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African Debt

June 13, 2005 at 12:00 AM EST
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RAY SUAREZ: At a White House ceremony today, President Bush congratulated the presidents of Botswana, Ghana, Mozambique, Namibia and Niger on their commitments to democracy. The president also endorsed a weekend agreement by the finance ministers of major industrialized nations — known as the G8 — to scrap the debt of 18 of world’s poorest countries, four in Latin America, the rest in Africa. The countries owe money to wealthy western nations and international lenders like the World Bank, the International Monetary Fund, and the African Development Bank.

PRESIDENT GEORGE W. BUSH: The countries eligible for this relief are those that have put themselves on the path to reform. We believe that by removing a crippling debt burden we’ll help millions of Africans improve their lives and grow their economies.

RAY SUAREZ: Under the deal, more than $40 billion in debts would be forgiven right away and the wealthy donor countries would pay the interest on the loans. Yet even with the debt forgiveness deal, only one-sixth of the total debt owed by African countries would be erased. In the past, many poor countries have spent more on debt service on international loans than on health and education services for their people. After the White House meeting, the president of Niger, one of the countries to have its debt written off, told reporters his nation appreciated the help.

INTERPRETER FOR PRESIDENT TANDJA MAMADOU: Any commitment from any friendly countries is very necessary and urgent at this point.

RAY SUAREZ: Twenty more countries could be eventually eligible for the debt relief, leading to a total relief package of more than $55 billion. The British- and American-backed deal had to overcome objections from other G8 members like Germany who often don’t agree with blanket debt forgiveness plans. The debt relief announcement came on the heels of a meeting last week with Britain’s Prime Minister Tony Blair, where President Bush announced the $674 million U.S. aid package to help African nations with humanitarian emergencies. The British leader had wanted $25 billion from wealthier nations for African aid.

RAY SUAREZ: For more on the debt agreement and whether it addresses Africa’s economic needs, we turn to George Ayittey, economics professor at American University and president of the Free Africa Foundation. His most recent book is “Africa Unchained: The Blueprint for Development.” And Jeffrey Sachs, director of the Earth Institute and professor of development and health policy at Columbia University; he’s also a special adviser to United Nations Secretary-General Kofi Annan.

Professor Sachs, is this method for debt relief what these heavily indebted countries need, and if it is, is it enough?

JEFFREY SACHS: Well, it’s a small step in the right direction. I’m hearing a bad echo, Ray. It’s a small step in the right direction, but it’s also only a very modest way towards what Tony Blair rightly said Africa needs, which is funds to be able to invest in overcoming extreme hunger, disease, lack of infrastructure. Without the doubling of aid that Prime Minister Blair spoke of and that President Bush rejected, Africa won’t get out of this massive crisis that it’s in.

RAY SUAREZ: Professor Ayittey, do you agree with Jeffrey Sachs’ assessment, a small step in the right direction?

GEORGE AYITTEY: Well, it is a step in the right direction. I think everybody knows that Africa is in a very deep crisis. There is economic misery and social deprivation and that Africa needs help but the question then is how. And also we have to make sure that we don’t repeat old mistakes; this help is only short term. It doesn’t address Africa’s long-term fundamental needs and how to put Africa on the right track to development. What Africa needs to do is to grow, to grow out of debt. What this does is simply stabilize the situation.

RAY SUAREZ: Well, when you say not repeat old mistakes, what about this agreement builds in some protection against those old mistakes, or does anything?

GEORGE AYITTEY: Well, true, there has been some conditionalities in the sense that this debt relief is supposed to release resources to be devoted to education, healthcare and infrastructure, for example. In the past African government made such promises but they never carried them out.

And also we all know the big elephant in the room. The big elephant in the room is African governments. Africa has been totally mismanaged and misruled in the past decade, but nobody wants to talk about that because of political correctness. Africa’s begging bowl leaks horribly. As a matter of fact, the African Union itself estimated that every year corruption alone costs Africa $148 billion. If African leaders could cut that in half, they’ll find more money than what Tony Blair is trying to raise for them.

