During the last two weeks the leaders of the world economic institutions have been meeting in Washington DC. This has been a period of intense anxiety and high expectations for the Heavily Indebted Poor Countries (HIPCs) such as Zambia. Anxiety has arisen out of fear that the gatherings might turn out to be a mere academic exercise where financial pledges are made but never fulfilled. High expectations have emanated from the intense lobbying for debt cancellations that has been going on in recent months.

What is the opinion of the CCJP/JCTR Debt Project, which includes Jubilee 2000-Zambia, about the developments coming from the Washington DC meetings? While it is still too early to have a complete analysis, it is already clear that much more needs to be done if the poor of the world are to enter the new millennium with hopes of a better standard of living. This is especially true for Zambia.

During the annual meetings of the International Monetary Fund (IMF) and World Bank (WB), the issue of debt relief has been very high on the agenda. Debt cancellations, debt rescheduling, future debt negotiations, raising funds for debt relief schemes, sale of gold reserves, conditionalities on debt arrangements, future lending policies, etc. -- these have been the "hot topics" subject to debate and decision.

It was hoped by the heavily indebted poor countries and debt campaign activists that creditors would this time around place more emphasis on pragmatic efforts aimed at eradicating poverty. Memories are still fresh of a similar meeting held in Cologne, Germany last June. There the leaders of G7 nations decided to review the HIPC Initiative proposed by the IMF and World Bank. Some changes were made to raise more money, include more countries, and speed up the process a bit. But these were minor changes only. And the entire exercise was linked to faithful following by the debtor countries of the stringent conditionalities imposed by Enhanced Structural Adjustment Facility (ESAF). This is the SAP model so widely experienced in Zambia as a major cause of human suffering.

This link of debt relief to ESAF is seen by our Zambia campaign to be a fatal flaw in the Cologne Initiative. As the official external review of HIPC commissioned by the IMF showed so clearly last year, the ESAF model is premised on wrong assumptions and implemented with a pace and rigidity that is alien to the local environment and exacerbating poverty conditions. It is of great significance that major orthodox economists such as Joseph Stiglitz and Jeffery Sachs are now readily admitting that the model has failed to meet people's expectations.

So the question comes now: does then the current Washington meetings offer any greater hope to the world's poor? It is true that the meeting has focused much, at least in rhetoric and pomises, on poverty reduction in the world's poorest countries. Therefore the effort has been to secure financing for an "enhanced" HIPC Initiative. Both Mr. Wolfensohn, head of the World Bank, and Mr. Camdessus, head of the IMF, have told the press that such additional financing does seem possible.

Gordon Brown, the British Chancellor of the Exchequer, has spoken of a "virtuous circle of debt relief, poverty reduction and economic development" being created. But we would ask, how would this new creation be achieved when debt relief is still linked to the discredited Structural Adjustment Programmes? The Chancellor's virtuous circle risks becoming a vicious circle!

One of the most respected groups doing debt analysis and advocacy, the European Network on Debt and Development (Eurodad), has welcomed efforts to increase debt cancellation and has stated that it is vital that all countries, in particular the G7, contribute to financing this cancellation. However, Eurodad feels that focusing on how much the "enhanced" HIPC Initiative will cost and who will pay what, whilst keeping debt relief tied to structural reforms, has missed two key points.

Firstly, the HIPC Initiative is still not going to offer enough debt relief for the poorest countries. Eurodad emphasises that debt sustainability is still measured in strictly economic terms, without taking account of social conditions. For instance, Mali, which ranks eighth on the list of poorest countries in the world, is going to pay more in debt service after qualifying for the Initiative than before. One fifth of children born in Mali do not live to see their fifth birthday due to poverty conditions intensified by the debt burden.

As we know so well, the story is no different for heavily-indebted Zambia. Recent UNDP Human Development Reports show life expectancy plummeting below forty years. And the just completed report sponsored by UNICEF demonstrates the terrible decrease in all of Zambia's major social indicators. But Zambia still uses more of its scarce government revenues in servicing its debt than it spends on health and education.

Secondly, Eurodad states strongly that debt cancellation should not be tied to the IMF's Enhanced Structural Adjustment Facility (ESAF) or to its newly announced successor, the " Poverty Reduction and Growth Facility" (PRGF). Instead, debt cancellation should be conditioned on how equitably the money freed up is spent and how effectively it is monitored by the governments and civil society organisations concerned. The two complicated processes of structural, macroeconomic reforms (e.g., SAPs) and debt relief (e.g., outright cancellation) should be delinked from each other.

