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Debt relief key to poor nations’ progress

by Cesar Chelala

NEW YORK — A pledge by wealthy nations, to be announced officially this week in Prague, to provide substantial economic aid to poor nations, is an important step in the right direction. To be truly effective, however, economic aid should be part of a more general aid package — including cancellation of debt — that should also include fair trade and technical assistance to improve the health and education status of recipient countries.

Recipient countries themselves should produce detailed antipoverty programs for schools, health and rural development. Efforts to comply with these requirements may take months or even years for the countries involved. A few of them have threatened to withdraw their applications in frustration over those requirements. Rich nations should understand that many countries are underdeveloped precisely because they do not have the expertise to develop those programs by themselves. Thus, giving them debt relief is necessary, but aid must consist of more than just that..

In many cases, lending agencies, notably the World Bank and the International Monetary Fund, demand that recipient nations adopt measures such as trade liberalization, free flow of capital, and austere government budgets that leave them in worse economic shape than before the adoption of such measures and place inordinate burdens on the poor sectors of the population. In addition, many countries spend more on interest payments than on health and education. Several development experts consider the lending agencies’ policies counterproductive, adding to poverty rather than reducing it.

A country in such a situation is Zambia, which has one of the world’s worst health records. It is estimated that by 2002 Zambia will be spending twice as much paying back its creditors as it will be spending on basic health care. This is happening in a country that is experiencing deteriorating health standards and decreasing life expectancy.

In addition to Zambia, OXFAM figures show that in five other African countries — Mali, Burkina Faso, Tanzania, Mozambique and Malawi — debt payment will outstrip spending on basic education, even after those countries have ended the debt relief program.

The slow speed of this relied effort has been sharply criticized both by OXFAM and by UNICEF. They state that the debtor countries should not have to adhere to the rigid rules for macroeconomic reform for six years to qualify for loan reduction, but rather to a two-year record of progress toward economic reform and poverty reduction. In the case of UNICEF, it is the first time that a U.N. agency has been so openly critical of the IMF’s prescription for managing the economies of the world’s poorest countries.

Experience shows that adjustment programs have devastated the economies of the poorest countries and caused misery for hundreds of millions of people. A study carried out by researchers at The Development GAP shows that there is a positive, linear relationship between the number of years that countries implement adjustment programs and increases in debt levels.

The United Nations estimates that more than 50 countries have debts that they will never be able to pay, and in some countries the debt burden is more than 90 percent of their income. Paying the debt diverts scarce resources that should be devoted to education and health, and creates conditions of economic and political instability throughout the world. According to the Jubilee 2000 Coalition, which advocates cancellation of the debt, “Debt is tearing down schools, clinics and hospitals and the effects are no less devastating than war.”

To make it more effective, there should be a complete overhaul of the debt relief process, one that would take more into account the points of views and the real needs of the debtor countries. As Professor Venkatesh Seshamani remarked, “You cannot have both debt and development — they are antithetical.”