Where do we go from here in relation to debt

The issue of debt is not so much what we demand but whom we address with what messages. First the message of ending the debt burden has been directed largely at one direction – the creditors. The message itself has been one of appealing for understanding whether based on justice or empathy. There is nothing wrong with this in as far as this appeal is coming from our northern partners directed at their publics and governments. What ever strategies they find as feasible to exert pressure for action should be welcomed by us as long us these strategies neither diminish the African dignity nor undermines the messages coming from Africans.

We, unwittingly, have been consumed almost entirely by this strategy of appeal. By directing our energies at appealing to northern creditors suggests our lack of belief in the power of the debtor. However, the Nigerian debt relief effort, no matter how unsatisfactory, and the Argentinean debt restructuring initiative suggest that debtors do have power and can force change. In the Nigerian case, it was the threat by Parliament to withhold appropriation for debt servicing and the subsequent road show that the joint committees of parliament undertook in Europe and America to drum home their threat that forced the Paris Club to rush through a debt relief package. In Argentina’s case, an economic and political meltdown resulting from years of faithful compliance with the IMF’s conditions and faithful debt servicing, forced Argentina to impose a unilateral moratorium on debt servicing and then subsequently unilaterally discounted its debt instruments by 75%. After heaving and puffing both the IMF and the private creditors accepted their lot and Argentina’s economy rebounded.

Some would say that Nigeria and Argentina could do what they did because they hold large debts - $34bn and $32bn respectively – and that they fit the classic case of “if you owe the banks $50,000 you are in trouble but if you owe them $50bn the bank is in trouble”. There may be some truth in that. If so, Africa’s debt overhang of over $200bn provides the muscle for a successful collective African threat.  This is the task for the African union and we should make that forcefully clear. The cancellation of $200bn, poses no threat to the global financial system but can save millions of lives. Even a threat of a collective moratorium will send the message clear and loud, especially if this threat were accompanied by a enforceable commitment to transparency and ant-corruption and the channelling of the money so saved into revamping public services. Our message to governments should be that the development disaster, including the HIV/AIDS crisis is so deep that there can be no more time left to wait for trickle down debt treatment. We should not celebrate divisive debt relief initiatives like the one delivered at Gleneagles although we can celebrate the victory in terms of the comprehensive principle, i.e. that all debts, including the debt stock owed to the IFIs must cancelled. We should call upon our northern partners to support messages of defiance based on the urgency of the need to save lives.

There are of course several other justifications for a debtor-led action to end the debt burden, including the issue of legitimacy and odiousness adopted in Johannesburg. Ultimately however, the challenge is to campaign for an international law that enforces obligations on both debtors and creditors towards a just treatment. The absence of such a regulatory mechanism results in a situation where creditor cartels hold all the power. This is fundamentally unjust, the more reason why a strategy of debt management based on appealing to the empathy of those who have come together for the sole purpose of promoting their interests cannot, fundamentally,  lead to a just solution.

So where do we go from here in relation to debt:

• Welcome the principle of debt stock cancellation agreed at Gleneagles and at the annual meeting of the IMF/Bank but condemn the selectivity and divisive approach.
• Develop a strategy to pressurise the AU and its member states to adopt a debtor-led strategy
• Campaign for an International Law to regulate international debt.

Taken from Charles Abugre: Reviewing the Johannesburg Platform in the light of 2005: Some thoughts: Think piece for the Taking stock and moving forward, November 2005