Clinton's Debt Relief Call Questioned

By Abid Aslam

WASHINGTON, Mar 17 (IPS) - Advocates of debt relief for Africa are questioning US President Clinton's latest proposals to reduce creditors' claims against some of the world's poorest nations.

''President Clinton is to be congratulated for recognising the need for significant debt relief,'' said Congressman Jesse Jackson, Jr. ''But his proposed solution would only make matters worse.''

Jackson, an Illinois Democrat and sponsor of U.S. legislation that would provide unconditional relief to debt-burdened African countries, assailed Clinton's proposals made Tuesday at a "ministerial" meeting of top officials from some 50 African countries.

Clinton made ''an overture (that) is conditioned upon going along with the structural adjustment programmes of the International Monetary Fund (IMF) and the World Bank,'' Jackson said.

Those conditions were aimed at opening African markets to the West by pushing trade and investment regimes akin to the much- maligned North American Free Trade Agreement (NAFTA), he argued. ''The failed NAFTA model...must not be imposed on Africa.''

Clinton repeatedly has touted a ''new relationship'' between Africa and the United States since visiting the region one year ago.

Efforts to win Congressional approval of trade and investment legislation have been in vain, however, and the U.S. president opened a three-day 'US-Africa Ministerial' meeting here Tuesday by highlighting the debt problem.

Clinton asked other leaders of the Group of Seven (G-7) economic powers at their June meeting in Cologne, Germany to make ''significant improvements'' to the Heavily Indebted Poor Countries (HIPC) debt initiative.

''We should provide extraordinary relief for countries making extraordinary efforts to build working economies,'' he said. This would mean ''debt reduction that is deeper and faster'' than that offered by HIPC, which came into being in 1996.

Like the existing programme, however, Clinton's sketchy plan would channel the benefits to countries toeing the line on structural adjustment.

''It has taken Clinton a year to come up with this but it is the same old debt-relief framework,'' said Njoki Njoroge Njehu, director of the non-governmental U.S. 'Fifty Years is Enough Network'.

''Even the Bank and IMF are now aware of the widespread dissatisfaction with HIPC and are reviewing the initiative but Clinton is offering the same old way of doing things. He's just replaced the term 'structural adjustment' with talk of 'economic reforms'.''

Policy labels may change, Njehu added, but ''all we see is ever-escalating debt, a 400 percent increase in Africa since 1980 alone.''

Key details of Clinton's proposal remained vague, creating the impression that ''this came more from a political angle and has yet to be substantiated,'' said Veena Siddharth, senior advocacy officer at the non-governmental organisation Oxfam International. ''This is a huge boost of political energy, but what does it really mean?''

As laid out by Clinton and U.S. officials Tuesday, the latest proposals would:

- Expand the number of countries that could qualify for HIPC to around 50, from 41. Potential African beneficiaries would include Ghana and Congo but the rules for entry - loyalty to the IMF's Enhanced Structural Adjustment Facility (ESAF) would be unchanged.

- Write off concessional 'aid' loans, which were made at below- market interest, to all countries qualifying for HIPC. The United States, which has ceased offering such loans for efforts such as food aid programmes, would be willing to write off another three billion dollars in old debt if other creditors - to whom some 70 billion dollars were owed - did the same.

Japan, traditionally very reluctant to forgive debt, would have to give up the most, according to Oxfam International.

- Cancel 90 percent of loans made on commercial terms by agencies such as the U.S. Export- Import Bank and the Commodity Credit Corporation to HIPC-eligible countries. France, which grabbed headlines for writing off aid loans to Central America after Hurricane Mitch but refused to relinquish its much greater 'non-concessional' claims, would be most affected, said Siddharth.

- Accelerate relief in ''exceptional'' - but as yet undefined - cases and increase financing for HIPC countries during the 'interim' period between the decision to grant them debt relief and the actual provision of that relief.

So far, the World Bank has been alone among multilateral creditors in providing such help. It remained unclear whether Washington would lean on regional development banks and the IMF to follow suit.

To pay for all this, Clinton favoured selling off a portion of the IMF's gold reserves and investing the proceeds. The sale of 10 million ounces of gold could generate some 1.5 billion dollars in revenue, U.S. officials suggested.

Calls to liquidate a portion of the Fund's gold reserves, set up by its shareholders more than 50 years ago, so far have failed. Germany, long the G-7's highest-profile opponent of a sale, has begun to entertain the possibility.

IMF officials occasionally have given the idea tacit support but on condition that the proceeds be used to bolster ESAF and not be ploughed directly into debt relief.

''What Clinton is proposing would have to be agreed to by all the other creditors and then would have to be approved by Congress, so in effect he's putting up a straw man,'' said Njehu. ''But the British have made firm proposals on debt relief and the Germans and other G-7 members have made or are expected to make encouraging statements. Clinton needed to say something, to have something to show in time for the next G-7 meeting in June.''

One African official noted that despite the prominence given to debt on the first day of this week's conference here, much time would be reserved for talking up U.S. business interests in Africa.

''The United States needed to say something on debt to have any credibility in pursuing its trade and investment agenda,'' he said.