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Debt cancellation not a solution to SADC countries
Williot Benjamin & Mandla Hadebe, Southern Africa Social Forum (SASF)
Extracted from SASF Newsletter
October 25, 2006

Participants to the on-going three-day Southern African Social Forum in Lilongwe, Malawi have said debt cancellation is not a solution in itself to the problems of development and called for African countries to stop borrowing from the International Financial Institutions. It was noted that if countries stopped relying on the IFIs they would crumble as they make their money through lending.

The gathering observed that the World Bank and International Monetory Fund ( IMF ) impose crippling conditionalities on borrower governments, which in turn affects the entire inhabitants of those particular countries.

Father Brian McGarry, chairman for the Zimbabwe Coalition on Debt Development said that people should not focus only on the money it self but look forward to the outcomes.

Father MacGarry spoke about Zimbabwe's debt which he said had ballooned about ten-fold since independence in 1980. Zimbabwe inherited its debt from the illegal regime of Ian Smith, around US$40-55 million, which was also attributable to the fact that Rhodesia, then, had stopped paying interest on its loans, despite the fact that it was allowed to borrow although under sanctions from the rest of the world, thus rendering its debt illegitimate because the lenders should have not engaged an illegal government.

Nevertheless, Zimbabwe had to start repaying these debts immediately, and although there was a great deal spent on social spending in the early years of the government, soon the government fell prey to conditionalities and had to restructure its expenditure around the conditionalities imposed on it by the IFIs as part of the Structural Adjustment Programme that it found itself under.

This worsened the debt burden and when the Zimbabwe government stopped making repayments to the IFIs, it found itself under even more difficult conditions as they could not access any loans as a result of the signalling role of the IFIs.

Mungutiwa Sitali, the Debt and Trade Project Assistant of Jubilee Zambia said Zambia is a recent beneficiary of the Multilateral Debt Relief Initiative (MDRI) announced by the Group of 8 rich countries at the Gleneagles Meeting in 2005. He said the good news was that its debt was cancelled, falling from around US$7,4 billion to about US$502 million. The bad news is that a significant number of people are still poor and unemployed, while because of its new credit-worthy status, Zambia had already started borrowing fresh funds.

He added that some of Zambia's debt can be considered illegitimate because the funds were used to bolster neighbouring nations' aspirations to independence and counter the effects of apartheid. Nevertheless, it appeared the Zambia should look at putting in place strategies that ensure sustainable contraction and use of loans. He said Zambia would have to borrow to create growth in its industry for loans to become sustainable, a point he said other countries should follow.

Moreblessings Chidaushe, Programme Officer at the African Forum and Network on Debt and Development, AFRODAD, reiterated that as debt cancellation activists have been calling for the unconditional cancellation of all debts as Africa does not owe and therefore should not have to pay anyone anything. This call was welcomed by participants at the discussion on illegitimate debt who agreed that it was indeed Africa that was owed by the West and that instead of wasting time auditing how much Africa has already paid, the West should be auditing how much is to be paid to Africans.

Other participants felt it would be necessary to have debt audits so that Africans are informed exactly how much they have been exploited through payments of debt alone at the cost of their citizens.

Malawi is also a beneficiary of the MDRI but is also in danger of falling into a similar fate to that of Zambia. The impact of the debt cancellation has filtered into the economy and has had a significant impact in people's livelihoods. Mabvuto Bamusi, Programmes Director at Malawi Economic Justice Network (M E J N) said that Malawi as a nation should really scrutinize conditionalities in the future to ensure that loans contracted lead to development. "We need to screen their conditionalities as well as their policies towards development in (our) countries," he said.

Bamusi also said parliaments need to play an important role in loan contraction processes so that loans really benefit the whole nation.

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