World Bank, IMF Could Forgive Debts From Poorest Countries: British NGO
"The AIDS crisis is devastating Africa and the continent's biggest creditors, the IMF and the World Bank, are still taking the money," said Adrian Lovett, director of Drop the Debt, a British-based group advocating debt relief for poor countries.
"They should take a reality check and act now to cancel the debt. From today, the old excuse that they cannot afford to do so is comprehensively demolished."
The group in a statement here cited a finding by the London accounting firm Chantrey Vellacott DFK that the bank and the fund "can afford 100 percent cancelation through a number of options, including use of reserves and net income, without impacting adversely on their ability to carry out their objectives, AFP reported.
A World Bank spokeswoman later challenged the findings, saying the "numbers don't add up." An IMF spokeswoman insisted that simply wiping out the debt was not "a panacea" for poor countries.
The study also faulted the heavily indebted poor countries (HIPC) initiative, a World Bank-IMF program offering debt relief to countries that adhere to IMF-backed economic reforms and commit themselves to fighting poverty.
By the end of 2000, according to the bank, 22 countries had been approved for debt reduction, with an estimated $20.3 billion committed for relief. Another 19 nations are also eligible to participate in the initiative.
But according to drop the debt, the 22 countries -- after passing through the HIPC process -- will still owe more to the bank and the fund than they will to the next largest 17 creditors combined.
The study estimated it would cost the World Bank $353 million a year and the IMF $368 million to cancel the debts owed them by HIPC participants -- equivalent to a dollar a year for every person living in the world's seven leading industrialized nations.
If the Group of Seven -- Britain, Canada, France, Germany, Italy, the United States and Japan -- agreed to fund a write-off of HIPC debt by the World Bank and the IMF it would cost each of their citizens just a dollar a year, according to the study.
At the World Bank, spokeswoman Caroline Anstey argued that the numbers supplied by drop the debt "don't add up," and stressed that the institution is committed to expanding debt relief.
She pointed to the bank's concessional lending arm, the International Development Association (IDA), which makes zero interest loans to the world's neediest nations -- those that had a per capita income in 1999 of less than $885.
Nearly half of new IDA commitments each year, about $6.5 billion, are financed from loan repayments and investment, she said, adding that if the obligations were simply written off the ability of the bank to continue making interest-free loans would be undermined.
"IDA has no provisions for losses arising on credit to members," she said. "That means that a write-off would be a direct dollar-for-dollar reduction in IDA's ability to make future credits to poor countries. So that in effect means that IDA credits would be cut in half."
To support further credits in the absence of repayments, according to Anstey, rich countries would have to double their contributions to the IDA fund -- "which in our present political climate doesn't seem likely."
Speaking for the IMF, Lucie Mboto Fouda said debt was not the only problem facing poor countries, noting that many African states are riven by armed conflict.
"We don't believe erasing the debt is a panacea," she said.
"What we believe strongly is that with HIPC we can raise social expenditures. Social expenditures are expected to increase by an average of $1.7 billion year from 2001 to 2002 in the 22 countries (currently participating in HIPC) and most of those resources will be directed toward health, education, HIV/AIDS programs, basic infrastructure and governance reform."
She added that thanks to HIPC these countries will be spending an average of seven percent of their gross domestic product on social needs and just two percent on debt service.