The Hindu : Opinion / Editorials : Welcome but not adequate relief

Online edition of India's National Newspaper
Wednesday, Jun 29, 2005

Opinion

Opinion - Editorials

Welcome but not adequate relief

The 100 per cent debt write-off deal for some of the world's poorest countries finalised by the G-8 is but a symptomatic response from the group of developed countries whose record on addressing Africa's chronic poverty and under-development has been far from creditable. The $ 40 billion write-off for 18 nations nevertheless underscores a recognition by the group that cancellation, not reduction, is the appropriate manner of redeeming them from the perennial cycle of borrowings. Debt relief was first agreed upon in principle nearly a decade ago under the Highly Indebted Poor Countries (HIPC) initiative — designed by the World Bank and the International Monetary Fund. The HIPC reckons debt alleviation not in terms of the impact it would have on the life prospects for millions around the world, but links it to policies that would augment export revenues of the recipient countries. Aid flows steadily declined in the past two decades and poor countries are spending more on debt-servicing than on health care and education. A study by the United Nations Conference on Trade and Development says that even states which have experienced partial recovery will have to increase repayments because of their commitments in social sectors. Some of the poorest and populous countries such as Nigeria, Indonesia, and Bangladesh have always been excluded from this global initiative. It is also significant that barely half the number of countries eligible for relief under the HIPC would benefit from the latest deal. It is likely that at least some members will dip into their budgets to finance the write-off. According to estimates by development lobbies including Non-Government Organisations, at least 62 countries need their debt to be cancelled if the 2015 target of halving global poverty is to be achieved.

The debt wipe-out agreement brokered by the G-8 President Tony Blair has no doubt generated the right momentum ahead of the annual summit in Gleneagles. On its agenda are landmark proposals of the African Commission, set up by the Labour Government, to double multilateral aid and phase out farm subsidies by 2010. The U.S. has not endorsed the U.N. target of raising official development aid to 0.7 per cent of the GDP and Britain has pledged to meet the goal only by 2012. Given the insistence of the European Union, the U.S., and Japan on retaining subsidies which soak up resources, they may find it difficult to provide additional funds for aid. In any case, the more basic question in relation to many poor countries, particularly in Africa, is why aid flows have not led to sustained development over the decades. Africa's predicament has to do, above all, with political and developmental backwardness. The absence of basic institutional prerequisites — such as a functioning democracy and adherence to mechanisms of the modern rule of law — the tendency of developed countries to prop up dictatorial regimes, and the hard selling of arms to African governments have effectively thwarted progress.

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