Full Debt Cancellation in Sub-Saharan Africa

SYNOPSIS: FULL DEBT CANCELLATION IN SUB-SAHARAN AFRICA

Julia Tallmeister

THESIS:Full debt cancellation must be implemented in Sub-Saharan Africa because debt repayments are unaffordable, it will have a positive impact on public spending, and the debts are illegitimate.

Counter-argument #1:Debt cancellation is not the right solution; there are other ways to help the economy of Sub-Saharan Africa and the health of the people, such as foreign aid, or implementing capitalism.

Evidence:

The Ministry of Commerce claims that China plans to double free aid and interest-free loans to African countries to help with social, cultural and public welfare projects over the next three years. Preferential loans worth $3 billion will be provided to help African countries develop infrastructure, purchase technological equipment and establish production enterprises.[1]
Africa is not in an unbreakable cycle of poverty, considering that in the past, countries such as England, France and Ireland have been even poorer than contemporary Africa and had a much lower life expectancy.[2]But these countries broke their cycle of poverty when capitalism was introduced.

Argument #1:The debt held by impoverished countries of Sub-Saharan Africa is unaffordable.

Evidence:

Sub-Saharan Africa as a whole spends $13.3 billion repaying debts each year, but the Global AIDS Alliance estimates that Sub-Saharan countries could need up to $15 billion each year to fight the spread of HIV/AIDS.[3]
Between 1970 and 2002, Africa received about $540 billion in loans. Although $550 billion was paid back in principal and interest, the debt stock remained high, at $295 billion by the end of 2002. Sub-Saharan Africa received $294 billion in disbursements and repaid $268 billion in debt service. However, the debt burden was hardly relieved because the debt stock remained, this time at $210 billion.[4]
Indebted African countries can only pay off the debt with earnings in foreign currency. These countries must take money from their exports, aid, or new foreign loans.[5] In 1996, Sub-Saharan African countries were paying $1.30 on debt service for every $1 received in grant aid from donors,[6] and for every $1 received in aid grants in 1999, Africa paid back $1.51 interest on debt.[7]
Capitalism leads to the rich becoming powerful and the poor dying; it inflicts problems among all nations. In south Asia, hundreds of millions are without food, shelter and clean water. In the former Soviet Union, the number of people living below the poverty line increased by 300%.[8]

Counter-argument #2: Because of the corruption of many Sub-Saharan governments, debt cancellation and even foreign aid should not be allowed.

Evidence:

According to The Heritage Foundation/The Wall Street Journal 2005 Index of Economic Freedom, of the 18 countries that would immediately qualify for debt relief, most of them do not have economies that could take advantage of it.[9]
The Transparency International Corruption Perceptions deemed Chad and Bangladesh the most corrupt nations in the world. Africa was deemed the most corrupt continent, with 31 of 44 nations scoring less than three.[10]

Argument #2: Debt cancellation has a positive impact on public spending; specifically on healthcare and education, and there are ways to ensure the money will not be misspent.

Evidence:

In Benin, 54% of the money saved through debt relief has been spent on health including rural primary health care and HIV programs.[11]
Cameroon used its debt savings to launch a national HIV/AIDS plan for prevention, education, testing and mother-to-child transmission abatement.[12]
Bolivia and Mauritania both directed funds from debt relief towards improving healthcare.[13]
Monitoring schemes have made it possible to track the use of debt relief to fund schools, teachers, healthcare and infrastructure.[14]

Counter-argument #3: Poor countries need to develop reputations as responsible borrowers who repay their debts instead of having borrowed funds dismissed. Debt cancellation will not help poor countries achieve either of these goals.

Evidence:

If private lenders know that a government has to the right to disapprove the earlier debt because of illegitimacy, they will not want to help finance a country.[15]
If debt is cancelled, it could jeopardize the function of the banks and lenders; therefore it is immoral for the debt to not be repaid.[16]

Argument #3: The debt in Sub-Saharan Africa must be cancelled because it is the outcome of illegitimate loans.

Evidence:

“In cases where borrowed money was used in ways contrary to the people’s interest, with the knowledge of the creditors, the creditors may be said to have committed a hostile act against the people. They cannot legitimately expect repayment of such debts.”[17] - G-8 Summit 2004
If debt is not cancelled and lenders are able to force repayment of harmful loans, in the future they will only continue to do so.[18]
After investigation by the US Senate Foreign Relations Committee it was found that $100 billion may have been lost to corruption in World Bank lending projects, and now the impoverished citizens of impacted countries must pay the resulting debts.[19]
If was found by Maurice Fitzpatrick, author of Chantrey Vellacott's audit that "the existing debts due to the World Bank and IMF could be completely cancelled ... without jeopardizing the ability of the World Bank and the IMF to carry out their overall functions."[20]
The position of banks will hardly change; the only difference will be they will not receive future payments of Third World bonds. Banks will benefit because they will no longer be requested to bail out debtor nations with more loans.[21]

[1] Xinjua, “China to Fulfil Pledges for Africa”, China Daily (January 1, 2007)

[2] Andrew Bernstein, "Capitalism Is the Cure for Africa's Problems." Capitalism Magazine (2003).

[3]Common Dreams, “Reality Check: Findings Prove IMF, World Bank Can Afford 100 Percent Debt Cancellation for Poorest Countries to Help Fight AIDS”, (April 10, 2001)

[4] Race and History, “Case for African Debt Write-Off”, (October 3, 2004)

[5] Africa Action, “Africa's Debt”,

[6] Ibid

[7] Life Over Debt, “Debt Talking Points for Activists”,

[8] Ibid

[9] Ana Isabel Eiras, “Unconditional Debt Relief Is a Big Mistake”, (November 14, 2005)

[10] Kate Heneroty, “Chad Tops List of Most Corrupt Governments in Annual Survey” < (October 18, 2005)

[11]Make Poverty History, “Drop the Debt”,

[12] Stand Up Speak Out, “Debt Cancellation”, (2007)

[13] Jubilee Debt Campaign, “Does Debt Relief Work?”,

[14] Trisha Rogers, “Drop the Debt!”

[15] William Easterly, “Think Again: Debt Relief”, (2001)

[16] Robbie Mochrie, "Economic and Theological Approaches To Debt Cancellation." Heriot-Watt University

[17] Anup Shah, “Causes of the Debt Crisis”, Global Issues (June 3, 2007)

[18] Odious Debts, “Odious Debts Campaigns - South Africa”, (November 20, 2002)

[19] Jubilee USA Network, “Debt Cancellation and Corruption”,

[20]Common Dreams, “Reality Check: Findings Prove IMF, World Bank Can Afford 100 Percent Debt Cancellation for Poorest Countries to Help Fight AIDS”, (April 10, 2001)

[21] Michael Rowbotham, Goodbye, America! (Charlbury, Oxfordshire: John Carpenter Publishing, 2000) 112.