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From Africa Recovery, Vol.13#2-3 (September 1999), page 32 (part of special feature on ECA conference "Financing for Development")

Aid, debt and political will

OPEC countries have generally met or exceeded the UN target for development aid allocations, says OPEC Fund Director-General Seyyid Abdulai of Nigeria, adding that his Fund took part in the original design of the HIPC initiative.

Current levels of development aid are unsatisfactory and their distribution is "even worse," says Mr. Seyyid Abdulai of the OPEC Fund for International Development. With aid levels from major donors down to 0.2 per cent of their gross national product (GNP), compared with the agreed UN target of 0.7 per cent, he finds the trend "worrying" and unlikely to change soon. The situation is even "desperate," says Mr. Abdulai, arguing that " all reforms imply hardship," and if African countries are required to undertake reforms with inadequate aid, then "it becomes almost hardship for nothing."

On the HIPC initiative, Mr. Abdulai said the World Bank, IMF and his Fund agree that more relief is needed. But they also "believe it should come from the bilaterals because, after all, we have no ability to tax anybody. Whatever we do comes from our capital. If you give money for debt relief, that money is not available for new development projects. So there's always that trade-off." He hoped that major donors "will be forthcoming with more funding" and commended Germany, citing France and the UK also. On the question of political will, he said that a country allocating 0.2 per cent of GNP to ODA could easily go to 0.4 per cent without raising taxes. "It is the will to do it that is the problem."

Such countries are major forces in a Paris Club that has been reluctant to cancel any more than 80 per cent of eligible HIPC bilateral debt, and the Club is now asked to go to 90 or even 100 per cent cancellation. To this, Mr. Abdulai simply said: "If they can do that, it will be very helpful."

He felt that moral hazard remains a valid concern. "Even the very liberal people" in donor countries "will want to be sure that their money is really going for assistance" and not to defense spending.

Still, he said, the OPEC Fund -- a lending institution owned by developing countries -- does not impose conditionality. "Proper reforms, properly implemented, help put domestic resources to better use, so reforms should be recommended. But since we're developing countries also, we do not believe it's up to us to tell other countries that you must do this or that, otherwise we will not give you loans. We will not tell you we'll help you [with] a water project if you change your tariffs and charge people more; or that you must not subsidize agriculture. If we're building a road, we agree on the standard of the road and your [repayment schedule]. Our terms do not change with the project; they're country specific. So whether it's for a hospital or agriculture, if it's a poor country, we charge 1 per cent interest, 1 per cent service charge, with a five-year grace period, 17 years' maturity and I'm recommending that we raise maturities to 20 years."

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