AFRICA: IMF debt-relief programme under scrutiny
JOHANNESBURG, 22 October (IRIN) - The International Monetary
Fund's
(IMF)
controversial debt relief programme came under scrutiny this week
following an internal report showing that without further foreign aid,
struggling economies in Africa could find themselves in a debt trap
once
again.
In a working paper published in Washington, the IMF noted that
although
its Highly Indebted Poor Countries (HIPC) initiative had achieved
success
in some countries, the programme was "not a guarantee for long-term
debt
sustainability".
The HIPC initiative was first launched in 1996 by the IMF and World
Bank,
and entailed coordinated action by the international financial
community,
including multilateral organisations and governments, to reduce to
sustainable levels the external debt burdens of the most heavily
indebted
poor countries.
IMF researchers argued that while the HIPC initiative was projected to
significantly reduce the total stock of debt, and generate substantial
debt-service savings, the programme's emphasis on using debt relief to
increase spending on the poor could in fact reverse economic gains.
Debt relief campaigners have questioned the wisdom of an exclusive
focus
on raising social spending in HIPC countries, arguing that increased
spending on social services, such as health and education, had not
always
been associated with improved social indicators.
This was due, in part, to inefficiencies in spending, and the
allocation
of these funds to activities that had relatively little effect on the
poor.
In 2001 the IMF suggested that a comprehensive strategy to tackle
poverty
should focus not only on securing additional resources for social
spending, "but on eliminating inefficiencies in these expenditures and
reallocating funds to programmes that are most beneficial to the poor".
Jubilee Research, an international debt-relief advocacy group, said it
was
"unfair" that often resource-strapped HIPC countries were expected to
spend more on poverty-reduction programmes, and questioned whether
debt-relief savings had actually contributed to overall poverty
reduction
in HIPC countries.
"We welcome the fact that the IMF has acknowledged that the
conditions
it
places on countries under its HIPC programme are unrealistic. We have
also
maintained that, even though debt relief under HIPC has produced some
limited success, there remains a serious resource gap. It is because of
this resource gap that many HIPC governments find it increasingly
difficult to meet the demands to spend more on social services, and
even
post-HIPC countries will experience this same shortcoming," Jubilee
Research senior economist, Romilly Greenhill, told IRIN.
The IMF report recommended that HIPC countries should consider
scaling
down "ambitious expenditure programmes", as an option, but they faced
"daunting social needs".
"A tightening of spending programmes could actually generate
back-tracking
of reforms," the IMF noted.
Another recommendation to increase resources was a broadening of the
tax
revenue base within HIPC countries. But while this was seen as "a
worthwhile endeavour", the main drawback was the time it would take
before
a significant impact would reflect in government coffers. Moreover, in
some of the poorer countries, the tax base was too narrow, with
economies
heavily dependent on largely informal activities.
The report concluded that while securing further grants from the
international community would bolster efforts by HIPC countries to
implement their poverty reduction strategies, this option was not a
panacea for weak economies. A chief concern was that some of the
countries
already "suffer" from aid dependency.
Should donors continue to financially engage with HIPCs, these
countries
would have to promote an "enabling environment for higher private non
debt
financing flows, for example, through foreign direct investment," the
IMF
said.
But Greenhill stressed that further debt relief, instead of aid, would
benefit the ailing economies.
"At least debt relief is predictable. Often, in the case of aid
donations,
although US $50 million is initially pledged, the country in reality
only
eventually receives $20 million. The added advantage of debt relief [as
opposed to aid disbursement] is the inherent sense of local ownership.
Aid
often is assoicated with conditions imposed by donors, at least with
debt
relief countries can spend the funds as they see fit," she told IRIN.
NGOs urge greater transparency of diamond control
JOHANNESBURG, 29 October (IRIN) - Attempts to convince some of the
world's
major diamond producing countries to submit to an independent audit of
their national diamond control systems were scuppered on Wednesday by a
handful of governments, who argued that calls for an impartial review
system went beyond the scope of the Kimberley certification process.
Representatives from governments, the diamond industry and NGOs
gathered
for the Kimberley Process plenary meeting in South Africa this week, to
decide whether or not to adopt a South African-backed peer review
proposal.
But Global Witness, the British-based lobby group, told IRIN that
progress
towards reaching consensus on the peer review mechanism was slow.
"It is really disappointing, especially since the peer review system
has
the backing of the major diamond producer countries, international NGOs
and the World Diamond Council. However, despite this strong support
there
has been resistance from some countries, including Zimbabwe and India.
It
is ironic that there should be any objections, especially since it's a
voluntary system," Global Witness campaigner, Alex Yearsley, told IRIN.
Global Witness dismissed arguments that setting up an impartial
auditing
system had not been part of the Kimberley agreement.
"Independent monitoring is crucial to the credibility of the scheme
and,
therefore, part of the certification process. The peer review system is
a
constructive mechanism to ensure compliance," Yearsley said.
Under the Kimberley scheme, chaired by South Africa, diamond producer
countries are obliged to issue certificates proving that gems come from
legitimate mines.
Exporting countries that failed to respect the deal would be prevented
from selling diamonds, and could face international sanctions.
Although the scheme was widely seen a positive step in curbing the
trade
in "blood" diamonds, advocacy groups have argued since its inception
that
the process was flawed, because of the failure to develop strong
verification and monitoring measures. They have called for regular,
impartial monitoring to ensure the certification system is transparent.
Another concern was the lack of progress in the collection and analysis
of
statistics, which are seen as an important tool for detecting trade in
"conflict" diamonds.
"There are a significant number of governments that have failed to
submit
the required statistics, calling into question their commitment to the
Kimberley Process," Yearsley said.
NGOs would argue for the suspension of governments that had not
submitted
their statistics before the Plenary Meeting of the Kimberley Process
Certification Scheme, he added.
Conflict diamonds have helped fuel some of the most brutal wars in
Africa,
including the Angolan and Siera Leonean conflicts. Angolan diamonds
were
widely seen to have funded the 27-year war by former rebel group UNITA
against the government.
It is estimated that illicit diamonds make up only about three percent
of
the annual global production of rough diamonds, which totalled US $7.8
billion in 2002.