Is debt relief for the poor countries on the horizon? Will we really be able to celebrate a "Jubilee" liberation from debt burdens that stifle development and crush hopes for so many millions of people?

When the G-7 leaders finished their work in Cologne in mid-June, newspapers across the world echoed the official communiqué’s glowing language that major steps were being taken for solving the global debt problem. President Clinton’s bold promises earlier this year that up to ninety billion US dollars would be made available for debt relief seemed to be fulfilled as the rich northern countries called for reform of the "Heavily Indebted Poor Countries" (HIPC) initiative (affecting more than forty nations) put forward by the World Bank and IMF and pledged major cuts in the debts owed them by the struggling countries in the south.

But another chorus of reaction has come from non-governmental groups in both the north and south, calling the Cologne Debt Initiative seriously flawed in priorities, approaches and outcomes. Groups such as OXFAM, European Debt and Development Network (EURODAD), Jubilee 2000, Jesuits for Debt Relief and Development (JDRAD), and representatives from debt coalitions in Africa, Latin America and Asia, have all sharply criticised the G-7 recommendations as grossly inadequate for and in some sense a serious step back from equitable and effective solutions.

What accounts for these two very contrasting perceptions of the debt relief package agreed to in Cologne? The divergent views come from two quite different starting points. The creditors are primarily interested in limiting the costs that they must incur through debt relief arrangements while the debtors are concerned about what they can afford to pay without undermining their ability to meet the essential needs of their people.

In Zambia, a very poor nation of ten million people, over 300,000 signatures were gathered over the past year for the "Jubilee 2000" petition calling for cancellation of our debt of close to $7 billion. But these signatories are understandably disappointed since the outcome of Cologne would effectively reduce less than $1 billion in actual debt stock and would insignificantly touch the very large amount the government must set aside each year for debt servicing -- more, in fact, that is allocated for health and education purposes. The Archbishop of Lusaka, Medardo Mazombwe, recently stated that servicing of debt "is a major block to development and affects the livelihood -- indeed the very ability to live -- of millions."

A SERIOUSLY FLAWED INITIATIVE

From the perspective of analysts and activists promoting cancellation, three major flaws mark the Cologne Debt Initiative. First, access to debt relief continues to be tied to the stringent reforms mandated by discredited structural adjustment programmes. The most recent external reviews of the "Enhanced Structural Adjustment Facility" (ESAF) approach repeatedly make the point that it is the wrong model for most debtor countries. Yet Cologne reiterated the insistence that that ESAF targets must be faithfully met over a several year period before debt relief would be possible.

Second, debt sustainability -- the amount of debt servicing a country can be expected to pay -- continues under the HIPC arrangements to be based on purely economic factors (debt stock to export earnings ratios) which do not take into consideration the levels of poverty and the financial needs to deal with this poverty. By excluding social considerations, the Cologne Debt Initiative continues to impose requirements that are politically dangerous as well as ethically untenable.

Third, the World Bank and IMF are given even more say in determining the economic and social policies of the debtor countries. Under the guise of new poverty reduction rhetoric, these institutions will continue to impose neo-liberal economic conditions that have more fiscal management rationale than social development basis. These are "conditionalities from above" that ignore the national political and civil structures that could and should determine local priorities for poverty eradication.

"CONDITIONALITIES FROM BELOW"

What then is necessary for more effective and equitable relief for countries like Zambia that are so drastically burdened with an enormous debt? Surely the starting point must be more honest recognition of the facts of the debt situation and critical analysis of the limitations of the Cologne approach. Supporters in the north of the campaigns for debt relief must not be misled by claims made by G-7 leaders or officials of the World Bank and IMF that "major breakthroughs" have occurred in reaching a settlement.

Equally urgent is the need to listen to the voices in the south that flatly challenge the HIPC and ESAF approaches as unacceptable even in the "reformed" modes that are being proposed by some northern friends. For example, the "Lusaka Declaration" emanating from a meeting of representatives from 14 African nations last May stated unequivocally that "We reject HIPC and the other current debt relief processes" that are tied to imposed reform programmes that are "deepening economic, social and ecological hardships for the vast majority of people" in Africa.

But it is important to note that this southern perspective adds an equally strong call for "conditionalities from below" -- mechanisms to be put in place that would assure resources freed up would really serve the needs of the poor. These are not outside formulae imposed by creditors but structures involving local people and institutions with the debtor country. Two important mechanisms that encompass civil society participation already have some experience in African countries today:

1. An official tripartite "debt management mechanism" that includes representatives from civil society (e.g., churches, trade unions, non-governmental organisations, etc.), elected members of Parliament, and agents of relevant governmental ministries (e.g., finance, social development, agriculture, etc.). Such an official task force arrangement is working in Uganda and starting in Tanzania, with authority to monitor debt negotiations and determine the direction of freed-up resources toward poverty eradication.
1. An independent "social audit mechanism" that is based in civil society organisations and publicly reviews national budget allocations and performance in relationship to meeting the needs of the poor. Such a social evaluation of the national budgetary process and content has in fact been done for the past three years by the Catholic Commission for Justice and Peace of the Zambian Bishops Conference, with significant public attention focused on government priorities.

Debt cancellation that does indeed benefit the poor is not only necessary but it is also possible. But much more needs to be done than has been offered by the Cologne Debt Initiative. Churches and civil society groups in creditor countries should lobby that their governments to exercise the political will to cooperate with the forces of civil society within debtor nations to make that possibility a reality. Only in this way can we move beyond the half-measures of the Cologne Debt Initiative to full Jubilee measures that will insure equitable debt cancellation and effective development options for the poor of the world.

Peter Henriot, S.J., a political scientist, directs the Jesuit Centre for Theological Reflection in Lusaka, Zambia, and is involved in the "Jubilee 2000" campaign in that country.
6 July 1999

Published in AMERICA (vol 181, no 4), August 14-21 1999