World Bank and IMF take first steps to relieve debt problems

THE World Bank and the IMF have taken the first concrete steps towards tackling the debt problems of developing countries with the unveiling of a $338 million debt relief package for Uganda.

However, the announcement of the package has been greeted with disappointment by groups campaigning for greater debt relief for the Third World. The Irish based Debt and Development Coalition said it now appeared that developing countries would be carrying their debt problems well into the next millennium.

The decision, taken at the annual spring meeting of the two bodies in Washington, means that Uganda becomes the first country to benefit from the "highly in debted poor country" (HIPC) initiative.

This provides for more than $5 billion in debt relief to developing countries which successfully follow a programme of structural adjustment and spending cuts prescribed by the World Bank and the International Monetary Fund.

The postponement of Uganda's relief package until 1998 has angered some groups, who say the country is being crippled by the economic straitjacket it has been forced to adopt.

Spending on education and health has been cut drastically. For example, parents now have to find 75 per cent of their children's fees for attending primary school. In addition, indigenous industry is suffering as local markets are opened up," says Ms Jean Somers, coordinator of the coalition.

Oxfam has calculated that Uganda could save $80 million annually over the next three years under the HIPC initiative. The savings represent six times the current level of spending on primary health care, and four times the spending on primary education.

Over a five year period, this could finance a poverty reduction programme to save the lives of almost 400,000 children and provide all pupils with access to primary education.

The IMF, in response to criticisms that the debt writeoff plan is going too slowly, said last week that another five or six countries will be lined up to benefit from the initiative shortly. The mostly likely to qualify next are Bolivia, Burkina Faso and Ivory Coast, with Guyana and Mozambique to follow.

An IMF official blamed delays on a decision in relation to Uganda on concerns about money from debt relief being diverted to arms. Uganda, which is widely believed to be backing the rebels fighting in Zaire, recently increased its spending on defence.

The World Bank president, Mr James Wolfensohn, said recently he had received assurances from Uganda that the debt relief funds intended for hospitals, schools - and other social purposes would not be diverted.

According to Ms Somers, the total indebtedness of developing countries exceeds $200 billion. "The debt problem has become so enormous that it is even undermining aid. For every pound paid in aid, three pounds flows back to the developed world in debt repayment. The situation has become so ridiculous that creditors are effectively paying themselves."

As a result, the IMF has become a net recipient from African countries, receiving over $4 billion from the world's poorest region - sub Saharan Africa since 1987.