Paris Club Debt Relief: A Bitter Pill to Swallow Rwanda, Zambia and Honduras Meet the Paris Club
In May this year, the three most recent HIPC Initiative completion point cases (Rwanda, Honduras and Zambia) met with the Paris Club (as is the norm following achievement of completion point under the initiative). From the civil society views presented here, it appears unlikely however that this will secure long-term debt sustainability for the countries involved. All three comment pieces point to the overwhelming levels of poverty still prevalent in all three countries, and in the cases of Rwanda and Zambia, the devastating impact of HIV/AIDS. Meanwhile, Honduran NGOs point to the worrying levels of new debt being contracted by the country. All three countries are off-track towards meeting the MDGs by 2015.
In April, the All Africa.com website, an African information service provider, expressed optimism that 2005 might prove a watershed year in the drive to cancel much of Africa's foreign debt . However, it still appears that wealthy creditor nations, and in particular the G7, are still not prepared to budge on the issue of multilateral debt cancellation or provide enough new and additional financing in the form of grants. The UN Millennium Project report puts estimated annual financing needs to achieve the MDGs at over US$60bn. Poor countries also owe most of their debts to the multilateral institutions, which are not being cancelled systematically. So far, only the UK, Canada and Netherlands have pledged some additional financing to help cover the costs of debt service owed to the World Bank and African Development Bank for a limited group of countries over the next ten years. But these efforts are also woefully inadequate. In total, they cover around only 18% of the debt service owed to two multilateral institutions for some 23 countries for 10 years. Inter- American Development Bank debts are excluded from these efforts and Honduras will reimburse a total of US$80 million next year to the IADB rising to US$ 82 million in 2007.
So while the Paris Club may glorify its achievements, the fact remains that a) these countries need 100% cancellation of all of their debts is they are to have any hope of making inroads towards achieving the MDGs by 2015; and b) the Paris Club as a forum for debt work-outs just isn t working as demonstrated by the endless visits of countless countries to have their debts renegotiated. It is clear that what is needed is a radical shake-up of the international debt architecture to avoid repeated cycles of indebtedness and relief. Proposals for a fair and transparent arbitration process represent one strong and viable solution in this regard. Paris Club creditors need (and should) take bold and immediate action on both of these points. That would really show members commitments to the MDGs