African debt seminar: Solutions must go beyond relief to encompass broad economic and political strategy

• Pages: 349-352

Page 349

Debt has been identified as a key element undermining efforts to achieve sustainable development in African countries. But debt relief on its own cannot remove the crippling burden under which the African countries have labored for the past two decades; nor can it achieve the goal of rapid, sustainable growth leading to poverty reduction.

A seminar organized jointly by the government of Japan and the Central Bank of Kenya, with support from the United Nations Development Program (UNDP) and the collaboration of the IMF and the World Bank, was held in Nairobi, Kenya, on August 30-31. It provided a forum for African ministers of finance and central bank governors from more than 14 countries, joined by leaders of private business and religious groups, to consider solutions to Africa's debt problems. Participants also included representatives from international institutions and donor and creditor governments. The conference was officially opened by Daniel arap Moi, President of Kenya, and chaired by Festus G. Mogae, President of Botswana (and former IMF Executive Director). Masaru Yoshitomi, Dean of the Asian Development Bank Institute, served as Vice-Chair.

In his opening remarks, Mogae noted that Africa faces an immense debt burden. Citing World Bank figures, Mogae said Africa's combined current external debt totals more than $285 billion, representing more than 200 percent of its exports. The heavy burden of servicing that debt has diverted resources away from essential development programs, such as the provision of infrastructure and basic human development efforts. Millions of people, he said, are suffering from poverty and deprivation.

Workable solutions, Mogae said, should reflect African needs and perspectives while being acceptable to the international community. Such solutions must necessarily involve sharing of the debt burden between lenders and borrowers and must also reflect the reality that debt relief will be effective in contributing to development only if it is combined with high-quality economic management. We can expect willingness on the part of the international community to contribute to putting Africa onto a sustainable path of higher growth, he said, only if we make earnest efforts to help ourselves.

Depth and diversity of the debt problem

In 1996, the IMF and the World Bank launched an initiative aimed at providing debt relief to the heavily indebted poor countries (HIPCs) of Africa. In June 1999, proposals for enhancing the HIPC Initiative were made at the Cologne summit meeting of the Group of Seven industrial countries, emphasizing the use of resources from debt relief to accelerate social development. According to G.E. Gondwe, Director of the IMF's African Department, there now seems to be a good chance that a satisfactory solution can be found to the external debt overhang of most of the indebted poor countries of Africa. But, he stressed, no single approach to resolving the debt problem will be right for each country. Even in its enhanced form, the HIPC Initiative would be applicable to about 30 of the 50 African states. It is therefore important to recognize the diversity of the debt situations of individual countries and to look for solutions most appropriate to the individual case.

Gondwe and several other participants, including Neway Gebre-ab, Advisor to the Prime Minister of Ethiopia, and Earnest Ebi, Deputy Governor of the Central Bank of Nigeria, noted...