Africa must make faster progress on mobilizing domestic and external resources in order to consolidate the positive growth of the past four years and to halt the spread of poverty. This was a conclusion of the joint conference of African ministers of finance, economic development and planning held in Addis Ababa on 6-8 May 1999. Organized by the UN Economic Commission for Africa (ECA) on the theme of the challenge of raising finance for development, the conference attracted high-level participants from African and creditor countries and institutions, and from the United Nations system.
Aid, debt, investment, trade -- the components of resource flows -- were discussed from different angles, all converging on the objective of reducing poverty by half in Africa by 2015. This target, agreed at the 1995 World Summit on Social Development in Copenhagen, will be hard to achieve even for South-East Asia, the World Bank has said. The task is even greater for Africa, which needs to attain an average 7 per cent annual economic growth for the next 15 years, or roughly double the average for the last eight years. Still, "a hungry man never says that the coconut shell is too hard," declared ECA Executive Secretary K.Y. Amoako, urging African countries to thoughtful action.
The continent's responsibility for its own progress was implicit throughout the conference, and was often made explicit by forceful speakers. Among them, Ethiopia's Prime Minister Meles Zenawi said Africa has "no choice" but to improve its mobilization of domestic resources as the decline of external resources is unlikely to end soon. The continent also has no choice but to bring under control an HIV/AIDS epidemic that is undermining all the economic gains, warned Dr. Peter Piot, Executive Director of the Joint UN Programme on HIV/AIDS (see article "AIDS: the development emergency").
Only a few months from the millennium, there is an "intellectual and policy ferment" in African and donor countries, both sides sharing long-term goals but with "differences about how to get there," said Mr. K.Y. Amoako. But there is also a "critical need" for more transparency and predictability in donor-recipient relations, based on "clearly understood rules of the game," added Mr. Meles. Effective partnership requires confidence and trust, as well as predictability and transparency "on the part of all those involved," he continued, concluding that "we still have a long way" to go.
Photo: UNICEF / Jorgen Schytte
His words were amplified from the donor side by Dutch Development Cooperation Minister Eveline Herfkens during a panel discussion on policy reforms and aid effectiveness, moderated by Mr. Seyyid Abdulai of Nigeria, Director-General of the Organization of Petroleum Exporting Countries' (OPEC) Fund for International Development. Without mincing words, Ms. Herfkens said there must be an end to lip-service about partnerships and about African countries "owning" their development process. She hoped things had changed since her recent six-year stint on the World Bank Board of Directors when the atmosphere was very much "tough negotiating and not a partnership approach. That type of negotiating leads to the other side trying to cheat," she observed. From experience, she affirmed that donors "simply cannot buy policies."
She insisted on transparency and accountability from both donors and recipients, along with "basic agreement on policy content" and on the budgetary and institutional aspects of policy implementation. Bluntly, she said the "bad habits" of donors include being "erratic" in terms of commitments, tying aid in a "costly and corruption-prone" fashion and "buying the best [African] civil servants," a practice that undercuts local institutional capacity. Donors have also been "incoherent" by providing loans to support export production and then "not allowing you to sell [your] products in our countries because of our protectionist trade policies."
Ms. Herfkens warned African ministers of the hard work ahead, with the Bank and International Monetary Fund, to achieve a transparent fiscal framework and review not just the development budget but all public expenditure. Proposing that aid flows be integrated in national budgets, she promised to improve her own behaviour as a donor official, and indicated that all donors should "return spending authority, control and accountability to the beneficiary country."
In order to facilitate poverty reduction, Mr. Paul Collier, currently Director of the World Bank's Development Research Group, called for the expansion of aid programmes. Blocking that expansion, he suggested, is the concept and discourse of "aid dependency" which he attributed to the "New Right," adding that it had replaced the "trade dependency" discourse of the "Old Left" of the 1970s. On leave from Oxford University where he is professor of economics and Director of its Centre for the Study of African Economies, Mr. Collier made a detailed critique of several fallacies in the current aid environment. Aid volumes, he affirmed, will grow again "as long as we can rebuild the case and the constituency for aid" (see article "Making aid more effective").
