April 10, 2002

No structural adjustment rewards for poor yet

Ordinary Mozambicans have yet to see any real changes in their daily lives despite official World Bank figures suggesting that the country has performed well under the heavily indebted poor countries (HIPC) initiative. An Economist Intelligence Unit report said on Wednesday, April 10, that Mozambique had satisfied the stringent conditions set by the World Bank and the International Monetary Fund (IMF), and was in line to receive a further US $4,2 billion reduction of its foreign debt - the remainder of promised debt relief. As a result, its debt service obligations fall to only 6 percent of exports and 10 percent of government revenue over the 2010 period, compared with 20 - 23 percent in 1998, according to the report.

Analysts, however, caution that while US $4,2 billion may sound like a lot of money, debt repayment remains unsustainable for many of the poor countries targeted under the HIPC initiative. The initiative, sponsored by the World Bank and the IMF, aims to reduce the money some of the world's poorest countries owe to foreign creditors. "Even assuming that all the projections are correct, 10 percent of government revenues is still an enormous amount for a poor country like Mozambique to be paying out to foreign creditors. "While this may be a "best case" HIPC scenario, it is still not good enough. Given the needs in Mozambique, the damage that Mozambique suffered from years of war, full cancellation of the debt to international financial institutions and other major foreign creditors is required," senior research fellow of Africa Action, William Minter, told IRIN on Wednesday, April 10.

Mozambique became the third country to obtain HIPC debt relief. However, the Jubilee 2000 Coalition - a global grouping of charities set up to lobby for third world relief - said that while "the deal looks good on paper, many Mozambicans still do not have access to proper clean water, sanitation or primary education". "Yes, the figures may appear encouraging, but it is too soon to judge if the HIPC initiative will have any impact on ordinary people. Most Mozambicans remain poor. In fact the gap between the rich and the poor has widened. "Although the government has increased spending on social welfare, it is negligible as to make any difference," Jubilee 2000 co-coordinator of Economic Justice and External Debt Sector, Gaime Chivite, told IRIN. Chivite said Mozambique might find itself in a new debt trap if it continued to borrow huge sums of money from private lenders to finance large developmental schemes. "Although there are no guarantees that investing in large-scale projects would increase exports, the government needs to be cautious or old debts may be subsumed by new ones," he said. Donors told IRIN on April 8, that they favoured providing development aid to Mozambique because it had a record of good governance and transparency. (IRIN)


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