Issue: Debt Cancellation in Africa

In July 2005, the leaders of Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and the United States met at the G8 Summit in Gleneagles, Scotland. The G8 leaders agreed to cancel the debts of some of the most indebted countries. The developing nations who benefitted were required to commit to spending the money they saved on loan repayments on areas such as health care and education. To date, 21 countries have received debt cancellation through this agreement, 17 of them in Africa, resulting in the cancellation of repayments amounting to $38 billion.

Which African countries have benefitted from debt cancellation? Benin Malawi Senegal Burkina Faso Mali Sierra Leone Cameroon Mauritania Tanzania Ethiopia Mozambique Uganda Ghana Níger Zambia Madagascar Rwanda

Benefits of debt cancellation

 Primarily due to debt relief, 20 million more children are in school in 2004 than were in 2000. Tanzania has used its savings from debt relief to increase education spending and eliminate school fees. Almost overnight, an estimated 1.6 million children enrolled in school. By 2003, 3.1 million additional children were attending school.  Mozambique used its debt service savings to vaccinate 1 million children against tetanus, whooping cough and diphtheria, as well as build and electrify schools. In addition, Mozambique has invested in the fight against HIV/AIDS and used debt savings to open 24 new testing and counselling offices with the goal of reaching 50 such offices by 2007.  Burkina Faso has focused debt relief savings on fighting AIDS, improving education and providing access to safe drinking water. In 2002, money freed up from debt service payments went to joint government and civil society initiatives that have helped control the spread of HIV/AIDS at 6.5%. Two clinics were built and the cost of drugs decreased by between 38 percent and 96 percent. In addition, Burkina Faso used debt savings to build 746 schools, 20,251 classrooms and put over 110,000 children back in school over the last three years. Access to clean water has increased by 26 percent for families. This means that over one million more people now access safe drinking water. Continuing problems

 Not all developing countries are eligible for debt cancellation. African countries such as Kenya and Lesotho, who spend a significant portion of their budgets repaying loans, were excluded from the deal because their total debts are not high enough to qualify for cancellation. In this case, the agreement ended up excluding such countries from the benefits of debt cancellation because they did a relatively good job of managing their debts.  The agreement did not address the issue of new debt. In order to meet their needs, African countries are still borrowing money. Many countries are taking on expensive loans from emerging powers such as China. Unless poor countries get access to grants and low interest loans then the debt crisis will return.

Activities

1. How many African countries have benefitted from debt cancellation following the 2005 agreement?

2. What condition did developing countries have to agree to? Why do you think this was the case?

3. “Debt cancellation has solved the problems of developing countries in Africa.”

Give two reasons to support and two reasons to oppose this view.