Mozambique Parliament Demands Total & Unconditional Debt Cancellation and Appeals for Help to Put Pressure on Creditor Countries

"Total and unconditional cancellation of Mozambique's foreign debt" wascalled for in a statement issued by the Mozambican parliament at the endof the a special parliamentary conference on foreign debt, 4-5 December1998, in Maputo.

The call was backed by all three parties in parliament, and comes after calls for cancellation by President Joaqium Chissano and Deputy Finance and Planning Minister Luisa Diogo.

Present Relief 'Insignificant'

On 7 April 1998 Mozambique was promised debt relief under the World Bankand International Monetary Fund's Heavily Indebted Poor Countries (HIPC)Initiative. Under HIPC, nearly $3 billion of Mozambique's debt will bewritten off on 1 July 1999. This seems a good deal and has been widelytouted by the World Bank and IMF. But in reality, Mozmabique gains almostnothing.

Diogo told parliament that "we conclude that the HIPC initiative will notproduce any significant impact on the volume of future [debt service]payments". Debt service in the three years before HIPC averaged $111million per year; after HIPC it will average $100 million, she said. Thisis still "unsustainable", Diogo said, and thus the government also callsfor 100% cancellation.

The reason for the confusion is that Mozambique has been paying only aboutone-third of the debt service -- interest plus principal repayments --that was actually due. The rest was simply deferred for later payment.Under HIPC, this is the part which is cancelled. If, with extremestruggle, Mozmabique was able to pay more than $100 million per year, thenBank and Fund consider this "sustainable" under HIPC.

Debt service payments of $100 million per year are more than governmentcurrent expenditure on health and education combined. Using UNDP figures,it is possible to estimate that if even half of the debt service paymentswere instead added to health and education spending, this would cut inhalf the present levels of child and maternal mortality -- and save thelives of 300 children every day who now die needlessly from disease and 30women who die each day in childbirth.

'An Act of Justice'

The parliament's deputy speaker Abdul Carimo ended the conference bycalling HIPC "ridiculous". He concluded that "at the very least, totaldebt cancellation is an act of justice."

In a background paper prepared for the conference, Parliament's WorkingGroup on Debt cited the Germany debt settlement of 1953, when debt servicepayments were sharply reduced to allow Germany money to rebuild. This debtrelief is widely seen as one of the foundation stones of the post-wareconomic miracle. Yet, under HIPC, debt service paymetns are considered"sustainable" if they are five times as much as Germany was required topay. Mozambique is trying to rebuild after the devastation of the warwaged by apartheid. The Working Group said: "We ask, what is the justiceand sustainability" of demanding that Mozmabique should pay five times asmuch as Germany was requried to pay after its war?

The working group pointed out that Mozambique is one of the very poorestcountries in the world, with indictors far below even the African average.Only 30% of the population has access to clean water; only 40% has accessto health services; only 24% of women can read and write.

Carimo warned that while "total debt cancellation today would permitmiracles in building national capacity, but granting it a few years in thefuture would be nearly irrelevant."

"Initiatives of western countries are always late in relation to the realneeds of developing countries," Carimo said. "Preventive medicine isalways more effective an curative, but for the economies of developingcountries the west only uses curative medicine."

Call for Help from Other Parliaments

Mozambique's parliament called on "parliaments of creditor countries toinfluence their governments and the Bretton Woods Institutions to totallycancel the foreign debt."

In an impassioned statement, Virginia Videira, chair of the parliamentaryplanning and budget committee, said "our problem is the lack of weight wehave in the World Bank and IMF. Things will only change when people in thenorth put pressure on those institutions."

The Mozambican Debt Group, a local civil society coalition, asked forspecial pressure to be put on Germany which "has done everything possibleto obstruct" debt relief, and the former colonial power Portugal which hasfailed to show leadership and has done nothing extra to cancel debt. Bycontrast, it "applauded" efforts by Switzerland, Sweden, Norway, Finlandand Great Britain.

In response, Luc Dhoore, vice president of AWEPA, the EuropeanParliamentarians for Africa, promised that AWEPA would "act as a lobbyinggroup for the cancellation of the debt." AWEPA, based in Amsterdam, wasformerly the Association of West European Parliamentarians for ActionAgainst Apartheid and has 2000 members in European parliaments.

Conditionality Rejected

The final statement of the conference specifically called for cancellation"without conditions" because of conditions imposed as part of HIPC. TheHIPC "final document" requires that before debt is actually cancelled("completion point"), presently scheduled for 1 July 1999, Mozambique'sparliament must pass legislation to increase health service chargesfive-fold. Many members of parliament are opposed to this; they noted that70% of the population is below the poverty line, and that large anincrease will deny access to health services for many of the poorestpeople. Lina Magaia MP told the meeting: "I was just with a motheryesterday who did not have the 1000 MT (US$ 0.08) fee to take her child tohospital. And the World Bank wants to raise the fees."

