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On October 18, 2006 Africa Action called on the World Bank to cancel Liberia’s debt.

Nearly one year after her election to the presidency of Liberia marked an historic return to democratic rule after years of civil war in that country, Ellen Johnson-Sirleaf visited Washington, DC from October 16-18, and petitioned for U.S. support of Liberia’s reconstruction efforts. In the restoration efforts over the past year, Liberia has taken important steps and the international community has hailed the nation’s progress. However, the U.S. and other countries’ pledges of increased aid will have little effect in the face of Liberia’s continuing heavy debt burden. Africa Action has joined Jubilee USA and other debt campaigners calling on the World Bank to promote Liberian development by canceling the country’s debt.

Ann-Louise Colgan, Acting co-Executive Director of Africa Action, said, “In order for the U.S. and other nations to live up to their promises of support for Liberia’s newly-emerging democracy, international creditors must cancel the country’s overwhelming debt immediately and without conditions. President Johnson-Sirleaf and her government must not be hampered in their urgent rebuilding efforts by the unfair demands of the international financial institutions.”

Liberia’s total debt stock currently stands at $3.7 billion. This debt was accumulated during years of non-representative and corrupt rule, and the Liberian population did not benefit from these funds. In a speech in Washington, DC earlier this week, President Johnson-Sirleaf underscored these factors as a significant hindrance to Liberia’s development. Creditors have said that Liberia will not be eligible for any debt relief or cancellation until it submits $1.5 billion in back payments and accumulated interest. Meanwhile, the Liberian government presently manages an annual budget of $80 million. Africa Action today stated that the stipulations on debt cancellation are unjust and unreasonable.

Marie Clarke Brill, Acting co-Executive Director of Africa Action, said, “Liberia is saddled with a massive debt burden that poses a serious obstacle to future progress. President Johnson-Sirleaf’s visit provides an opportunity for activists in the United States to show their support for her government’s efforts and to urge international creditors to do the same, and call-in days this week reinforced this message.”

On October 16 and 17, hundreds of activists telephoned World Bank President Paul Wolfowitz’s office, urging that he support immediate cancellation of Liberia’s debt. Their message highlighted the pressing need for resources to provide for electricity, health and education, and that debt servicing constitutes an inhumane financial drain.

Africa's massive external debt burden is the single biggest obstacle to the continent's development and to the fight against HIV/AIDS. The over $200 billion that African countries owe to foreign creditors represents a crippling load that undermines economic and social progress. The All-Africa Conference of Churches has called this debt "a new form of slavery, as vicious as the slave trade".

The albatross of illegitimate debt diverts money directly from spending on health care, education and other important needs. While most people in Africa live on less than $2 per day, African countries are forced to spend almost $14 billion each year servicing old, illegitimate debts to rich country governments and their institutions, the World Bank and the International Monetary Fund (IMF). Over the past two decades, African countries have paid out more in debt service to foreign creditors than they have received in development assistance or in new loans.

Much of Africa's foreign debt is illegitimate in nature, having been incurred by unrepresentative and despotic regimes, mainly during the era of Cold War patronage. Loans were made to corrupt leaders who used the money for their own personal gain, often with the full knowledge and support of lenders. These loans did not benefit Africa's people. More generally, many Africans question the notion of an African “debt” to the U.S. and European countries after centuries of exploitation. They ask, “Who really owes whom?”

Yet, despite the social and economic costs of this massive outflow of resources from the world's poorest region, the wealthy creditors of Africa's debts continue to insist these debts be repaid.

For years, the Heavily Indebted Poor Countries (HIPC) Initiative, a debt relief framework launched by the World Bank and IMF in 1996, failed to provide a solution to the debt crisis. Designed by creditors, this initiative was intended to extract the maximum in debt repayments from poor countries. It failed even to meet its stated objective of reducing Africa's debt burden to a “sustainable” level.

In July 2005, following years of civil society campaigns in Africa, the U.S. and elsewhere, the Group of Eight (G-8) rich countries announced a deal on debt cancellation for 18 impoverished countries, 14 of which are in Africa. The World Bank and IMF approved this debt package in September 2005. Separately, the Paris Club of rich country creditors recently finalized a deal to cancel some of Nigeria's massive external debt, after moves by the Nigerian parliament to repudiate this debt. In the deal, which covered $30 billion in debt, Nigeria had to pay 40% of the total, or $12 billion. Those funds would have been more appropriately and justly directed at reducing poverty and achieving other development goals. Nigeria is not eligible for debt relief under the HIPC Initiative, and civil society in that country has long demanded cancellation of Nigeria's odious external debts.

While the G-8 deal marked a small victory, it still fell short of the promises of 100% debt cancellation made by G-8 officials in 2004, and it did not take full effect until July 2006. The deal still leaves the majority of African countries on “debt row,” required to meet harmful economic conditions as a condition for future debt relief or cancellation. Moreover, both the G-8 deal and the Paris Club deal for Nigeria failed to recognize the illegitimate nature of Africa's debt. African governments must still spend billions of dollars each year repaying old, illegitimate debts at the expense of urgent priorities like the HIV/AIDS pandemic.

The U.S. is the single largest shareholder in the World Bank and IMF, the institutions to which most of Africa's debts are owed. As such, it holds major influence over the international response to Africa's debt crisis. An independent audit of these two institutions has revealed that they can afford to write off Africa's debt completely. Recent IMF reports have also demonstrated how debt cancellation can be financed primarily through IMF gold and secondarily from World Bank reserves without harm to these institutions.

The U.S. should use its power to achieve the cancellation of all of Africa's debts. Just as the U.S. advocated for the cancellation of Iraq's odious debts, it should apply the same standard to the illegitimate and odious debts African countries still have to repay. Debt cancellation is essential to the continent's efforts to fight HIV/AIDS and poverty, and to regain its economic independence.

Africa Action condemns the repeated failure of the U.S. and other wealthy creditors to take sufficient decisive action on the debt crisis. Our Campaign to Cancel Africa's Debt mobilizes pressure on the U.S. government to push for 100% unconditional debt cancellation for all African countries. Please see Africa Action's statement on what constitutes 100% debt cancellation for Africa. The statement also highlights the relationship between debt, health, and HIV/AIDS.

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October 19, 2006
Issue 202

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