On aid effectiveness, Ms. Carol Lancaster looked at the "critical" role of donors as decision makers on the purposes of aid, and as the designers, implementers and evaluators of that aid. A former Deputy Director of the US Agency for International Development (USAID) and currently a professor at Georgetown University in Washington, DC, she spoke with both practical and research experience.
Between 1957 and 1995, Ms. Lancaster reported, the US provided $22 bn of aid to sub-Saharan Africa, of which $5 bn went to Zaire under Mobutu, Somalia under Siad Barre, Sudan under Numeiry and Liberia, mostly under Doe. "That aid was lost," and the US was not alone, she stated. There had been problems with "Swedish aid in Tanzania, Belgian aid in Zaire, Italian aid in Somalia," and "many others."
Besides faulty decisions on aid allocation, Ms. Lancaster noted the "extremely uneven" quality of implementation and evaluation. Her research conclusions included the following: aid to Africa has been the least effective and sustainable of any world region, and the least effective type of aid has been that aimed at institutional change.
She described aid agencies as "political entities" under several forms of pressure. These include pressure to allocate aid "for diplomatic purposes" and also to spend. Not spending available funds has been seen as "career limiting" at both USAID and the World Bank, she said. This has led to haste and a common "unwillingness to say no" to inappropriate aid among donors and recipients.
Donors, Ms. Lancaster said, continue giving aid for political objectives such as a seat on the UN Security Council -- "that tends to be one of the high political goals of Japanese aid today" -- or to strengthen a country's position as an international power. Aid programmes can show, or withdraw, political support to a government, and also secure access to African leaders for donor ambassadors to discuss issues important to their own governments that have little or no relevance to development.
After touching on the pressures exerted by political, business, trade and non-governmental organization interests, Ms. Lancaster said that multilateral aid agencies are also "political entities operating in a political environment." She stressed the limited capacities of donors and their agencies, called for more serious self-evaluation, affirmed that the decline in aid flows since 1992 will likely continue, and noted that the public is the least informed and most passive element in donor countries.
Among the vigorous comments from the floor was the observation by Lesotho that the "sound policies" that come as conditionality from multilateral agencies are now becoming criteria for qualifying for aid. Pleading for flexibility, Lesotho noted the problems of countries using "75 per cent" of their annual budget to pay off foreign debt while being required to carry out "very expensive" reforms. Such countries deserve fast debt relief instead of a long track record.
Backing Ms. Lancaster's speech, Sudan expressed the hope that instead
of political conditionality, there would now be renewed emphasis on policy
conditionality only. Then, in contrasting irony, the Malawi representative
noted that when his country was under virtual dictatorship for several years
in the past, its policies had been praised as "sound" by various
donors.
Aid should "comply with" the policy objectives of recipient
countries, Egypt affirmed. Such objectives include maximizing the value
added to local resources, promoting national exports, supporting joint ventures,
developing infrastructure, transferring technology and enhancing productivity.
These policies will promote economic growth and enable aid recipients "to
confront the challenges of aid reduction and increase aid effectiveness."
By thanking the UN Development Programme (UNDP) for moving from a "donor-driven" approach towards "granting" greater national ownership, Nigeria triggered several related interventions. UNDP explained that its country programmes are thoroughly negotiated with the government and actually "belong" to that government. Supporting Ms. Lancaster's proposal to replace the notion of African ownership with that of responsibility, some speakers restated Africa's primary role in improving the conditions for its own development. As Nigeria put it, "Africa must take its destiny into its own hands."
