International -- Finance: DEBT MARKETS
NEW MILLENNIUM, CLEAN SLATE FOR THE WORLD'S POOREST NATIONS? (int'l edition)
A push is on to cancel their debt by 2000
In a small, scruffy office tucked away in the shadow of London's Waterloo train station, L. Ann Pettifor spins out an ambitious plan for the millennium. Instead of fireworks and street fairs, the Jubilee 2000 Coalition, the group she heads, wants to see the cancellation of more than $100 billion owed by 52 of the world's poorest countries--roughly a third of the group's total external debt. "Let's take the millennium as an opportunity to celebrate something really meaningful," says Pettifor, a 50-year-old former parliamentary lobbyist. "Remove the burden of debt that affects one billion people."
At first glance, the proposition seems quixotic. The coalition consists mainly of 45 church groups, charities, and labor organizations, including Christian Aid, Oxfam International, and the International Confederation of Free Trade Unions. But along with the heightened public awareness it is stimulating, the coalition is also attracting the attention of such institutions as the World Bank and the International Monetary Fund. "It's not going to go away," says one World Bank official. "And it's a conscience that is definitely holding the financial community's feet to the fire." The U.S., too, admits that the initiative is increasing pressure to step up more modest relief plans that creditor governments have already launched.
BRITISH PLEDGE. Certainly the issue has set Gordon Brown, Britain's Chancellor of the Exchequer, alight. On Sept. 16, Brown announced a plan called Debt 2000: The Mauritius Mandate. In a speech to Commonwealth Finance Ministers gathered in the island nation, he called for the acceleration of current relief initiatives to make big inroads by 2000. And he pledged that Britain will start by cancelling $212 million in debt from poorer Commonwealth nations. His inspiration? In his speech Brown said: "I thank the church groups and others who have drawn our attention to the opportunity to resolve the problem by the start of the new millennium."
The campaign's main focus is in sub-Saharan Africa, where the high interest rates and falling commodity prices of the 1980s caused debts to balloon. According to World Bank figures, the region's total external debt has risen from $84 billion in 1980 to $235 billion last year--three-quarters of the region's gross national product.
To address the stubborn problem, Jubilee 2000 combined the campaigning efforts of three religious groups: Christian Aid, the Catholic Fund for Overseas Development, and the Tear Fund. Support is still heavily weighted in religious groups. Even the Pope has spoken in support of debt relief. The concept is rooted in the Old Testament idea that every 50 years a jubilee should be declared in which debts should be forgiven and the enslaved freed. Says Andrew Simms, a spokesman for Christian Aid: "This stock of unpayable debt needs to be gotten out of the way once and for all before these countries can stand on their own two feet."
But the Jubilee plan is too ambitious for most lenders. The World Bank, the IMF, and the Paris Club of government creditors, who hold most of the paper, already have a much more modest plan. Called the Heavily Indebted Poor Countries Debt Initiative (HIPC), it would forgive only $7 billion for about 19 countries, mostly in sub-Saharan Africa. And countries must fulfill stringent criteria, chiefly economic reform plans, to qualify. Says a senior U.S. official: "Debt reduction has to be selective and accompanied by sensible policies, or countries will find themselves right back in the same fix."
Relief packages have been formally agreed on for only two countries, with three more in talks. Mozambique, one of those still negotiating, is typical. Its foreign debt equals eight years' worth of exports. The HIPC plan would bring that down to about 2.5 years' worth.
Jubilee 2000 originally hailed the HIPC initiative as a breakthrough. And they still acknowledge its political importance in bringing together government, private, and multilateral lenders. But slow progress leaves relief advocates frustrated. "It is too little, too late," says Ann Pettifor. It's also too slow for Gordon Brown. His focus in Mauritius was on making the most of the HIPC framework. To this end, Brown wants firm decisions on the amounts and terms of available relief for at least three-quarters of eligible HIPC nations by 2000. Jubilee 2000 groups see Brown's ideas as a sign that people in high places are listening. And the coalition intends to convert many more like him before the century turns. By Heidi Dawley in London, with Mike McNamee in Washington and bureau reportsReturn to top