DEVELOPMENT: Germany To Write Off Debts Worth 5 Billion Dollars

By IPS Correspondents Reprint | | Print |

Ramesh Jaura

BONN, Jan 6 2000 (IPS) - Responding to strong campaigning pressure by the global Jubilee 2000 Coalition, Germany’s Development Minister Heidemarie Wieczorek-Zeul has confirmed that the Berlin government will write off 100 percent of the bilateral debts of some 30 poorest countries of the world.

The initiative will begin to be translated into action this year, said Wieczorek-Zeul in a statement made available to IPS this week. “We plan to cancel debts worth about 9 billion marks (five billion dollars)”.

The figure includes commercial loans that have yet to be paid back. In addition, Germany will back the 15-nation European Union’s debt cancellation initiative, contributing about 360 million dollars, said Wieczorek-Zeul.

While she did not name the countries whose debts will be cancelled, an official at the development ministry said, countries which would benefit from the debt write-offs are those included in the Heavily Indebted Poor Countries initiative (HIPC).

HIPC is the international vehicle for debt rescheduling and cancellation, managed by the International Monetary Fund (IMF) and the World Bank. 41 of the world’s poorest qualify for HIPC, but they have to prove their ability to meet stringentic conditions before any debt cancellation.

Countries enjoying debt forgiveness are required to put into place a comprehensive and participatory poverty reduction strategy, said Wieczorek-Zeul.

“We want to ensure that wide sections of the population in developing countries really gain from debt cancellation – by way of better opportunities for education, improved health care and proper counselling for family planning,” she added.

The rationale behind debt forgiveness was to give highly indebted countries a “room for financial manoeuvre The affirmation of Germany’s vow to write off the debts of world’s poorest countries came within three months of President Bill Clinton pledging cancellation for poor-countrmeetings in Washington last September.

Earlier, Canada had committed similar pledges to writing off the debts of world’s poorest countries.

Last month, Britain followed suit, with the Jubilee 2000 Coalition of some 1,800 church and other non-governmental organisations, praising the “magnanimous gesture”, but warning that it was “not yet clear cut” whether Britain’s actions will make a difference and save children’s lives. 19,000 children a day are dying because of the debt burden, claims Jubilee 2000 drawing upon the latest annual report of the UN Children’s Fund (Unicef).

The world-wide Jubilee 2000 Coalition has emerged from years of campaigning by southern movements on debt and the ternal debt burdens and new credit agreements.

Jubilee 2000 in the south comes out of many of those struggles, says Friedel Huetz-Adams of Erlassjahr 2000, Germany chapter of the Jubilee 2000 Coalition.

As the developing ith offers of big loans at very low rates of interest. Many countries in Latin America took up the offer and soon found that with interest rate rises and commodity price decreases they couldn’t keep up the repayments.

Countries in Africa, which proclaimed independence later, were forewarned about the pitfalls of the debt trap butt. Still lacking control over their own resources, they were desperate for credit to match the high expectations of their people and inevitably took the loans eagerly offer conditions attached to these loans became onerous to the population, who found they were not benefiting from the international lending process.

From Argentina to Zambia, initial resistance took the form of strikes and demonstrations when the first price rises for basic goods followed the implementation of various programmes based on the adjustment models of the IMF and World Bank. As debt and adjustment continued, a more coordinated people’s response emerged.

This mass opposition has prompted policy-makers in the developing world to propose various alternatives to the IMF’s Structural Adjustment Programmes (SAPs). For example, the African Alternative Framework to SAPs (AAF-SAP) was put forward in 1989 by the U.N. Economic Commission for Africa under the bayo Adedeji who later became an Under Secretary-General of the world body.

Later adopted by the Organisation of African Unity (OAU) and receiving the support of the U.N. General Assemblyk and IMF and western leaders.

An official at the German development ministry dismissed suggestions that Germany – which claims the third largest poor- country debt, amounting to 6.1 billion dollars, after France’s 11.7 billion dollars and Japan’s 10.5 billion dollars – was dithering on implementing the debt cancellation initiative.

The plan was first agreed at the Cologne summit of the Group of Seven (G-7) major industrial countries.

“This was very much an initiative taken by us,reen Party – in power since October 1998 – has been leading the debt cancellation initiative.

Nevertheless, because of complicated mechanisms involved, most of the 41 countries considered to qualify – in principle – for the HIPC initiative will have to wait for some time to enjoy the benefit of debt cancellation.

Until now seven countries – Bolivia, Burkina Faso, Cote d’Ivoire, Guyana, Mali, Mozambique and Uganda – have qualified for debt relief under the HIPC initiative totalling about 3.4 billion dollars in Net Present Value (NPV) Terms.

The sustainable level.