Saturday, September 24, 2005

IMF, Debt, and Millennium Goals

The IMF has agreed to follow through with a pledge to erase 55 billion dollars in debt from 19 African countries. This deal was originally proposed during the G8 meetings in Gleneagle, Scotland during July 2005 - thanks in large part to the work of Bono and Jeff Sachs. While 55 billion is not as high as many had hoped for, the amount does help and gives some promise to the future of those African countries most affected by extreme poverty.

Unfortunately, the US, nor any other nation, has met the promises made during the year 2000 which were aimed at reducing world poverty and outlined in the Millennium Development Goals. The G8 countries pledged 0.7% GDP annually to IMF/World Bank/UN programs aimed at reducing poverty (sustainable farming, infrastructure, education, and health initiatives). Yep, 7 cents of every 10 dollars is all it would take and during the Millennium conference the US promised to give just that. Last week at the World Bank meetings, those same countries looked at where they were 5 years later and realized that they were not on track to meet their 10 year goals and therefore, instead of ramping up efforts to follow through on previous commitments, simply SCALED BACK their earlier promises. However, at the same meeting Bush gave a speech citing the extreme burden of poverty on the future of global democracy, global trade, and economic sustainability, giving some hope that the administration at least understands why it is necessary to make serious commitments to future programs - such as Debt Cancellation.

Why is debt cancellation so important? If a country is trying to climb out of poverty, it needs to invest its money into infrastructure and new business. However, with a high debt, the financial price of servicing that debt is so high, that a country can never get ahead, no matter how innovative and successful its citizens, entrepreneurs, and businesses.


Mill Goals said...

Beyond debt reduction is the committment these countries made at thelast G8 meeting to give 5-6 % of their GDP annually for at least ten years to the same countries. I got that is how the debt reduction was really financed.

It is really good, but you have to wonder about Social Security, it never went away did it?

a living hominid said...

I believe that is incorrect. This passage is from the G8 report

1.0 The G8's Promises

The G8 promised a doubling of aid to Africa, as part of an overall increase of $48 billion for all developing countries by 2010 (compared to 2004 levels), "which will start to flow immediately" (according to Tony Blair). The European Union promised to increase its aid by an extra $38 billion. Canada promised to double the overall volumes of its aid by 2010 and aid to Africa by 2008/09 compared to the 2003/4 levels. The United States of America promised to double aid to Africa by 2010 whilst Japan pledged an additional $10 billion over the next five years. If the Japanese deliver, this will halt an embarrassing 5-year decline in the volume of Japanese aid. In addition, Germany, Italy, France and the UK confirmed time tables for reaching the much heralded 0.7% of GDP commitment. In contrast, Japan, the United States and Canada remain unwilling to commit to a timetable to reach the 0.7% target. In terms of conditionality, the communiqué contained language to the effect of allowing developing countries to "decide, plan and sequence their economic policies".

In terms of debt, the G8 announced a 100% cancellation of the multilateral debts of some Highly Indebted Poor Countries (HIPCs) calculated to amount to a total of $55 billion of relief, "$40bn dollars immediately" according to Gordon Brown in a speech to UNICEF and "without conditions" in a speech to his Treasury Select Committee. This debt deal is expected to benefit 18 HIPC countries who have successfully completed their HIPC programmes with the IMF with another 20 countries possibly benefiting with time. In addition, Nigeria stitched a deal estimated to be worth $17bn of debt cancellation including debt stock, described by Nigeria's finance minister and former World Bank employee as "unprecedented".

Do you have a source regarding the 5-6% number - I haven't seen anything near that.

Also, I believe that our future economic stability is much more tied to global poverty than it is to alternative social security legislation. While important, social security will inevitably cost more than 7 cents per 10 dollars and will also save millions of fewer life's - therefore it doesn't have the pressing urgency that the daily deaths of thousands do in my book.

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Anonymous said...

Interesting article on remvoal of debt to Africa. How sweet of the countries that attended the G8. BUT what Africa really needs is help to propell an industrial revolution. Many of the country's problems will begin to disapate. Blanket AID sometimes is just parallel to a band aid.

Anonymous said...

Good reading on the subject of the perils of economic aid and long term crippling indentured countries....Read, Confessions of an Economic Hit Man.

Anonymous said...

confessions of an economic hitman..ditto..very good book. IMF..*^(@(*'s
As for Debt erasure ..its a good start but how about getting rid of the criteria that create debt? From our farm subsidies to those pesky arms dealers helping to fuel civill wars. Spoken as a neophyte but heck spoken anyways..