14 June 2005
Trevor Manuel, South Africa’s finance minister, is “exceedingly optimistic” for Africa after the Group of Eight (G8) industrialised countries agreed to write off over US$40-billion (R265-billion) in national debt owed by 18 of the world’s poorest nations.
Saturday’s agreement by the G8 – made up of the US, UK, Japan, Canada, Russia, Germany, Italy and France – provides 100% write-offs for the 18 countries straight away, with more countries to qualify later.
This will free up national resources for growth and development in the African countries of Benin, Burkina Faso, Ethiopia, Ghana, Madagascar, Mali, Mozambique, Niger, Rwanda, Senegal, Tanzania, Uganda, Zambia and Mauritania.
Other nations to qualify are Bolivia, Guyana, Honduras and Nicaragua.
Manuel said the agreement had many positive implications for South Africa, reports the Sunday Independent. It would mean a better quality of life for the people of some of its closest neighbours, reducing migration to South Africa.
He added that South Africa’s trade with other African countries was too much of an unsustainable one-way passage. Debt cancellation would help develop institutions and infrastructure and boost spending, improving two-way trade.
The Sunday Independent reports that for countries such as Malawi, the deal could be a lifeline. While one in five Malawians is HIV-positive, the country spends more on debt interest payments than on health.
Another South African neighbour, Mozambique, had to repay $61-million a year on a $4.9-billion debt. It will now be able to invest those funds in building its health system and infrastructure.
Mozambican Prime Minister Luisa Diogo told Associated Press on Saturday that her country still owed a “very small” amount of debt to other lenders.
“We can implement our programmes while we are paying debt. Before, we couldn’t,” she said. “We had to pay debt and we couldn’t do anything else.”
President Thabo Mbeki’s office also hailed the agreement, saying it would “boost Africa’s regeneration”.
“The President is encouraged and believes this is a step in the right direction,” spokesperson Bheki Khumalo said. “It will go a long way towards the regeneration of the continent.”
Gordon Brown, UK finance minister and a key player in securing the agreement, hailed it as “the biggest debt settlement the world has ever seen”.
Up to 20 other countries could be eligible if they meet targets for good governance and tackling corruption, writes the Sunday Independent, leading to an eventual debt relief package of more than $55-billion.
“The G8 finance ministers have agreed to 100% debt cancellation for heavily indebted poor countries,” Brown said at a London news conference on Saturday.
“Our agreement in return for debt relief is that it goes towards health, hospitals, nurses, education, schools, teachers and infrastructure.”
Aid agencies welcomed the deal, reports the Sunday Independent, saying it would save the 18 countries a total of $1.5-billion a year in debt repayments. Nations in sub-Saharan Africa alone owe about $68-billion.
Now for fairer trade
BuaNews reports that debt cancellation, fair trade and increased aid will be among the issues discussed at the G8 summit in Scotland next month.
According to Manuel, the G8 has also agreed to put pressure on trade ministers of rich nations to “agree on a timetable to phase out trade-distorting subsidies.”
The US and European Union’s policy of massively subsidising their farmers is seen as a huge hurdle to growth and poverty alleviation in developing countries.
The issue of fairer trade will come under scrutiny at the World Trade Organisation ministerial meeting in Hong Kong in December, where developing countries expect a breakthrough.
“There’s pressure on trade ministers to reach agreement on a timetable to remove trade-distorting agricultural subsidies,” Manuel said.
A fairer trade system will also give African exporters access to US and EU markets. Removing the subsidies could increase sub-Saharan Africa’s cotton exports by up to 75%.