Parliament stressed that "resources released by debt cancellation shouldbe preferentially applied to the social sectors."

"The argument that without the debt, Mozambique will not maintain fiscaland monetary discipline is not valid, because Mozambique -- even with thecancellation of debt -- will continue to need foreign aid and that will beused, as it always has been, to pressure the government to maintain fiscaland monetary discipline," Deputy Speaker Abdul Carimo said.

Indeed, "cancelling the debt is not to start a new process of debt andabandoned economic programmes. Just the opposite is true -- cancelling thedebt allows the economic programme already under way to be reinforced,"Carimo said.

Furthermore, "economic and social development are unsustainable if theinstitutions of the country are not solid. Money released by debtcancellation makes it possible to reinforce the justice system, educationand health."

Carimo also pointed out that to avoid a new debt trap, the new draftconstitution now being debated in parliament bans variable interest rateinternational loans and requires that parliament approve all foreign loanstaken by the government. (Uganda's constitution already has a similarrestriction.)

In an angry intervention, the parliamentary spokesman Alcido Guenha saidthat the demand by Europe for conditions on aid and debt relief was reallypart of the "serious racism of Europe". He continued: "A continent thatcreated the two worst World Wars and which until recently haddictatorships in Spain and Portugal lectures us on democracy. Europe talksof corruption, but who kept Mobuto in power? -- not Africa."

Aid Or Debt Relief?

Members of parliament were highly critical of countries that want to giveaid but not cancel debt. Carimo commented that "we live in an absurdsituation, because the international community is willing to financedevelopment projects but not help us to release the funds which areabsolutely indispensable to correctly use and maintain the infrastructurethey create."

Indeed, aid was partly to blame for the debt crisis, according to theparliamentary speaker Eduardo Mulembwe. Many programmes financed bycredits failed, he said, because they were "pushed by the donor orcreditor -- they were 'supply driven'" and forced a dependence on foreigntechnical support that led to failure.

Many MPs stressed the responsibility of the creditors. Deputy SpeakerAbdul Carimo noted that "irresponsible western banks" gave loans even whenthey new that the borrowing countries could never repay. And when poorcountries are in debt, they "fall into the web of the InternationalMonetary Fund and World Bank" and are forced to accept policies imposed bythose bodies that are widely seen as wrong.

The Conference

The "International Conference on Mozambique's Foreign Debt" on 4-5December was called by parliament. Most members of parliament (MPs)attended. Opposition leader Afonso Dhlakama, president of Renamo but not amember of parliament, also attended to give his backing to the demand fortotal cancellation. The final declaration was unanimously supported by theMPs present and by all parties.

Most of the speakers were MPs. As well as Luisa Diogo and Luc Dhoore,non-parliamentary speakers included Joseph Hanlon and Kofi Klu of Jubilee2000, the World Bank resident representative James Coates, ConstantinoGode and Otilia Pacule of the Mozambique Debt Group, and representativesof local trade unions. Members of parliament of southern Africa and Europealso attended.

Speaking for the largest trade union federation (OTM-CS), Pedro JoaquimManjaze said: "we pardon criminals and give them amnesties. Surely we cangive an amnesty to those countries made poor by colonialism, and give apardon to poor children?"

Filimone Meigos, speaking for the journalists union SNJ, warned that debtmight cause political instability. He said that because of debt andadjustment policies, the north of the country was not being developed, andthere was a real danger of a secessionist movement in the north.

Cancelling Uncollectable Debt

World Bank representative James Coates told the conference that more ofMozambique's debt could not be cancelled because HIPC was the maximum thatthe creditors could afford. More than half of all money allocated to HIPCcountries so far had been allocated to cancel Mozambique's debt next year,he said.

But the five MPs who spoke after Coates all rejected his views. CarlosMoreira Vasco said: "My belly is full of statistics about debt. The WorldBank representative says the Bank has done all it could do. This justshows the lack of will. My constituents in Nampula province want theexport earnings from the cashew nuts they produce to be used to import rawmaterials for clothing factories or to improve the roads, not to pay thedebt. We must cancel the debt."

"Mr Coates said that HIPC was the result of a great effort by thecreditors. I cannot accept that," said Carlos Alvaro. "Our people have noshoes; our grandchildren are born into debt. All partiotic Mozambicansmust stand up and tell the creditors: 'no more debt can be repaid'."

For more information on Mozambique and the conference, look on theJubilee 2000 web site or contactJoseph Hanlon.

For more information on AWEPA actions on Mozambique's debt, contactTamme Hansma.