RAY SUAREZ: Professor Sachs, are there built-in oversight provisions, or as Professor Ayittey calls them, “conditionalities” to make sure that some of the mistakes of the past aren’t repeated?

JEFFREY SACHS: What’s happened, Ray, is that part of this debt was canceled earlier. And what the world saw and what the International Monetary Fund and the World Bank reported was that not only did every dollar of saving go into health and education but more than a dollar went in because the increased funding of those key sectors was amplified by new commitments within the recipient countries. The fact of the matter is that this kind of debt relief has worked.

The tragedy is that when President Bush says he’s not giving more aid of the up-front kind that Tony Blair called for, the result will be millions of children continuing to die of malaria every year because the United States is not doing what it promised to do, and millions dying of other preventable and treatable diseases because the United States’ assistance is so tiny; that’s the real tragedy here.

RAY SUAREZ: So to be sure I understand you, when you cite these earlier efforts at debt relief, the countries have gone ahead and done what’s been asked of them without people forcing them to do so?

JEFFREY SACHS: Oh, there were conditionalities, and they worked. In other words, you make a plan. Half of the debts of these countries and more were already canceled. This is just completing the process. And in the first stage, the saving was to be channeled to health and education. That’s exactly what happened — more than dollar for dollar because the countries not only took the saving and invested, but they added some extra of their own domestic resources. So that’s what has proven that this process works.

Similarly, when we’ve tried to control diseases, like river blindness or trachoma or Jimmy Carter’s work on guinea worm eradication or Rotary International’s work on polio, it always worked. It’s been dramatic; the tragedy is we’re not putting in the resources to get the job done. Not that it doesn’t work, but we spend so little. When George Bush said no to Tony Blair, that’s the real tragedy.

RAY SUAREZ: Professor Ayittey, with the record that Jeffrey Sachs is talking about, when we look at Ghana, when we look at Niger, Mozambique, and others, is democracy a necessary precondition for these kinds of schemes coming out all right, having the record that they do?

GEORGE AYITTEY: Well, it is definitely a necessary condition for many Africans because we know that the African regimes, many African regimes have failed their people and many Africans want regime change, and there are a lot of African leaders who make promises but don’t carry them out.

I mean, the progress — I mean, it is noble for the rich countries to help Africa, but then the question is: What are African leaders themselves doing to help their own people?

When Uganda got debt relief in 1999, the first item President Museveni bought was a presidential jacket for himself. I mean, look at Ethiopia, for example. Smart aid is what will empower the African people to instigate reform from within. The United States and rich countries cannot change Africa from within. It has to impose reform on Africa; it has to come from within.

And civil society people — these are the people — civil society groups are the people who need to monitor the aid to ensure that the aid is directed to what it is supposed to. And in order for them to do so, they need to have the space, they need to have the freedom, and they need to have the right to demonstrate, and to petition their government. They can’t do that in Ethiopia; they can’t do that in Eritrea; and so this is why I was cautioning that we may be repeating some of our old mistakes.

RAY SUAREZ: Are those rights guaranteed to citizens, Professor Sachs, in the countries that are up front for getting this phase of debt relief?

JEFFREY SACHS: Take the case of Ghana, where President Kufuor was at the White House. He was just reelected, he’s a popular man, just reelected in a multiparty election late last year — and Ghana is exactly that, it’s a place where people can speak out, where there is a democracy. It is just an impoverished country. It needs help.

And malaria is everywhere. They need help to fight malaria. The children are dying. We could help not only save the children but help the children to grow up productive enough for a bright future for the country but we are not doing it right now.

RAY SUAREZ: Well, Professor Ayittey, if you’re in the finance ministry in an African capital today, what practical difference, as you look out at the coming year, does it make not to have to make those interest payments or principal payments on that burden of debt?