But in so doing, Africa must also deal with its crushing burden of debt. Arrears on payments of interest and principal on foreign loans account for two-thirds of the growth in African debt since 1988, and reached $64 bn in 1996, or 27.5 per cent of Africa's total debt, reported Mr. Rubens Ricupero, Secretary-General of the UN Conference on Trade and Development (UNCTAD). This is the "best indicator of the extent of debt overhang," he said. It is "no secret" that heavily indebted poor countries (HIPCs) spend an average 40 per cent of revenues on debt service. Tanzania spends "nine times as much on debt payments as on health care despite the AIDS pandemic and four times more than on education." In such ways is debt servicing "crowding out" national investment in human and capital infrastructure.
Calling for bold and determined pursuit of an imaginative new deal on debt, Mr. Ricupero emphasized that an independent body of recognized experts from creditor and developing countries should conduct the evaluation of debt sustainability. This would eliminate the conflict of interest where creditors alone decide the criteria to apply, and "we know that these criteria are all open to scrutiny and debate."
Realism, Mr. Ricupero argued, is too often "synonymous with resigning ourselves to the unwillingness of the powerful to do what it takes to solve the problem." Realism is not static, he continued, pointing to the change of government in Germany that rapidly and radically altered that country's position on debt relief. Creditor positions on debt relief have been in "continuous evolution" as each of them proved inadequate, he declared. For example, concessional debt relief granted by the Paris Club has moved from the "Toronto terms" (33 per cent) in 1989, to the "London terms" (50 per cent), the "Naples terms" (67 per cent), and recently to the "Lyon terms" (80 per cent). Levels of debt relief are not God-ordained, but are a question of political will, Mr. Ricupero concluded.
While welcoming an "independent perspective" in the HIPC review
along with public accountability "for what we are doing," Mr.
Jeffrey Katz of the World Bank felt it would not be "wise" to
have another layer or institutions involved in the decision-making process
on debt sustainability.
Exporting aluminium
ingots and logs from Ghana: Donor countries need to reduce protectionist
barriers in their own markets.
Photo: World Bank
Mr. Hernandez-Cata of the IMF predicted that the greatest challenge for an expanded HIPC package would be finding the financing. Meanwhile, he said, African countries have a long way to go in order to raise investment ratios from their 1990s average of 17 per cent of GDP to the much higher levels needed for faster growth. In listing the factors that hamper domestic and foreign investment, Mr. Hernandez-Cata put the emphasis on reducing various kinds of risk.
Burkina was glad to have qualified for a HIPC deal, but noted that there were some conditions to meet that often had significant social costs. Several of the countries ranking lowest on UNDP's human development index are also those with the heaviest debt burdens, the delegate remarked.
In their declaration, the ministers concluded that the need for "more pervasive and effective reforms of debt relief" to be implemented by major creditors "does not diminish the need for African states to better manage their debts and to receive appropriate technical assistance in this task."
Africa must focus on poverty reduction, ministers declareMost African countries lack the basic structures to reach and sustain the 7 per cent annual growth rate required to halve poverty by 2015. Therefore Africa's Ministers of Finance, Economic Development and Planning decided in Addis Ababa that, among other things, African countries must:
On debt, African ministers welcomed a "new international realism... that much of the debt is unpayable, and that current debt resolution mechanisms, particularly the HIPC initiative, are far too slow, far too selective in coverage, and far too [conditional]." Current developments are "in line" with the recommendations they made in 1997, the ministers noted with satisfaction. Their new proposals were forwarded to the Cologne summit of the Group of Seven major creditor countries and were largely endorsed. But some elements were not, namely the call for "exceptional debt relief for post-conflict countries, particularly those with protracted arrears." The ministers said other countries adversely affected by conflict situations and by serious natural disasters should also receive exceptional treatment that "should also include the cancellation of debts." African ministers noted the idea of referring debt sustainability analysis to an independent body composed of eminent persons conversant with financial, social and development problems and jointly selected by creditors and debtors, with creditors committing themselves to considering cancellation of debt that is deemed unpayable. |
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HIPC initiative is like blackmail, says Meles
Look hard at the long-term issues, says Amoako