By Jim Lobe
WASHINGTON, Nov 28 2001 (IPS)

Tanzania has qualified for some three billion dollars in debt relief under the controversial Highly Indebted Poor Countries (HIPC) Initiative.

Whether the reduction will translate into substantial reductions in poverty in the East African nation of 36 million remains to be seen, according to independent development groups that have called for much more far-reaching measures to reduce debt.

According to the World Bank and International Monetary Fund (IMF), however, Tanzania’s total current external debt stock of some six billion dollars will be reduced by about 54 percent over time.

Tanzania is only the fourth country to reach this “completion point” under the HIPC scheme, after Uganda, Mozambique, and Bolivia.

For Tanzania, this means that, under current projections, annual debt service payments should be cut by an average of 47 percent over the next 20 years, from about 193 million dollars two years ago to an average of about 116 million dollars over the next decade, and 87 million dollars from 2011 through 2021.

As a percentage of government revenue, debt service should fall from 19 percent over the past year to an average of 7.7 percent from 2001 to 2011 and 4.4 percent from 2011 through 2021, the Bank said.

The two agencies lauded Tanzania’s compliance with a series of structural adjustment programmes (SAPs) in recent years, which they suggested was responsible for one of the fastest economic growth rates in sub-Saharan Africa.

They said the country, one of the world’s poorest in terms of per capita income, grew at close to five percent last year and is expected to maintain a similar pace this year despite the slowdown in the world economy, which has brought steep plunges in prices for some of Tanzania’s most important exports. These include coffee, cotton, and minerals.

Tanzania has long argued that its debt burden was crippling prospects for development.

Earlier this month, Foreign Minister Jakaya M. Kikwete told the U.N. General Assembly debt service consumed one-third of the government’s budget, leaving the rest to pay its civil service, maintain law and order, and provide basic social and economic services like health, education, water, communications and transportation.

“This clearly underscores the fact that debt relief and debt forgiveness will go a long way towards enhancing government capacity to discharge its duties,” Kikwete said. He noted, however, that the relief afforded under HIPC may still not be sufficient to overcome the debilitating impact of debt, particularly in sub-Saharan Africa.

Other African nations and non-governmental organizations (NGOs) share his assessment and have campaigned hard for debt relief over the last five years.

So far, their efforts have met with only limited success, and that mainly provided by HIPC.

Launched in 1996, the scheme aimed to reduce the debt – particularly that part of the debt owed to multilateral agencies like the Bank and the IMF – of the world’s poorest countries to less unsustainable levels, initially below 200 percent of the value of each debtor’s exports.

Very little was achieved over the following three years. Under pressure from debt campaigners, the world’s wealthiest countries, which dominate the boards of the main international financial and development agencies, agreed in 1999 on a plan for broader and deeper relief.

This so-called “enhanced framework” calls for deeper and faster debt service relief for some 36 countries in exchange for their adherence to Bank- and Fund-approved SAPs and commitments for increased spending on health and primary education services for their poorest citizens.

In the last several years, debt relief packages, which could total more than 36 billion dollars under the enhanced framework, have been put in place for: Benin, Burkina Faso, Cameroon, Chad, Ethiopia, Gambia, Guinea, Guinea-Bissau, Guyana, Honduras, Madagascar, Malawi, Mali, Mauritania, Nicaragua, Niger, Rwanda, Sao Tome & Principe, Senegal, and Zambia, in addition to Tanzania and the other three countries which have reached the completion point under the programme.

Still, many NGOs as well as debt-burdened governments argue this will not be sufficient to lift tens of millions of people out of poverty and restore their prospects for a better standard of living. In the view of the critics, the goal should be 100 percent debt relief, particularly in light of the challenges faced by many sub-Saharan countries in coping with the HIV-AIDS epidemic.

A recent report by Oxfam International, for example, found that more than two-thirds of the countries that have begun to receive debt relief, including Tanzania, still spend more on debt servicing than on health and half spend more on their debt than on health and education combined.

Earlier this month, the Brussels-based group Eurodad pointed to what it called “over-optimistic projections” on future commodity prices for the agencies’ calculations of sustainable debt loads under HIPC, suggesting that the plunge in prices was likely to reverse whatever benefits HIPC provided in debt relief.

“Most (highly-indebted poor countries) will not achieve debt sustainability unless they receive substantial additional debt reductions,” according to the report, titled ‘What Goes Down Might Not Come Up.’

Tanzania itself may be a prime victim, Oxfam warned in July. Bank assumptions on the effect of debt relief on the country’s growth prospects still “leave Tanzania in an extremely precarious position, both in terms of the size of debt relief, but also in terms of resources freed up for education and other poverty reduction financing,” it said.

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