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

Ceilings on debt relief are not 'God-given'

Japan's principle is to make loans and then expect them to be repaid, said Ambassador Shinsuke Horiuchi, Special Assistant to the Minister of Foreign Affairs. But "of course, there are a lot of unforeseeable circumstances" that hamper repayment.

He said Japan has so far cancelled some $3 bn worth of debt, with reschedulings more than double that figure. At the 1998 Second Tokyo International Conference on African Development (TICAD-II), Japan "unilaterally" expanded its debt relief scheme. It would now urge fellow creditors to raise the Paris Club ceiling of 80 per cent relief on bilateral debt to 100 per cent. Japan plans to implement this unilaterally, an expensive move, Mr. Horiuchi said, but "if it has to be done, it has to be done."

Japan might have given the impression of being one of the toughest creditors because of domestic legislation that forbids debt cancellation. Another constraint is the care that must be taken with soft-loan resources, one-third of which comes from taxes while the rest is borrowed, largely from public pension funds. So Japan makes grants to a debtor country equivalent to a given amount of debt. It is this use of "different pockets, one for grant aid, the other for loans" that may have given the impression of Japanese recalcitrance on debt cancellation, the ambassador explained.

And neither does Japan ask further conditionality "of our friends," he said. "If a country is eligible for HIPC, we go along with that." On the call for relaxing the eligibility criteria, Mr. Horiuchi said, "we really think that poverty is the mother of impediments to growth and we are going to take this poverty criterion very seriously." Mr. Horiuchi noted that alongside bilateral aid arrangements, Japan is putting some $73 mn into HIPC Trust Funds in the World Bank and IMF.

He is confident that the HIPC initiative can be improved, but with Japan holding about 40 per cent of ODA debt, he stressed that the cost of debt relief should be equitably shared among all creditors.

Very strong on the moral hazard argument, Japan is also "a bit worried about aid dependency. Many countries say 'if more money is available, we'll be okay.' But I don't believe that is true. What we developed countries can do is assist their self-help efforts... but we can't develop them."

[Back to index] [To Volume13#2-3 -- full graphics]

Material from this article may be freely reproduced, with attribution to "Africa Recovery, United Nations".
We would appreciate a copy of the reproduction.

Africa Recovery
Room S-931
United Nations
New York, NY 10017 USA

Tel: (212) 963-6857
Fax: (212) 963-4556
Email: africa_recovery@un.org

Website: www.africarecovery.org
Contact us by email: africa_recovery@un.org