Bangladesh deserves debt relief too

It is true that the problems faced by Africa are so enormous that it would need a generous economic package and sustained international efforts to overcome the current difficulties. The debt cancellation is a small step, but it is a step in the right direction, no doubt. In addition to debt cancellation, the British plan also includes boosting development aid to Africa by $50 billion a year, better trading opportunities, and creation of an International Finance Facility (IFF) that would borrow against future pledges from donors. London hopes agreements can be reached on these issues before the convening of the G-8 Summit in Gleneagles, Scotland from July 6 to 8.

President Bush was initially cool to the British proposal. However, after Tony Blair's recent visit to Washington, he agreed to this major debt cancellation package to give a political boost to his most loyal ally ahead of the summit. Tony Blair, on his part, played his card well by securing agreement of other EU partners to the main theme of his proposal before coming to Washington.

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What happened at the G-8 Finance Ministers Conference in London went beyond what Bush and Blair had agreed to in Washington. The total debt cancellation was estimated to be about $16 billion and only debts owed to the World Bank and the African Bank were included in the package (not that of IMF). Once it was realised that the IMF was in a position to meet a significant part of the cost involved from sale proceeds of gold in late-90s, Chancellor Brown persuaded other partners to broaden the package.

The eighteen countries which are getting immediate debt cancellation are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda, and Zambia. This would, on an average, save them about $1.5 billion in debt payments annually. It was also agreed that another nine countries, namely, Cameroon, Chad, Democratic Republic of Congo, Gambia, Guinea, Guinea Bissau, Malawi, Sao Tome and Principe, and Sierra Leone would qualify for debt relief within 12-18 months, and that the total could rise to almost 40, once African countries beset by civil war resolved their conflicts.

The British Chancellor has indicated that the debt cancellation programme would be implemented in stages, and once all 38 countries become eligible the package would total $55 billion. He has also noted that there is potential for about 60 to 80 countries to benefit from this package and the G-8 would try to further expand the programme.

There is no denying the fact that Africa desperately needs a generous economic package. The UN has recently called for urgent action to avert "disaster" in Africa and has emphasised that development assistance has to be doubled if Africa is to achieve the Millennium Development Goals by 2015. This significant debt package will surely help African and some Latin American countries.

Unfortunately, it will offer no help to poor Asian countries, particularly those in South Asia who, despite resource constraints, have been paying their debts regularly. South Asia is home to one-fifth of humanity and 40 percent of the world's absolute poor live in this continent on less than $1 a day. In terms of GNI per capita, South Asia, with its figure of $510 is at par with that of Sub-Saharan Africa, and it is half of that of South-East Asia and Pacific countries and one-sixth of Latin American and Caribbean countries.

In the global context, South Asia lags behind all other regions of the world, both in its income and in human development levels. It is true that during the past decade, South Asia has been able to register rapid GDP growth, yet 43 percent of its people live below the poverty line. The UNDP Human Development Report puts the South Asian countries at the bottom rung of the table. The region's share in global trade is less than 2 percent and even a few years ago, the exports of Thailand alone equaled the combined exports of all seven South Asian countries. The region, largely due to its chronic instability, has also failed to attract significant Foreign Direct Investment and lags far behind South-East Asia in this area.

The inherent weakness of the South Asian development scene is best demonstrated by the fact that although South Asia, particularly India, has made major progress in the IT sector, the region has the lowest internet use and access to personal computers among developing regions. According to World Development Indicators 2005, with 10 internet users per 1,000 people, South Asia ranks well below Latin America and South-East Asia. Compared to that, Sub-Saharan Africa has 20 users per 1,000. Access to personal computers is also low in South Asia as compared to other developing regions.

The G-8 debt cancellation campaign has primarily focused on the Heavily Indebted Poor Countries (HIPC) at the cost of other poor countries, mostly in Asia, who have been repaying their debts regularly. Paradoxically, debt relief is only provided to those countries who default on debt repayment. As such, the poor countries who maintain their repayment schedule are considered "good debtors" and, consequently, penalised for not defaulting. The whole argument is that, since these countries are able to repay they must have "sustainable" levels of debt. The sustainability of debt is primarily measured on the economic matrix called Debt Sustainable Analysis (DSA) introduced by the World Bank and IMF, which lays too much emphasis on the country's exports and does not fully reflect the true nature of the debt burden on government expenses. Thus, Bangladesh and other South and South-East Asian countries are not included in the HIPC and, therefore, were not eligible for debt cancellation.

Bangladesh, in terms of population, is the largest Least Developed Country (LDC) and its external debt has grown from $4.2 billion to about $18.5 billion in the past two and a half decades. Our current per capita debt is about $133. More than one-third of our national budget is allocated to debt-servicing -- at a tremendous socio-economic opportunity cost -- when nearly half of the population are illiterate and live below the poverty line. The majority of the people do not have access to safe drinking water or sanitation. During the past decade our per capita aid has dropped by 50 percent, but the repayment of external debt has increased from $67 million to $683 million in 2000 -- a more than ten-fold increase. Bangladesh's debt-servicing constitutes 1.5 percent of the GNP while, for example, the government's allocation to the health sector is 1.6 percent. Two-thirds of Bangladesh's debt is owed to the World Bank, IMF, and other multilateral organisations, while one-third is owed to bilateral creditors. Although some bilateral donors have agreed, in principle, to grant debt relief to Bangladesh, the multilateral bodies have refused to even consider the proposal.

The current proponent of debt relief to poor countries is none other than our past colonial master, who knows our actual socio-economic condition more than anyone else. Given the current generous mood prevailing in the G-8 circles, our government should approach Prime Minister Tony Blair and other G-8 leaders at the highest political level to consider our case for debt relief on its own merits. Chancellor Brown has indicated that the Group is amenable to expanding the debt-cancellation programme to include other poor countries. Time is of the essence here, and we have three weeks at our disposal before the convening of the next G-8 Summit. If we do not plead our own case, no one will do it for us. Let us not forget, the crying baby gets the milk.

Syed Muazzem Ali is a former Foreign Secretary of Bangladesh