BY SEAN HEALY
While their press secretaries will no doubt come up with a headline-grabbing figure to spin it otherwise, the leaders of the world's eight largest industrialised economies are preparing to ignore worldwide calls to "drop the debt" at their summit in the northern Italian city of Genoa.
By doing so, the Group of Eight (G8) will do more than enrage the 100,000 already angry people expected to protest against them in Genoa and the millions around the world who expect them to alleviate the crushing burden of debt on the world's poorest countries.
George Bush, Tony Blair, Junichiro Koizumi and company will also attempt to draw a line in the sand, on debt as they are doing on climate change, on trade, on the whole process of corporate globalisation.
They will say to the people of the world, whichever country they are in, "We have given you enough" — and hope it, and the tear gas, deters the worldwide protest movement.
The Genoa G8 summit, from July 20-22, is looming as more than just a showdown between Italy's police force and military and Europe's burgeoning anti-capitalist movement. It is also a showdown between the world's people and its rulers, about which direction the world will head.
While once they felt confident that they could control the agenda, and could therefore allow crumbs to drop from the table, rich country governments are now feeling under siege and desperate, and they're not giving anything away without a big fight.
"Debt relief" is the perfect example.
The promise of relief on the poorest countries' massive debts has been at the centre of rich countries' claims to be making the global system work in a just and fair manner. It has been at the centre of claims that they are being "responsive" to "international civil society" — it's been continually amended under pressure from below.
Launched by the World Bank and the International Monetary Fund (IMF) in October 1996, the "Heavily Indebted Poor Countries" (HIPC) initiative was the first such plan to contemplate actual debt cancellation, rather than simple renegotiation or rescheduling. It offered those countries which qualified 80% debt cancellation after countries completed two three-year structural adjustment programs.
In June 1999, at the G8's summit in Cologne, Germany, as 50,000 people outside formed a human chain demanding the cancellation of debt, the rich countries went further, launching the Enhanced HIPC initiative.
The initiative offered "broader, faster and deeper" debt relief, with the seven most industrialised countries promising to cancel 90% of debts owed to them by countries who graduated the scheme. The headline figure, announced to much fanfare, was US$100 billion.
Since then, most industrialised countries, including all of the G8 except Russia have felt the need to promise further packages of nearly 100% debt cancellation for HIPC countries.
Miserable failure
But for all the accolades that this is "very good news for the poor of the world" (World Bank president James Wolfenson), Enhanced HIPC has been a miserable failure: it's been narrow, it's been slow, it's been tied up with conditionalities, and it's been unable to offer even graduates of the scheme freedom from the debt burden.
Only 41 countries have been deemed able to qualify for debt relief — only the poorest of the poor. The poor of Indonesia, or Haiti, or Nigeria, aren't deemed worthy.
So far, only one country, Uganda, has reached "completion point" and qualified for any actual debt cancellation. Of the US$100 billion headline figure, announced two years ago, only US$12 billion worth has yet been delivered.
Of the 23 countries which have reached "decision point", their debt repayments have dropped on average by only 27%, leaving most of them still spending more on debt than health. Two countries, Zambia and Niger, will have to make larger debt repayments after "debt relief" than before it.
Debt relief is dependent on accomplishing IMF- and World Bank-supervised structural adjustment. Benin has had to privatise its cotton sector, Malawi was told to keep its health expenditure 15% below its 1997-98 "peak", Ghana must sell off its urban water service provision, and, by following the enforced "export-driven" economic model, all HIPC countries have become more dependent on the vagaries and volatilities of international commodity markets.
Even after all of this, however, Enhanced HIPC will not provide a way out of debt and dependency even for the lucky few who graduate from it.
In the first place, it's not designed to.
Debt relief is designed to create "debt sustainability", defined as equal to no more than 150% of export earnings.
Under this definition, if Enhanced HIPC was totally fulfilled, and if all bilateral creditors carried out their promises, HIPC countries would still be paying 15% of their annual export earnings on debt repayments. Repayments would still total US$1.38 billion (from US$2.7 billion before relief), while their total debt would still equal US$16.7 billion (from US$40.6 billion before relief).
Under "debt relief", the poor countries aren't to be allowed off the debt treadmill; rather, the pace of the treadmill is to be slowed enough to be "sustainable", to allow them to keep running forever.
Even this, rather horrific, outcome is turning out to be too much to expect, however.
In April, the World Bank and the IMF produced an internal paper which admitted "HIPC debt relief alone does not ensure long-term debt sustainability" and that "reducing debt to that level [i.e., sustainability] at a single point in time is no guarantee against future debt problems".
Unrealistic growth projections
The amount of debt to be cancelled is based on grossly unrealistic World Bank and IMF projections for growth and export earnings: they predict export earnings growth in the next decade will double that in the last, for example.
As a result, debt servicing will quickly rise again straight after relief is granted. Senegal's debt service, for example, will jump by 61% in 2004 and Mauritania's by 46% in 2007, according to European monitoring agency Eurodad. After 2005, debt service starts to rise for 11 out of the 13 HIPCs for which there is post-2005 data; for nine of them, future debt service levels are far above present levels.
What is needed, debt campaigners will point out in Genoa, is not just a readjustment of the current "debt relief" scheme — an "Enhanced Enhanced HIPC" initiative won't work anymore than the last two have.
What's needed is debt cancellation which is quicker, wider and total, without conditionalities.
It is this which the rich country governments are deadset opposed to. In particular, they oppose any steps to get the World Bank and the IMF to match the near-100% cancellation already offered by G8 and selected other bilateral creditors. At present, under Enhanced HIPC, the two institutions will only cancel about half the debts owed them.
The World Bank and IMF could easily cancel 100% of HIPC debts: an independent April study by London accountancy firm Chantrey Vellacott DFK found that cancelling the debts of all 41 HIPCs would only cost the World Bank and the IMF US$353 million and US$368 million a year respectively, well within their resources.
But what rich countries want is to reduce their own exposure to, and their own direct enforcement responsibilities for, the debts of the poorest countries and pass them on to the multilateral institutions. Under Enhanced HIPC, multilaterals' share of HIPCs' debt will rise from 45% to close to 70%.
The G8 countries hold almost half the votes on the boards on both the IMF and World Bank and could easily enforce 100% debt cancellation on them — but to do so would weaken the two institutions' role as the enforcers of corporate globalisation in the poor world.
Faced with having to totally redesign their "debt relief" plans and offer substantive, rather than cosmetic, change, world leaders seem set on stonewalling.
In a clear sign of their intention to ignore the issue during the leaders' summit itself, G8 finance ministers didn't even discuss debt relief during their preliminary meeting in Rome on July 7. The IMF and World Bank's spring meetings in April likewise made no major announcements about debt relief.
British chancellor of the exchequer Gordon Brown and international development minister Claire Short have been telling non-government organisations that they should now start to focus on issues other than debt, as they've achieved as much as is possible.
The G8 leaders' attempt to "move on" from debt is unlikely to succeed, however. Just as their initial concessions only whetted the appetite of debt campaigners for more substantial changes, now their attempts to stonewall will likely only increase the global movement's determination to "drop the debt" once and for all.