Confronting Debt. Including Africa.

"In many African countries there are political obstacles to economic progress as well. ... They boil down to a 'winner-takes-all' attitude to political competition, the control of society's wealth and resources, and to the power of patronage and the prerogatives of office. It is coupled in too many instances with appalling violations of fundamental rights and a readiness to resort to force to resolve disputes or hold on to power. Only Africans can break out of these vicious cycles. I am gratified that so many have chosen to do so ...".

AMONG ALL THE WORLD'S poorest countries, including those in Africa, debt servicing requirements in hard currency prevent adequate investment in education and health or effective response to natural disasters and other emergencies.

REPEATED RESCHEDULING of bilateral debts of such affected countries has not significantly reduced their overall indebtedness.

SUB-SAHARAN AFRICA has the largest proportion of people living below $1 a day. Per capita income growth averaged +1.5% in the 1960s, -1.2% in the 1980s. Today, per capita income is just $500 a year.

AND YET, Mozambique topped the world's GDP growth last year, before its recent devastating floods. Higher commodity prices, of course, were a significant factor. But Mozambique, utterly impoverished and in the grip of an apparently intractable civil war only a few years ago, has taken great strides in many other ways as well. Botswana, ranked second on the list, and several other countries in the region have enjoyed good economic performance and good governance for some time.

EXTRACTIVE INDUSTRIES dominate the region's economy, and resources are being depleted at an alarming rate. Yields of basic food commodities have not increased significantly. Variable rainfall, highly-weathered soils, disease and pests have taken their toll. Inputs like fertilizer are often controlled by State monopolies and are not available to farmers at competitive prices.

AFRICAN PRODUCTIVITY has suffered because economic regimes tend to be tightly controlled and inefficiently managed by the State, resulting in high trade barriers, poor delivery of public services and widespread corruption. The private sector is unable to compete internationally because it lacks access to appropriate technology and information.

THE POOR INFRASTRUCTURE restricts the ability to move goods, so that transportation and shipping costs remain prohibitive. Electrical power consumption per person is the lowest in the world. Africa has 0.4 telephones per 1,000 people, and less than half of 1% of all Africans has used the Internet. A mere 17% of road surfaces is paved.

PRIVATE CAPITAL FLOWS to Africa are a tiny fraction of global flows, and for some countries capital flight is several times their GDP. Total outstanding external debts often exceed the entire gross national product, and it is not unusual for debt servicing requirements to exceed 25% of export earnings.

What We The Peoples Can Do

Ask donor countries and international financial institutions to consider wiping off their books all official debts of heavily indebted poor countries in return for their making demonstrable commitments to poverty reduction.

Encourage Governments, in designing such national programmes, to consult closely with civil society.

Sustain the growing interest demonstrated by the international community in assisting those African countries still afflicted by turmoil and tragedy.

Challenge the foremost experts in the world to think through the barrier of low agricultural productivity in Africa, along with the great philanthropic foundations, which have stimulated so much good and practical research on agriculture.

Enlarge the number, now relatively few, of African Governments which show the necessary commitment to poverty reduction in their national economic and social policies.

Bear in mind that the achievement of two founding aims of the United Nations eludes us still: freedom from want and freedom from fear; and a third, unforeseen at time, of creating an environmentally sustainable future has emerged.

Devising New Strategies

In 1996, the international donor community launched an initiative to reduce the debt of the so-called HIPC (Heavily Indebted Poor Countries) to sustainable levels. In the three years since the adoption of the HIPC initiative, however, only four countries have fully qualified. Another nine are reaching that point, while five others are engaged in preliminary discussions. But progress has been slow. A proposed expansion of the HIPC programme--agreed by the Cologne Summit of the G-8 in June 1999 and endorsed by the international financial institutions in September--provides for deeper, faster and broader debt relief. But it has yet to be implemented. And other obstacles remain. For instance, there is no mechanism for handling the large-scale restructuring of debt owed to foreign lenders by many private borrowers in the banking and corporate sector in developing countries.

Mr. Annan proposes that, apart from the debt wipe-off mentioned above, we consider in the future an entirely new approach, whose main components could include: immediate cancellation of the debts owed by countries that have suffered major conflicts or natural disasters; expanding the number of countries in the HIPC scheme by allowing them to qualify on grounds of poverty alone; pegging debt repayments at a maximum percentage of foreign exchange earnings; establishing a debt arbitration process to balance the interests of creditors and sovereign debtors; and introduce greater discipline into their relations.

For Africa--where there are as many telephones in the whole continent as there are in the city of Tokyo--the digital revolution in particular, besides creating a new economic sector, is also a means to transform and enhance many other activities. Mauritius, for example, uses the Internet to position its textile industry globally. UNCTAD's Trade Point Programme allows participants to trade products on-line. The Government of Mali has established an intranet to provide more effective administrative services. And there are other opportunities: for telemedicine and distance learning; for "virtual" banking, coupled with micro-credit; for checking weather forecasts before planting, and corp prices before harvesting; for having the world's largest library at your fingertips; and so on. The information technology sector, in short, can transform many, if not most, other sectors of economic and social activity.