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GOVERNANCE ISSUES AND EXTERNAL DEBT RELIEF FOR POOR COUNTRIE

Will debt cancellation affect poverty eradication in any effective and equitable way?  That is the question that Jubilee-Zambia is addressing with great seriousness, as are many other debt relief campaigns in heavily indebted poor countries.  It is a question intimately linked with the issues of good governance.

Before explaining that link, let me note that at times governance issues are raised as if they are only the concern of institutions and publics outside of poor countries.  That simply is not true, as the Zambian case will make very clear.

Jubilee-Zambia continues to campaign vigoursly for total cancellation of our external debt – close to seven billion US dollars.  For a country of less than ten million people, that is a per capita debt of twice the per capita GDP.  Debt servicing in the past ten years has eaten up 20% of GDP, while budgeted education and health services account for less that 3% of GDP.  Since 70-80% of Zambians live below the poverty line, debt cancellation is not simply an economic issue but a profound ethical and moral issue.

Yet there is genuine concern among Zambians as well as our cooperating partners and other well-wishers that money made available through debt relief might not in fact be directed toward poverty relief programmes of social services, employment generation, productive infrastructure, etc.  Mismanagement, corruption, inefficiency, etc., can and indeed have drained scarce resources and diverted new resources.  Governance issues such as participation in the determination of priorities, accountability and transparency in the management of funds, and effectiveness in long-term planning must therefore be central to our debt cancellation campaign.

To make a direct linkage between governance and debt relief, Jubilee-Zambia has proposed (1) the legal establishment of a “debt mechanism” and (2) the constitutional clarification of the “debt contraction” process.

The “debt mechanism” is a legal arrangement to guarantee that funds are handled in a transparent, participative and poverty-related way. It would involve a tripartite committee of representatives of civil society, Members of Parliament and officials from relevant government ministries to monitor allocation and distribution of funds.  There would also be a social fund where debt relief resources would be placed, to be distributed to poverty eradication programmes in an accountable and transparent way.  Uganda has something similar in place that has demonstrated its effectiveness.

Will a heavily indebted country like Zambia simply fall back into deep debt even after some cancellation?  To address this critical issue, we call for a constitutional change in the process of “debt contraction.”  Currently, the Minister of Finance and National Planning can sign for huge loans without consultation or approval of Parliament.  This should be changed, so that the loan process is subjected to public scrutiny regarding the purpose of the loan, conditions attached to it, expectations of repayment, beneficiaries, etc.  Again, Uganda offers an example of Parliamentary action that has in the past few years halted the contraction of some very large loans that were judged not to be beneficial for the country.

Frequently the debt campaigns in poor countries are accused of placing all the blame on foreign creditors for the economically devastating and ethically unacceptable levels of foreign debt and downplaying the responsibility of poor governance in the debtor countries.  But since Jubilee-Zambia does in fact believe that the major cause of our country’s immense debt is external – precipitous decline in commodity prices coupled with sharp increases in imports, irresponsible lending by creditors, rising interest rates caused by industrialized countries macro-economic policies, imposed conditionalites such as structural adjustment programmes that have increased economic decline and social hardships, geo-political factors such as the struggle against Apartheid – we are all the more committed to addressing the governance issues that might undercut both the case for total debt cancellation and the direction of debt relief resources for poverty programmes.

The motto of the Jubilee-Zambia campaign is “debt cancellation for poverty eradication.”  Put succinctly, the Zambian people do not want cancellation of debt unless it means resources for poverty eradication.  Paying attention to governance issues is therefore central to our agenda.  

13 January 2003

Peter Henriot, S.J., a political scientist, is the director of the Jesuit Centre for Theological Reflection (JCTR) in Lusaka, Zambia.  JCTR hosts the Jubilee-Zambia campaign.