GEORGE AYITTEY: Well, I mean, we have to find the origin of the problem. The origin of the problem in many African countries is that you’ve got state bureaucracies which are too bloated. I mean, if you take Ghana, for example, Ghana has 88 ministers and deputy ministers. Take Uganda; Uganda has 70 — for a country of 25 million people, Uganda has 70 ministers. Uganda’s budget is 40 percent aid-dependent. Ghana’s budget is 50 percent aid-dependent.

Even if you cancel the debt, you don’t eliminate that aid dependency. This is what I mean by getting to the fundamental root causes of the problem. Government, the state sectors in many African countries need to be slashed so that, you know, you put a greater deal of reliance on the private sector. The private sector is the engine of growth. Africa’s economy needs to grow but they’re not growing.

RAY SUAREZ: Professor Sachs, the public sector in these countries needs to be slashed?

JEFFREY SACHS: Absolutely not, because the public sector right now in Ghana is $10 per person per year, $10 for health. That’s why life expectancy is so low, why children are dying of malaria, why people can’t get treated for the most basic preventable and curable diseases, why life expectancy all over Africa is so low. So, no, don’t use the broad slogans to slash the public sector.

The public sector includes the healthcare; it includes primary education. It includes the basic road building. It includes safe drinking water and sanitation. And the problem is that these places are impoverished. If we helped — instead of giving food aid, we helped indeed to make farmers more productive; instead of giving emergency relief, we helped them to have a health system where the children could survive, then they would get out of poverty.

RAY SUAREZ: It seems like you two gentlemen aren’t disagreeing on some of the facts, just some of the emphasis. Isn’t Professor Sachs talking about money that’s better spent, not less money?

GEORGE AYITTEY: Well, yes. But in the past we entrusted money to the government sector and the government sector simply did not spend the money wisely. And that is why we need reforms, but the government sector is not being reformed. So in the meantime, people are dying. We want to save the people especially those, the children who are dying of malaria. If there’s a way by which we can…as a matter of fact, if we can get to the people directly rather than passing through these corrupt governments, it would be better for the people.

RAY SUAREZ: Well, let me get an answer from you on a question I asked Professor Ayittey earlier. From your point of view, how does planning, how does the day-to-day running of the government look different when you’re relieved of the burden of debt payments?

JEFFREY SACHS: Well, these countries will have an estimated saving of $1.5 billion per year. That’s what it really comes down to. But as Tony Blair indicated in order to make the basic investments in health, in primary education, safe drinking water, paved roads and so forth, the need is actually about $25 billion a year.

This is a very small step. The big step is to help make those investments in saving the children. That’s what George Bush has said no to last week. He has to reconsider for this step to make the difference that it should be part of.

RAY SUAREZ: Now on that point, Professor Sachs has said several times in the last couple of minutes that more money needs to be sent to Africa. Do you back that proposition, or are you still worried about where it is going to go?

GEORGE AYITTEY: More money, we need — Africa needs help, no question about that but I’d rather prefer that the money is channeled. That’s what I call smart aid; it’s channeled through African civil society groups. These are the groups which can be held more accountable. These are the groups which will sort of monitor how the aid money is spent.

In the past when money was given from government to government, there was no accountability, especially the World Bank loans. Nobody was held accountable for the misuse of World Bank loans. That is why it is important to channel some of the money through civil society groups.

And that’s a matter of fact, you know, there has to be transparency — one of the most, the true most effective antidotes against corruption, an independent free press, as well as an independent judiciary. In Africa, you only have an independent media in only eight African countries, so there is very little transparency. The best gift that rich countries can give Africa is Radio Free Africa and Radio Free Africa will do for Africa what Radio Free Europe did for Europe.

RAY SUAREZ: Professors Ayittey and Sachs, gentlemen, thank you both.

GEORGE AYITTEY: Thank you.

JEFFREY SACHS: Thank you.