Again, the Zambian case is very instructive. There is considerable fear, indeed outright suspicion, that debt relief that is coming to Zambia will not in fact benefit the poor. The only way that that fear and suspicion can be allayed is for the Government to come right out and endorse the proposal made repeatedly in recent months by the CCJP/JCTR Debt Project and many other groups: establish an independent tripartite commission (composed of representatives of civil society, Parliament and government ministries) to oversee debt negotiations and the orientation of freed up resources to social and productive needs (e.g., health, education, agriculture, women's groups, HIV/AIDS).

It is important to note that both the IMF officials and the World Bank's president, James Wolfensohn, pointed out that the move to the new Poverty Reduction and Growth Facility would be a difficult one. "It will take time, and will be a learning process for both our institutions." But a serious question is being raised by debt campaigners and that is why the IMF is being given an increased role in the entire process. Given the recent decisions of Cologne and Washington, the IMF is being significantly changed from the cooperative lending institution it has always been to becoming a policy-maker, financial architect, international debt relief and development institution in the countries that deal with it.

Simply stated, from both design and experience, there are institutions that deal with development issues that are much better placed than the IMF. We have in mind UN agencies like UNDP, UNICEF, UNAIDS, UNHabitat, ILO, WHO, etc. Yet these institutions are in fact neglected and starved of the much-needed funds to carry out their programmes effectively. From past history we can see that the Fund's record in development progammes has been poor at best and frequently disastrous.

Another international network of analysts and activists, Jesuits for Debt Relief and Development (JDRAD), has strongly criticised the outcome of the recent IMF and World Bank deliberations. JDRAD points to the ignoring of demands by 17 million Jubilee signatories worldwide. Effective debt cancellation and not enhanced HIPC arrangements are what the signatories called for. It is true that at least in a few cases (Zambia?) the limited enhancements offered to the HIPC Initiative might allow somewhat faster and broader debt relief. But the September 1999 IMF and World Bank meetings have made no explicit reference to the Jubilee call for a "fair and independent procedure" to determine debt relief.

It is in the light of this analysis that JDRAD argues that one of the main reasons why all of the mechanisms proposed and used over the past 20 years to determine debt relief have not succeeded is because they fail to ensure adequate representation of the people who are most seriously affected by the human cost of paying the debt. Exclude this representation and you exclude the chances for success. This point of "ownership" of economic reforms was made strongly in the IMF's external review of Zambia's reform programme.

The Jubilee 2000-Zambia campaign notes with grave concern the inadequacies of the just-completed Washington meetings. It is true that some positive steps have been taken and that the current scenario is at a much different stage that might have been imagined several months ago. This advance is certainly due to the worldwide pressures mounted by civil society through the Jubilee 2000 movement. But given the extremely serious condition that millions of the world's citizens face daily because of the unacceptable levels of debt servicing, much more dramatic and effective action is called for. Window dressing veiled in financial pledges that rarely get translated into real economic and social goods in the recipient nations is not acceptable.

Ms. Ann Pettifor, Director of Jubilee 2000-UK, has expressed similar sentiments. "When a King or President dies, world leaders drop everything to attend the funeral. Twenty thousand children die each day, because money is diverted from health and clean water into debt service. Too many countries will still be paying more on debts than health and education. Thus the Washington Package covers too few countries, offers too little cancellation and has no deadline. As a result debt will be stretched over too many years. We call on world leaders to drop everything and meet again before the millennium to respond to the calls of the poor."

Over the next several weeks, the CCJP/JCTR Debt Project will be analysing in greater depth the dimensions and significance of the new debt initiatives. The pledge by President Clinton to move toward total cancellation of all bilateral debts owed to the United States of America by the poorest countries needs close examination. The move he has taken is a step in the right direction and we hope that it will set a precedent for the other members of the G7 to initiate individual bilateral debt cancellations to the world's poorest countries. However, the Debt Project notes with concern the continued imposition of structural conditions (e.g. structural adjustment targets) to the promised 100% USA bilateral debt cancellation. For as long as these conditions are not removed it gives the Clinton administration a leeway to renege on its pledges under the pretext that the debtor countries have not stuck to the conditionalities. This amounts to a "carrot-and - stick game" and as such it is not fully beneficial to the debtor countries. The creditors should not play to the gallery but must deal with the debt crisis in the poor countries decisively and vigorously.

Similarly, the modifications in HIPC, the adjustments in ESAF, and the determination of poverty eradication goals all must be evaluated in terms of their real world impact on Zambia and other heavily indebted countries.

In the meantime, we reiterate that calls of debt campaigns around the world to build pressure for more effective and equitable debt cancellation. Here in Zambia, we will continue to collect signatures of ordinary citizens on a petition that makes very clear our position: CANCEL THE DEBT! We will continue to advocate for debt mechanisms to be put in place that will guarantee resources immediately serve the needs of the poor. And we will continue to push for making the start of the new millennium a moment for just and sustainable human development.

Tuesday, October 05, 1999
By Jack Jones Zulu
Coordinator Jubilee 2000 Zambia Campaign

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