Adapted from the new policy briefing by the Jubilee USA Network, "G7 Debt Relief Plan: More Grief Than Relief," available on the web at <www.j2000usa.org> and <www.50years.org>.

A report prepared by the World Bank and IMF for the meetings of their joint Development Committee in April 2002 reveals troubling failures in the implementation of their six-year-old debt relief plan. Paul Martin, then Canada's Finance Minister, responded to this report by calling for a full review of the HIPC program, and put the subject on the agenda of the G7 Finance Ministers' meeting in Halifax, June 2002. With Martin's unexpected departure, the review seems to have falled off the G7 agenda. What is known is that until the G7 takes decisive action, the international debt crisis will continue to grow and take millions of lives as poor countries cut health and other public services to pay their mounting foreign debts.

"Debt Sustainability"
The report from the IMF and World Bank acknowledges that even according to its arbitrarily high standard of "debt sustainability" — a debt burden exceeding 150% of the annual value of exports — more than half of the countries in line for HIPC relief will not attain "sustainability." The report blames declining prices for agricultural commodities, but for over a decade critics have complained that the institutions' projections — especially on export earnings — are groundlessly optimistic. Jubilee Research (U.K.) has looked into this tendency as it plays out in the HIPC program, and found that export earnings for the first 24 countries in the program was 5.5% in 2001 — less than half the World Bank's projection of 11.6%. For the same countries, the average ratio of debt to exports in 2001 is estimated at 280% — nearly twice the level deemed "sustainable" by the World Bank and IMF. Given that the determination of levels of debt relief are based on these projections, it should come as no surprise that the Bank is now finding its program doesn't do what it promised.

Uganda, the first beneficiary and frequent "poster child" for the HIPC program, had a ratio of 210% in 2001 according to the World Bank, and will likely hit 250% for 2002-03. The institutions will likely accord Uganda its third HIPC benefit soon, indicating that since 1998 it has slipped back into unsustaina-bility twice. The Bank wants to fund a large and unwise project in Uganda, the Bujagali Dam, which could generate significant new debt. But on June 17, concerns about the project's economic viability prompted the Bank's Board to delay a decision "indefinitely," raising hopes that the dam may be stopped.

HIPC: Reinforcing the Debt / Structural Adjustment Trap
The IMF has long insisted that countries receiving any funds be in compliance with an IMF program. The recent HIPC report reveals that the same standard is being applied, and quite rigorously, to countries in its debt relief program. That countries with debt crises are required to sign a loan agreement with the IMF to get debt relief may seem ironic. Indeed, the dependency built into the system is reflected in the fact that every country in the HIPC program has already drawn millions of dollars in new additional debt from their required IMF loan facility.

"Interim" debt relief, which was added by the 1999 "enhancement" of the HIPC program, is designed to ease the impact of debt during the period between the determination that a country is eligible for relief ("decision point") and its completion of HIPC ("completion point"). The April report confirms that the IMF will suspend its interim relief if a country falls "off track" in adhering to its structural adjustment conditions, or if it simply has not yet completed negotiations on a new IMF loan agreement.

Whether the relief is denied because of slow privatization processes, higher-than-predicted budget deficits or because negotiations for a new program are in progress, the IMF is clearly choosing to prioritize adherence to technical conditions over programs that can benefit impoverished people. The impact of any IMF suspension is magnified by the Paris Club of creditor countries and its practice of following the IMF's lead.

Three of the nine countries known to have had their debt-relief process held up — Honduras, Burkina Faso, and Zambia — have since gotten back "on track." Three countries — Nicaragua, Gambia, and Guyana — remain suspended because they have yet to conclude a new loan agreement with the IMF. The other three — Malawi, Guinea-Conakry, and Guinea-Bissau — are not receiving relief for a range of reasons: failure to clear expenditures with the IMF, discrepancies in financial reports, delays in privatization programs, concerns about "governance" (a euphemism for corruption), and poor economic performance (see article on Malawi in this issue of Economic Justice News).

While the G7 leaders have congratulated themselves for addressing the debt crisis, people in the Global South have been left watching the HIPC debt relief plan disintegrate into delays, inadequate relief and the broken promises of a resolution to the debt crisis. Meanwhile, debt continues to grow, services continue to be denied, and people continue to die.

The Jubilee USA Network calls on the G7 meeting in Canada this month to implement immediate 100% debt cancellation for impoverished countries without harmful structural adjustment conditions.