US Can Help African Nations by Forgiving Bilateral Debt
Debt-for-development swap could help ensure that money saved goes to schools and housing
AS camera crews leave Rwanda en route to the next crisis, Africa's plight remains a daunting challenge. Owing to a litany of tragedies, including civil wars, epidemics, and natural disasters, the United States and the West have just about exhausted themselves over Africa's miasma. Nobody seems to know what to do. Africa's economic conditions have sunk to once-unthinkable levels. The most oppressive of these conditions is the large amount of foreign debt that burdens virtually every country on the continent.
As the Clinton administration earnestly seeks to find reasonable and achievable ways in which the US can make a difference in Africa's economic future, it should look seriously at erasing Africa's debt. By doing so, President Clinton and Congress could do more to help Africa than any other administration in history. It is clear by the convocation of the first White House Conference on Africa in late June that the president wants to do the right thing, even if he does not always know what that might be. Mr. Clinton's insistence that Africa is important to the US has been warily received by Africa watchers, most of whom await positive signs of a coherent policy toward Africa.
Although the majority of African countries owe money to multilateral institutions like the World Bank and International Monetary Fund, their debt to the US is not insubstantial. The World Bank notes that sub-Saharan African countries owed $199 billion to all creditors at the end of 1993. According to the Treasury Department, almost $5 billion is owed to the US - up from $4.5 billion in 1992.
The eradication of official bilateral debt would provide a boost to Africa's economic growth and self-sufficiency. Given the post-cold-war decline in foreign aid, debt forgiveness will help African states partially offset lost aid by reducing payment outflows. Debt relief would allow the countries to devote a greater percentage of their small budgets to building roads, schools, housing, and hospitals. Opponents of debt forgiveness, including some congressional leaders, say that misguided macroeconomic policies, mismanagement, and general fiscal malaise are the real impediments to African economic growth. Others point to political turbulence and corruption as the reasons for Africa's problems. These critics say that living up to debt commitments is the price Africa must pay for its political failures and inordinate economic dependence on the West over the last three decades.
Proponents of debt forgiveness reply that the current practice requiring these poor countries to repay what is to them large amounts of interest does a great disservice. Debt repayment deprives African economies of badly-needed cash and comes at the expense of internal infrastructure developments. And because these payments have little, if any, impact on America's bottom line or overall budget deficit, the money goes further and has greater value in Africa than in the US.
IF one US foreign-policy objective is to promote greater fiscal accountability in recipients of US foreign aid, then debt payments should be used for development in these countries.
With sufficient guidance from donor nations, African states could repair the chronic state of underdevelopment within a period of 10 to 15 years if debt-for-development were implemented in US foreign-aid policy.
Many of Africa's economic travesties have been self-induced. Zaire, Liberia, Sudan, and, most recently, Nigeria are egregious examples: Economic growth and development have been held hostage to internecine strife or bald-faced chicanery.
Yet reality suggests that the likelihood of full debt repayment is slim and that debt forgiveness is in the best long-term interests of the US and Africa.
What about the political practicality of debt relief in today's fragile post-recessionary climate? It appears that Congress has made good on its perennial threat (or promise) to cut foreign aid in fiscal 1995, and there are serious proposals to revamp the foreign-aid system altogether. If these proposals are put into practice, there will be a vacuum created by the loss of American foreign aid; forgiving Africa's debt would be a noble and wise way to fill the void.
As long as Africa's economic future is tied to official donors from Europe, Asia, and the US, the continent will miss the wave of privatization sweeping much of the developing world, and it will remain on the margins of the world economy.
If Congress and the president agree that Africa's problems are caused as much by economic strife as by political conflict, and that Africa is important to US national interests, then they should do the right thing and clean the slate on African debt. The Opinion/Essay Page welcomes manuscripts. Authors of articles will be notified by telephone. Authors of articles not accepted will be notified by postcard. Send manuscripts by mail to Opinions/Essays, One Norway Street, Boston, MA 02115, by fax to 617 -450-2317, or by Internet E-mail to OPED@RACHEL.CSPS.COM.