Privatisation Hangs Over Debt Relief

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M

Mon, 13 Jun 2005 19:18:13 -0700 (PDT)

Privatisation Hangs Over Debt Relief

 

In Newspeak " privatization " means private profits at public expense.

Profits go into private pockets while expenses come from public

pockets. How much public money spent is immaterial, in fact the more

the better, it is the private profits that count. War for oil, world

bank, and thousands of others.

M.

 

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http://www.ipsnews.net/interna.asp?idnews=29049

 

G8 SUMMIT:

Privatisation Hangs Over Debt Relief

Analysis by Sanjay Suri

 

LONDON, Jun 12 (IPS) - The G7 finance ministers agreed Saturday to

write off the debt of 18 of the poorest countries, but firm

prescriptions of privatisation hovered over the debt relief offer.

 

Finance ministers from the Group of Seven of the world's leading

industrialised nations -- United States, Canada, Japan, Britain,

France, Germany and Italy (the G8, minus Russia) -- agreed to write

off 100 percent of the debt of 18 of the poorest countries, mostly in

sub-Saharan Africa. That will amount to debt cancellation of about two

billion dollars a year.

 

Campaigners focusing on debt relief welcomed the move. But the finance

ministers' agreement contains a provision on privatisation that has

the potential to deliver to them more money than they wrote off.

 

The ministers reaffirmed in a statement at the end of their two-day

meeting Saturday that " in order to make progress on social and

economic development, it is essential that developing countries put in

place the policies for economic growth. " Among these, they must " boost

private sector development, and attract investment, " and ensure " the

elimination of impediments to private investment, both domestic and

foreign. "

 

The ministers committed themselves to a successful outcome for the

Doha Development Agenda, agreed at the World Trade Organisation's

ministerial meet in the Qatar capital in 2001.

 

This, they said, " delivers substantial increases in market access for

developing countries, establishes a timetable for the elimination of

all trade-distorting export support in agriculture, and provides

effective special and differential treatment for developing countries. "

 

The commitment to " elimination of all trade-distorting export support

in agriculture " stops well short, however, of an agreement to end

subsidies to farmers in rich countries, estimated at more than 300

billion dollars a year. It is these subsidies rather than specific

programmes to support exports that have created artificially low

prices for Western produce that are choking exports from developing

countries.

 

The ministers said they recognise that " not all countries will benefit

in the short term from reductions in trade barriers. " The ministers

committed themselves to " provide support to enable developing

countries to benefit from trade opportunities. "

 

The ministers picked the example of Nigeria to stress that their

recommended way to reforms lies through embracing the policies of the

International Monetary Fund (IMF).

 

" Nigeria is key to the prosperity of the whole continent of Africa, "

they said in their statement. " We welcomed Nigeria's progress in

economic reform as assessed in the IMF's intensified surveillance

framework... and encouraged them to continue to reform. " In turn they

said " we are prepared to provide a fair and sustainable solution to

Nigeria's debt problems in 2005. "

 

It became clear that the International Finance Facility (IFF) pushed

by Britain's Chancellor of the Exchequer (finance minister) Gordon

Brown had failed to win significant support from other G7 countries.

 

The IFF, a scheme to raise money in government bonds to be paid off

through later aid pledges, was agreed as just one option. The

Millennium Challenge Account (MCA) of the United States, which ties

aid grants to pledges of good governance including the U.S. fight

against terrorism, remains in place as the preferred U.S. way.

 

France and Germany are giving their backing to some of the

recommendations of the Landau Report (named after French Inspector of

Finances Jean-Pierre Landau), particularly its proposal for a

contribution on air travel tickets to support specific development

projects and to refinance the IFF.

 

The G7 finance ministers clearly failed to agree a unified path of

movement towards the Millennium Development Goals (MDGs), set by the

United Nations in 2000. Little further progress is expected on this

front before the G8 leaders summit in Gleneagles in Scotland, July 6-8.

 

Unanimity emerged only over debt cancellation for what are known as

Heavily Indebted Poor Countries (HIPC). But the small print here too

indicates that this was not unanimity on unconditional support.

 

The HIPC countries have been told that any additional donor

contributions will rest on " performance-based allocation systems " , and

that such action will ensure that " assistance is based on country

performance. "

 

The World Bank has been made the monitor for these countries' moves

towards " good governance, accountability and transparency. " These

declared aims are inevitably open to endless interpretation.

 

The 100 percent debt cancellation further holds only for HIPCs " that

are on track with their programmes of repayment obligations and

adjusting their gross assistance flows by the amount forgiven. " That

is, the debt will be " forgiven " only to countries that can show they

were in the process of repaying.

 

While the debt cancellation will no doubt provide immediate relief,

there is enough in the stated package to raise some questions what

these countries may have to do next.

 

The finance ministers agreed that they will use grant financing to

" ensure that countries do not immediately re-accumulate unsustainable

external debts, and are eased into new borrowing. "

 

On just how they proceed from here, the HIPCs may have no choice but

to look to the World Bank and the IMF to show them the way.

 

(END/IPS/EU/WD/DV/IF/MD/SS/LD/05) (END/2005)