What Canada sees in easing loans to Africa
Ottawa — Monique V'ezina, the grandmotherly minister in charge of Canada's foreign aid program, called it ``a small message.'' She was talking here of the Canadian government's decision to place a repayments moratorium on some $700 million of official loans to sub-Saharan African nations. It could save them $250 million over the next 15 years.
When Mrs. V'ezina, the external relations minister, announced that decision May 27 at the special session of the United Nations General Assembly on the critical economic situation in Africa, she received a sustained ovation. The meeting was purposely defined in advance as not a ``pledging session,'' and only Canada and the Netherlands ignored that billing by promising help. None of the major donor nations offered any extra funds at that session to help Africa in the crucial years ahead.
John Williamson, an economist with the Institute for International Economics in Washington, termed the Canadian and Dutch money ``just peanuts in relation to the size of the problem. Nonetheless, they provided an excellent lead.''
Canada's ambassador to the UN, Stephen Lewis, chaired the ad hoc committee of the General Assembly that worked until 5 a.m. June 1 to negotiate a resolution containing a ``program of action for African economic recovery and development 1986-1990.'' It was adopted unanimously by the Assembly later that day.
Pleased with the result, Mr. Lewis said in a telephone interview: ``I want to contain my own euphoria.'' Mr. Lewis, former leader of the New Democratic Party, the smaller opposition party here, sees the program as ``a potential turning point'' for the economy of Africa.
In general, the economy of sub-Saharan Africa has been declining for more than a decade. Low-income Africa is poorer now than it was a generation ago. Population growth remains unchecked. Productivity is all but stagnant.
Some 39 of the 44 nations of that region have piled up some $62 billion in external debts, according to the World Bank. Because of falling export prices, debt-service payments increased from 7 percent of exports in 1980 to 25 percent in 1984. They are forecast to peak at 35 percent this year, dropping off to 33 percent in 1987.
Many of the nations cannot keep up with their payments. Only 15 countries were able to pay promptly during the 1980-85 period. Why then does Ambassador Lewis sound so optimistic?
One reason is the serious response of the African leaders to their nations' plight. Through the Organization for African Unity, they drafted a paper outlining the economic situation, priorities, and intentions. They talked of a five-year, $128 billion recovery program stressing rebuilding Africa's farm base.
Most experts feel that emphasis on farming is just what is needed in Africa, with its problems of famine and bursting population. The Africans even recognized the key role women play in doing the hard work of farming in most African countries.
The paper also calls for more reliance on free markets. In fact, Africans are already making tougher and wiser economic decisions. A United States official says 14 countries have greatly increased crop prices paid farmers, a step often needed to boost incentives and production; 11 are reforming or divesting state-owned enterprises, companies that are often inefficient and badly managed; 10 have devalued currencies, often needed to stimulate exports and discourage luxury imports; 7 have decontrolled some or all consumer prices. Such reforms, Lewis said, ``will make a profound difference.''
Lewis was pleased at the absence of ideological skirmishing at the UN session: ``It was not permitted to stop the process in its tracks. The whole international community wanted [the meeting] to be a success.''
A second reason for Lewis's good cheer was the possibility of aid from rich nations in a form other than just cash. He knows the US and other major industrial countries have budget restraints that make large donations of new aid unlikely. But he sees alternatives.
For one thing, other nations could follow the Canadian example by forgiving debts. The World Bank and its soft-loan affiliate, the International Development Association (IDA), could step up their lending. Almost 30 of the sub-Saharan African nations are so poor that they qualify for IDA loans. Seventeen have adopted sufficient domestic policy reforms to qualify for loans from a special World Bank facility for Africa.
In addition, Lewis has hopes that Africa's terms of trade will improve -- that it will get more money for its commodities and pay relatively less for its imports.
The African program called for some $9 billion a year of outside help for five years. That sounds like a lot. But according to a World Bank study, known and expected aid commitments already imply flows of some $8.5 billion a year to the end of the decade. The bank figures the Africans will need an additional $2.5 billion a year to return African growth to 3 or 4 percent a year by 1990. So the Africans' own program calls for relatively modest amounts of foreign aid.
Mr. Lewis, self-described as ``an enthusiast,'' is more hopeful for Africa than some experts are. Many gloomy predictions, with supporting statistics, have been made. But there is considerable agreement that the UN special session was part of a ``process'' that could lead to renewed African progress.
``It brought Africa back into the forefront of the world agenda,'' a World Bank official noted approvingly.