SUNS  4304 Monday 19 October 1998


AFRICA: CONVERT DEBTS INTO GRANTS, URGES ANNAN

United Nations, Oct 15 (IPS/Thalif Deen) -- U.N. Secretary-General Kofi Annan wants Western creditor nations to convert their bilateral debts with African nations - some 135 billion dollars -
into outright grants in order to relieve their cash problems.

"The massive external debt burden has been a major obstacle to economic growth and sustainable development in Africa," Annan said Thursday.

Addressing a Panel of High-Level Personalities on African Development Annan said that, in many African countries, the debt burden threatened "the sustainability of reform efforts and is disrupting the smooth functioning of the State."

Bilateral debts, he pointed out, represented about 40 percent of total external debts of African nations. The latter rose from 324 billion dollars in 1996 to 349 billion dollars in 1997.

The overall external debt of all developing nations, including the former East European countries, has been estimated at 2.2 trillion dollars at the end of last year.

The high-level panel, which serves as the Secretary-General's "think tank" on critical African economic issues, provides advise on actions to be taken towards an environment conducive to
sustainable development. Established in December 1992, it consists of 16 members from both developed and African countries, as well as from African regional organisations.

Annan said that Africa's external debt represented more than 200 percent of exports, and debt servicing absorbed more than 16 percent of export earnings. "For many individual African countries,
these indicators reveal an even grimmer picture," he observed.

In its annual survey of the economic and social situation in Africa, the United Nations said in April that "the alleviation of debt burden continued to be a major item on the agenda of African policy makers and their development partners."

Difficulties in meeting debt service obligations were reflected by the accumulation of arrears and the strong demand for their rescheduling, the report said.

Annan also recommended that financial institutions significantly increase access to the 41 Heavily Indebted Poor Countries (HIPC). A U.N. study on debt released last month said that the core of the
Third World debt problem still to be solved was the "unsustainable debt positions" of the HIPCs. Their total external debt amounted to 245 billion dollars at the end of 1996, the latest available
figures.

"As a group, those countries' debt burden remains severe, with a debt stock to export ratio of well over 300 percent (far above the 200 percent threshold used to indicate a debt overhang) and a debt
stock to gross national product (GNP) ratio of 127 percent in 1996, after several years of improvement," the report said.

The HIPCs, mostly African nations, include Uganda, Burkina Faso, Mali, Benin, Senegal, Guinea-Bissau, Ivory Coast, Mozambique, Bolivia, Guyana, among several others. The study said that "it is
a matter of concern that the implementation process of the HIPC initiative is very slow: two years have elapsed since its launching and yet only one country (Uganda) has benefited from the full-fledged relief as provided by the initiative."

Annan told the panel Thursday that available evidence suggests that the burden of external debt also deters private investment- domestic as well as foreign - as it calls into question the
credibility of, and confidence in, the economy.

He called for an increase in the volume and quality of official development assistance (ODA), which has been declining over the years.

In 1992, ODA stood at 61 billion dollars, then declined to 55  billion dollars in 1993 and rose to 58 billion dollars in 1994. In 1995, it moved slightly up, to 59 billion dollars, then dropped to 55 billion dollars in 1996, the latest available figures. Overall, ODA in real terms, after discounting for inflation, has fallen 16% since 1992.

Additionally, Annan asked what action could be taken to maintain "open markets for African products" and, at the same time, encourage private investment in Africa. Today's environment of
liberalisation, globalisation and the regional trade agreements offers increased export opportunities in developed countries, he said.

"However, globalisation and the liberalisation of factors of production, including the flow of capital across borders, have so far failed to benefit many African countries - despite the enabling environment they provide."

The Secretary-General said he would like to see African products gain greater access to developed-country markets. "Specifically, more progress is needed to reduce further the average level of tariffs on Africa's major exports," he added.

"I would encourage the major industrialised countries to place on the agenda of their next meeting the question of eliminating trade barriers to African goods - with a view to adopting a common policy
for implementation on a bilateral basis as well as through the World Trade Organisation (WTO)."