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FINANCE-NIGER: Groups Say Partial Debt Forgiveness Inadequate

Emad Mekay

WASHINGTON, Apr 9 2004 (IPS) - International creditors of the African nation of Niger have agreed to cancel 1.2 billon dollars of its debt over time under a controversial debt relief scheme, rewarding the country for its pro-free market economic restructuring plan.

Niger becomes the 11th nation to reach the completion point of the Heavily Indebted Poor Countries Initiative (HIPC) – the mark where creditors permanently grant debt forgiveness.

But doubts remain over whether the move will actually reduce poverty in one of the world’s poorest nations.

"Our call is for a 100 percent debt cancellation," said Neil Watkins of Jubilee USA Network, a leading group that lobbies for debt forgiveness.

"Even though debt relief has been beneficial in many cases, the overall record has been that after eight years the HIPC initiative has been too slow with too many conditions for not enough countries."

The International Monetary Fund (IMF) and the World Bank’s International Development Association (IDA), which offers concessional loans on easy terms, say they agreed this week that Niger has made the economic changes necessary to receive the partial debt cancellation.

The Washington-based organisations say they also moved now to offset recent negative economic news for the country, including a decline in uranium exports, lower U.S. dollar discount rates and a shortfall in external grant financing.

Despite the market slump, uranium still provides 72 percent of Niger’s export proceeds.

Under the HIPC, the World Bank will forgive 408.7 million dollars of the nation’s debt while the IMF will cancel 59.9 million dollars. Members of the Paris Club, 19 governments of northern countries with large claims on other nations, are expected to grant debt relief of 300 million dollars.

Several Paris Club creditors have said they will provide additional sums estimated to total about 33.0 million dollars; France, the United Kingdom and the United States have already started that process.

Non-Paris Club creditors are expected to provide debt relief worth about 210.3 million dollars to Niger, said the IMF and the World Bank in a statement.

The bank estimated Niger’s foreign debt at 1.8 billion dollars at the end of 2002, up from 1.6 billion in 2001.

The IMF and World Bank, often blamed for slapping burdensome conditions on borrowing nations, say the new relief comes as a result of Niger’s adherence to free market economic principles.

The country has embarked on an ambitious programme to privatise 12 state-owned companies, including the water and telephone utilities.

Niger, a landlocked nation of 11 million people on the southwestern edge of the Sahara Desert, has a very narrow national resource base and is highly vulnerable to external shocks, such as droughts.

Its gross domestic product (GDP) per capita was only about 200 dollars in 2002. Two-thirds of the population lives below the poverty line, while one-third can be considered extremely poor.

The Human Development Index of the United Nations Development Programme ranked Niger 174th out of 175 countries in 2003.

The IMF and World Bank are scheduled to hold their spring meetings in Washington from Apr. 24 to 25, with debt one of the many issues on the official agenda. Anti-debt campaigners say they plan dozens of events that will bring the failings of the HIPC to light.

The programme was launched in 1996, after the two international financial institutions (IFIs) came under strong criticism for their handling of poor nations’ debts. The HIPC permits all creditors, including multilateral lenders, to provide debt relief to the world’s poorest and most heavily indebted countries.

To date, 27 countries – two-thirds of the HIPCs – have reached their decision points, the stage at which creditors agree to consider debt relief, which amounts to more than 51 billion dollars.

Of these nations, 11 countries – Benin, Bolivia, Burkina Faso, Guyana, Mauritania, Niger, Mozambique, Nicaragua, Niger, Tanzania and Uganda – have now reached the points where creditors actually write off the debts.

The HIPC has been criticised by civil society groups, activists, some economists and even some experts at the bank and IMF, who argue that debt relief has failed to trickle down to the grassroots in highly indebted countries.

In a 2002 report, staff at the Bank and the Fund described HIPC as a project that had gone largely off-track. As many as 10 of the 27 countries would still face debt problems after reaching their completion points, the report conceded. That is twice as many as anticipated in 2001.

Some countries, like Bolivia, were also borrowing much more than had been previously anticipated – often to compensate for lack of tax revenues due to slower than expected growth, it added.

Advocacy groups want all debt owed by these nations cancelled, arguing it will free up desperately needed money for social services and health care, especially the fight against HIV/AIDS.

More than one-half of African nations spend more on debt payments to the IMF, World Bank and rich countries than on health care for their citizens.

The groups estimate that wealthy nations will spend at least 10 billion dollars annually in aid to fight HIV/AIDS; Africa governments pay 15 billion each year to service their debts.

"The spread of the AIDS virus won’t stop and wait for the IMF and World Bank to cancel the debt," said Jubilee USA Network National Coordinator Marie Clarke.

"While the IMF and the World Bank fiddle around with HIPC, the AIDS pandemic claims 8,000 lives each dayà this tragedy cannot be allowed to continue.."