Donors debate as debtors wait. Burdened Africans look for a reprieve
Boston — As the world's seven economic giants meet in Toronto next week, the world's most impoverished nations - those in sub-Saharan Africa - are watching to see if these rich creditors will keep their promises to help ease Africa's debt. These promises were made two years ago at the founding of the United Nations Africa Recovery Program, when the world's richest countries pledged to come to the aid of African nations straining under growing debt and interest payments, stagnating development, and sagging commodity prices.
Up to now, lender nations have been slow to provide relief. The exception is Canada, which forgave $650 million in 1986 - the total bilateral debt owed to it by Africa's poorest nations.
Other creditors denounced forgiving debt, citing the bad precedent it could set for larger debtors, especially in Latin America, and the fact that it could make a country appear unworthy of credit.
But lately, the idea has been catching on. Britain and the Scandinavian countries have cancelled substantial portions of African debt. And most recently, France decided to write off one third of its outstanding loans to Africa's poorest countries. West Germany and Japan have said they will take similar action. Of the major creditor nations, only the United States has not joined the trend.
According to World Bank figures, the total owed by sub-Saharan African nations is $150 billion. Of this, approximately 50 percent consists of bilateral, government-to-government loans. Some 30 percent is in the form of multilateral loans from the World Bank and the International Monetary Fund. The remainder are mostly private bank loans.
Experts say that the plight of some 24 countries in sub-Saharan Africa is so severe that substantive measures must be taken now to avert disaster.
African leaders recently denounced the devastating human impact of ``structural adjustment'' programs imposed by creditors, which, in many countries, have resulted in cuts in spending for social needs, higher consumer prices, and increased unemployment.
A number of African countries currently spend more than their Gross National Product to service their debts. In 1986, net resource flows to the region totaled $11.8 billion; debt servicing came to $7.6 billion.
``Not only is the economic decline in Africa not being stabilized, it's accelerating,'' says Kenyan Salim Lone, editor-in-chief of a UN Africa publication.
Some experts say a more sweeping change than mere debt relief is needed. Among them is Stephen Hellinger of the Development GAP, a Washington-based third world policy organization. He says the debt crisis can never be solved until its root causes - misguided development, capital flight, corruption, overemphasis on agricultural exports, and excessive military spending - are addressed.
``There must be accountability on the part of aid institutions which made loans based on a development model that made no sense for Africa,'' Mr. Hellinger says. ``The World Bank has been pushing a type of development in Africa that's geared toward export agriculture. As a result, the continent has become less and less self-reliant in food production.
The aid agencies, he adds, ``should fund a more self-reliant form of development.''
President Reagan, in a speech last week, gave no hint that the US plans to forgive any loans. Instead, his remarks reflect continuing support for the ``structural adjustment'' approach.
According to the Treasury Department, US government loans to sub-Saharan Africa currently total $4.4 billion.
The US recently announced that it would back the granting of concessional interest rates by other creditor nations, but would not itself grant such concessions. ``United States laws, policy, and budgetary realities constrain us,'' he said.
This decision signals the possibility that the Paris Club - an informal organization of creditor nations - might now offer a wider variety of options to debtor nations.
Such possible changes are sure to be discussed at the Toronto summit. British Chancellor of the Exchequer Nigel Lawson has proposed a number of debt relief strategies, and Fran,cois Mitterand has suggested that all creditors cancel one third of their debt, as France has done.
But even if the ``menu'' approach is adopted by the Paris Club, enabling creditors to choose from a range of debt-relief options, the only option open to the US would remain that of rescheduling payments.
Experts say the benefits of debt rescheduling are negligible. ``Extending a loan period means the debt just keeps getting bigger as it gets pushed forward,'' says Maurice Williams of the Overseas Development Council.
Stephen Lewis, Canada's Ambassador to the UN and adviser to the Secretary General on the African Recovery Program, says the United States's most recent move was ``not particularly encouraging.''