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Debts-forgiven African countries pile up huge debts Adeyeye Joseph Eight African countries, which escaped the debt trap as a result of a novel debt-forgiveness arrangement last year, have raked up new debts that are equal to the amounts that were forgiven. This was disclosed by a new report from the World Bank, released this month. All the eight countries, the World Bank/International Monetary Fund report says, were part of the Highly Indebted Poor Country program. The eight countries are Rwanda, Ethiopia, Uganda, Tanzania, Mauritania, Burkina Faso, Ghana and Mali. Nigeria was excluded from the HIPC list, despite the pleas of her officials then, because her creditors said she was not a low-income country. The report entitled, "An Evaluation Update of the HIPC Initiative Debt Relief for the Poorest Countries", was prepared by the World Bank Independent Evaluation Group. It says the affected countries' debt to export ratios (a measurement of a country's level of indebtedness) have outgrown the HIPC debt-safety threshold of 150 per cent. "The Enhanced HIPC Initiative has reduced $19 billion of debt in 18 countries, thereby halving their debt ratios. But in 11 of 13 post-completion-point countries for which data are available, the key indicator of external debt sustainability has deteriorated since completion point. In eight of these countries, the ratios once again exceed HIPC thresholds. The effect of improved exports and revenue mobilisation on debt ratios has been offset by new borrowing," the report says. Observers are saying that this latest development holds important lessons for Nigeria. Last month, the PUNCH had reported that the Minister for Finance, Mrs. Ngozi Okonjo-Iweala, had written to intimate President Olusegun Obasanjo with the activities of some "undesirable Nigerians" who were trying to induce the Federal Government to take questionable loans. "I wish to alert you to the activities of some questionable Nigerians who are proposing to arrange loans from sundry sources for the country. Some of these sources are distinctevly undesirable and bear watching. "It may interest Mr. President to note that even some of the financiers who have shown interest in providing Foreign Direct Investmentts are actually structuring the transactions in such a way that the Federal Government will end up accessing some foreign loans to finance their Foreign Direct Investments in Nigeria," she wrote. The HIPC programme was developed as an answer to the clamour by anti-debt campaigners who argued that debt cancellation for poor countries was the only way to develop these countries. Although the HIPC programme came into being in 1996, the implementation only started fully years later after the Group of Eight nations pledged to cancel the debt of the world's most indebted countries. The World Bank says out of the 29 HIPC countries 18 have reached completion point, the mark when debt relief is actually delivered. The HIPC identifies 38 countries as being eligible for debt relief. Thirty-two are in Africa. Under the HIPC programme, 27 countries have received a combined relief level of $54billion so far. "Debt reduction alone is not a sufficient instrument to affect the multiple drivers of debt sustainability. Sustained improvements in export diversification, fiscal management, the terms of new financing, and public debt management are also needed measures that are outside the ambit of the HIPC Initiative. HIPC governments would need to have sound policy frameworks and balanced development strategies, and the international community would need to assist the countries with enhancing their exports and building needed institutional capacities, while ensuring that HIPC debt relief is truly additional to other aid flows," the Acting Director of Evaluation at the World Bank, Mr. Ajay Chhibber wrote. The report traces the plight of the affected countries to a lack of discipline and a clear and concise strategy to manage their post-debt forgiveness savings and economies. It also says that fiscal and debt management skills are lacking in some of these countries. "The requirement to develop and implement a country-owned poverty reduction strategy has been an mportant and beneficial outcome of the initiative. These strategies have tended to emphasise social sector spending rather than a more balanced approach to growth and poverty reduction. By continuing to track public expenditures deemed "poverty reducing," the initiative's approach to poverty reduction has leaned toward channelling additional resources to social expenditures. The report says countries which have just escaped the debt trap could only be sure of a "permanent exit" that would free resources for poverty reduction and development if governments prepare excellent post-debt forgiveness strategies, effective policy frameworks and balanced development strategies. THE PUNCH, Friday May 26, 2006 |
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