Post by Moses on Jul 7, 2005 1:31:21 GMT -5
Analysts Lukewarm To G8 Debt Forgiveness For Africa
DAKAR, Senegal (AP)--The expected decision by G8 leaders to erase some of the debt Africans owe world lenders would free money to build schools and hospitals - but its impact may not be as dramatic as it first appears.
Few African countries - even those paying interest - were expected to make good on the principal.
"These were all nonperforming loans, so the deal...was very much a natural progression," says Richard Dowden of U.K.' School of Oriental and African Studies.
"It wasn't the great breakthrough that was claimed," Dowden said. "It's important, but it's not going to save Africa itself."
Prodded by host U.K. Prime Minister Tony Blair, leaders of the world's eight richest countries meeting at a summit in Scotland were expected to endorse a deal reached last month by their finance ministers to wipe out $40 billion in debt that 18 poor countries - 14 of them in Africa - owe international lending agencies including the World Bank.
Analysts say the debt forgiveness should bolster coffers of African governments by $1.5 billion to $2 billion annually.
Across the continent, that means leaders can increase spending on their people, but the amount is paltry when set against the needs of 900 million Africans.
Debt forgiveness is "important and it's symbolically important, but it doesn't substitute addressing the greater development problems," said Princeton Lyman, a Washington D.C-based fellow for the Council on Foreign Relations.
Among barriers to development are rich-nation subsidies, particularly those in the agricultural sector, that make rich countries' goods less costly in global markets than those produced in Africa, where labor is cheaper.
Rich countries - mainly the European Union, the United States and Japan - spend around $350 billion a year on agricultural subsidies and protection, said Blair's Commission for Africa report - an outline for helping end African poverty.
That's 16 times what the developed world currently gives in aid for Africa, the report said.
Many of the loans from the West were granted during the Cold War, when leaders were often rewarded according to their commitment against Communism, rather than their skills as economic and political stewards.
"Quite a lot of it (loans) wasn't used for what it was supposed to have been and quite a lot of it ended up back in private bank accounts in Switzerland and London," Dowden said.
Now, after the fall of Berlin Wall, rich nations are increasingly tying aid to good governance and decreased corruption.
Writing off old loans has so far benefited only Africa's best-run, most- peaceful countries - while the hardest cases queue up and lobby for their own debt writeoffs.
Republic of Congo, ruined by fighting among militias between 1997-2003, called Tuesday for its own debt to be forgiven.
"From the point of view of economic health, it's important the world's richest countries show the courage of their convictions and cancel the debt of African countries," government Spokesman Alain Akoula told reporters in the capital, Brazzaville.
The West African nation owes an estimated $5 billion to overseas lenders. That's double the entire sum of the goods and services - including crude oil - produced countrywide in 2004.
"When you have children of 13 to 15 years old who take up arms, it's really a problem of education and poverty," he said. "That should prick the conscience of the rich nations."
Blair has challenged G8 countries to double aid to Africa from a current total of $25 billion to $50 billion by 2010 and to increase giving for all foreign aid to the equivalent of 0.7% of national incomes by 2015.
Bush, after initially resisting Blair's call, announced last Thursday that he would seek to double U.S. aid by 2010, to $8.6 billion from $4.3 billion in 2004. But Bush opposes the 0.7% target. Anti-poverty activists said that Bush's goal of $8.6 billion fell about $6 billion short of what was needed from the U.S. to meet Blair's target.
As a consequence, the final summit communique was expected to drop any reference to a $50 billion goal in favor of talk more generally of a "doubling" of assistance.
Analysts skeptical of past promises by rich nations to help Africa were adding pressure Wednesday for the G8 leaders to arrange an independent oversight committee to ensure any directives made this week are implemented on the ground in Africa. The Commission for Africa made a similar proposal.
(END) Dow Jones Newswires
07-06-051105ET
Copyright (c) 2005 Dow Jones & Company, Inc.
Copyright (C) 2005 Dow Jones & Company, Inc. All Rights