The Poor Pay Twice for Third World’s Debts

World Bank President James Wolfensohn recently told the institution’s annual meeting that the “challenge of inclusion is the key development challenge of our time.” Although Wolfensohn acknowledged the need to reduce the disparities across and within countries as “an economic and moral imperative,” many questions remain.

Over the last six years, 38 million people in sub-Saharan Africa have sunk further into poverty due to their governments’ international debt and the structural adjustment programs imposed by international financial institutions.

In human terms, this means that each person in the Third World owes about $420 to the West. Joao, a boy selling oranges in the interior of Mozambique, would need to sell 4,400 baskets of oranges to repay his share of the debt. The woman selling her crochet work at a Zimbabwean roadside market would need to produce and sell 100 hand-crocheted bedspreads. The teacher in Zambia would have to pay 14 months of her salary. The technical expert who comes to Africa on a development mission often earns that amount in a single day. What does inclusion mean when such discrepancies exist?

Poor people are further impoverished by macroeconomic policies, collectively known as structural adjustments, that their government adopts as conditions for further borrowing and debt rescheduling from the International Monetary Fund and World Bank. UNICEF and the International Labor Organization document that the cost of structural adjustments is borne disproportionately by the poor and their children. So when aid and debt relief are made conditional on rigid structural adjustment measures that intensify and spread poverty, then the poor have paid twice.

In Zimbabwe, the structural adjustment program forced the reintroduction of school fees and charges for basic health services. These “cost recovery” measures are linked by independent monitoring groups to drops in school attendance, especially for girls. In the two years after structural adjustments were introduced, health spending was cut by one-third, health and maternity clinic visits fell and the number of women dying in childbirth doubled.

Structural adjustments also led to the removal of subsidies on basic foodstuffs, raising food prices beyond the reach of many poor families and leaving them without proper nutrition. Other economic reforms caused a a flood of cheap imports, leading to the collapse of some small local industries. The explosion of child labor is directly linked to structural adjustments as more children are drawn into the informal economy to supplement family incomes. Wage freezes and retrenchments in the formal sector have placed more burden on poor women in the informal economy, where they become by default the principal breadwinners of their families.

The much publicized Highly Indebted Poor Country (HIPC) initiative is one strategy introduced by the IMF and World Bank to address Third World debt. While acclaimed as an important policy shift, it fails to address the problems of people like Joao and the conditions that threaten the welfare and dignity of millions of people like him. The $5 billion to $7 billion that the HIPC initiative provides--roughly what U.S. citizens spend annually on athletic shoes--is only 5% of the debt of the 20% of countries most likely to qualify.

Delays in implementing the HIPC initiative, due largely to a lack of political will from northern governments like the U.S., exact a steep price from the poorest in the southern world. Oxfam estimates that in Uganda, the one-year delay in debt relief will cost six times the total government spending on health care. Mozambique--which will not qualify for debt relief until 2002--will spend $240 million in debt service this year as compared with only $144 million on its postwar reconstruction.

Unless we recognize that international debt touches peoples’ lives directly, debt will remain a point of academic debate--not a moral imperative. This is why a growing number of religious organizations are calling for debt relief as an urgent matter of justice. They recognize that the debt trap is economically unsustainable and morally unacceptable. From an economic perspective, maintaining the debt neglects long-term development strategies aimed at poverty reduction. From a moral perspective, the backlog of unpayable debt is an unjustifiable burden on those who suffer most from obligations they did not choose to assume.

Unsustainable debt in the poorest nations is a new form of slavery that keeps current and future generations chained in dehumanizing poverty. Addressing it requires bold action and prophetic solutions.

Former Tanzanian President Julius Nyerere once asked, “Must we starve our children to pay our debts?” The call to forgive unsustainable debt is not a plea for charity, it is a cry for justice. The challenge of “inclusion” will not be met until the U.S. and other industrialized nations have the political will to implement policies that promote equitable global relationships.