debate: burgeoning domestic debt in many HIPCs, similarly burgeoning private sector debt in the poorest countries, as well as the refusal of individual creditors to relieve these debts within the framework of the Initiative.
All autors are in favour of continuing and expanding HIPC. In this sense, they stay on the beaten trail. Only marginal mention is made of radical solutions such as the NGO request for an international insolvency process, or the current attempt by the Bush administration to terminate the HIPC and cease granting credit to the poorest countries.
Instead, the most inspiring solutions are Martin’s and Dijkstra’s attempts to invoke the Millennium Development Goals (MDG) as a basis for a new understanding of debt sustainability. Martin correctly points out that reliable calculations of what achieving individual MDGs will cost have become available.
Jürgen Kaiser
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