WHAT HAVE RELIEF INITIATIVES ACHIEVED AND WHAT REMAINS TO BE COVERED

1. WHAT HAVE RELIEF INITIATIVES ACHIEVED AND WHAT REMAINS TO BE COVERED?  By Charles Mutasa Executive Director, AFRODAD November 20, 2007

2. Introduction & Background Debt Relief has been extended through two vehicles- HIPC (I & II) & MDRI HIPC seeks to ensure that debt savings go to country �owned poverty alleviation priorities. To date 22 countries completed HIPC process & benefited, 18 of them are in Africa; of the remaining 8 are on interim debt relief & 10 are potentially eligible for debt relief & cancellation.

3. MDRI Beneficiaries 22 Countries that have received 100% IMF/World Bank debt Cancellation (21 as of July 1, 2006) Benin; Mauritania; Bolivia; Mozambique; Burkina Faso; Nicaragua; Cambodia (IMF only); Niger; Cameroon; Rwanda; Ethiopia ; Senegal Ghana; Tajikistan (IMF only); Guyana; Tanzania; Honduras; Uganda Madagascar; Zambia; Mali & Malawi .

4. Debt relief Achievements Mozambique:debt service payments have fallen by around two-thirds (1998-2002) , in 2002 net school enrolment rate increased to 62.6 percent cpred to 44 percent in 1997). Other e.gs include cutting infant, child & maternal mortality rates Access to clean drinking water in some places, access to immunisation etc.

5. Debt relief Achievements questions? Benefits to MDRI countries are significantly less than expected (No adequate donor funding to fully compensate IFIs for their share of MDRI relief) Debt Relief does not necessarily translate into increased education and health expenditures. Should be additional to ODA (Monterrey Declaration), but donor countries are �cheating� by including it in reporting, thereby inflating their aid figures

6. Increased school enrolment without quality education and more health centers without doctors or medicine should not be an end in itself- The Issue has to do with putting wealth creation on the fore front. What is the importance of reducing inflation to below 10% when there are no hospitals and when people are jobless?

7. Issues not properly addressed? Limited by HIPC I and HIPC II�s deficiencies. - Debt sustainability remains a highly ambiguous, manipulatable, political notion. - Exclusion of domestic debt from DSA Vs debt distress assessment. - conditionalities (IMF gate-keeping �over-rigid fiscal & macroeconomic frameworks e.g. wage ceilings)

8. �Anti-free riding� policy & greater IMF surveillance Vs newly emerging lenders (punitive measures for the newly solvent states & WB competing with other creditors) -Extensive supervision of countries� borrowing policies?intrusion into domestic affairs Vs sovereignty. -run counter to ownership & alignment principles of the Paris declaration.

9. Scope & coverage ------�We have Some Debt relief but not enough� -Only 3/19 multilaterals involved ? cases of creditor litigation Private sector debt not covered Domestic debt not considered Too limited in terms of beneficiaries it covers compared to those in need- Middle income countries sidelined (Kenya & Angola).

10. Vulture funds threat e.g. Zambia Going through the HIPC surgery before relief is too rough Vs fast track MDRI treatment (at completion debts eligible for relief could be partially/fully paid up). Debt Relief counted as aid (aid flows declined in 2005 & 2006) Too aid dependent with no exit strategy. No policies for prudent debt management & curbing graft.

11. No special arrangements/provision for post conflict states. Odious & illegitimate debts ignored/forgotten Lack of coherence in global development policies- Aid, Trade & Debt Relief

12. Has Debt Relief brought Sustainability? This should not be limited to the financial ability to service and pay back loans, but also a country�s ability to fulfil its obligations which include provisions of economic, social and cultural rights. (Multi-indicators required for DSA) Debt Relief beneficiaries are still in need of policy space to meet their human development needs

13. Underlying Challenges Domestic resource mobilization (increased savings, higher tax revenue & capital flight) Improving Effectiveness & absorptive capacity of development aid The problem of International trade as a vehicle for resource mobilization Ability to attract private capital flows including remittances?high value added sector & employment.

14. There is urgent need for: Increased investment in human & physical infrastructure A considerable widening of the policy space that has been restricted by years of adjustment. Economic diversification & sustained economic growth

15. Key Recommendations Debt cancellation must be outright & irrevocable-include all poor countries & creditors Debt relief must be subject to conditionality that promotes the objective of the relief operation itself-creation of fiscal space for human rights achievement. New lending architecture:grant-loan mix Resolve Debtor-creditor inequality r/ns

16. Donors must ensure that adequate resources are available for all HIPCs that can progress through the process without delay. Extend debt relief to middle income countries not meeting the HIPC threshold. Recognize the necessity of Debt Audits, inclusion of Odious & illegitimate Debts Call for a Transparent and Fair Arbitration (FTA) Mechanism

17. End of Presentation Thank you for your attention