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After debt cancellation, what next?

Caroline Nenguke

16 June 2005

The recent G8 meeting in London concluded to cancel 100% of the debt of 18 developing nations owed to multilateral institutions and developed nations. This sounds too good to be true, is there some hidden strings that will catch us unawares and tangle us in a web of dependency again?

Civil society organizations such as the Jesuit Center for Theological Reflection(JCTR) which houses the Jubilee Zambia campaign, has been calling for debt cancellation not only in Zambia but also in other third world countries. Our leaders have always lamented that due to debt repayments, most of which is interest and very minimal on the principle, governments have been unable to channel much needed funds to sectors such as health, education and infrastructure.

If the situation of hunger, illiteracy, HIV/AIDS and the numerous problems in Africa are because critically needed resources are channeled towards debt servicing, the immediate reaction then is that we can now begin to look forward to enhanced and accelerated development

Recently, I attended a meeting at which Zambia's minister of Finance and national planning, Ngandu Magande explained to civil society organizations and individuals present at the meeting what it meant for Zambia to reach the HIPC completion point. In as much as this means that most of the debt that Zambia owes will be forgiven, and has been forgiven, the minister stressed on the fact that the country still has a local debt that needs to be serviced and repaid. In his emphasis, it left me in no doubt that what this in effect means is that while all of the country's external debt has been canceled, the internal debt will take up most if not all of the savings from the forgiven debt.

This now leaves a critical question in my mind as to who or what will finance our development efforts, that may have led to the accumulating of the external debts. Are we not going to fall in the same ditch of unsustainable debt?

It suffices that I make mention that the multilateral institutions that have forgiven our debt are profit making institutions whose main essence of existence is in making profit before all else. Even acts of charity or social responsibility on their part come after they have made their profits and have excess to 'throw' around. To this effect, what are these institutions replacing with the interest paid through the canceled debts?

We have also heard that countries that reached the HIPC completion point do not only qualify for debt relief but also that they will not be given loans anymore, they will just receive grants. This too is welcome news but what are the conditions attached to the receipt of these grants? Are they sustainable, can we meet those conditions? All these are issues that are still very silent. And this silence makes me wonder as to what next we will be entrenched in that we will need to do as a country to reach yet another completion point.

Needless to say, Uganda reached the HIPC completion point and most of its debt was forgiven. Four years down the line the country has steeped back into the wallows of unsustainable debt. Uganda as a country has more export earnings than Zambia, so what makes Zambia any different and what makes us think that Zambia will not go in the same direction, in a shorter time?

Am now compelled to think again, when look back and analyze the debt servicing that has been going on by the third world countries to the multilateral institutions, most of the payments have always gone to payments of interest and very little towards the debt itself, this then brings the question, are these people not just canceling our debt because it is not repayable anyway?

I stress again that the 100% debt cancellation for 18 developing nations is very welcome and if backed by good intentions, can bring development and the attainment of Millennium Development Goals(MDGs).

Can these organizations please tell us what conditions are attached to the debt relief and the grants that we may or may not receive. Viva G8 for canceling our debt, we hope it is with good intentions and bring much needed development. Meanwhile, governments of developing nations this is a challenge for them to commit to good governance.