Protesters speed up debt relief

What do Pope John Paul, U2 lead singer Bono, and Mohammed Ali share in common?

Like the thousands of demonstrators driven back by water cannon and tear gas yesterday from the annual meeting of the World Bank and International Monetary Fund in Prague, these public figures are vocal proponents of cancelling third-world debts.

The protesters, some of whom threw stones and Molotov cocktails at police, stood no chance of satisfying their most extreme ambition - persuading the two international lenders to abolish themselves.

But the worldwide movement they spearhead is beginning to change policies within the institutions that dole out some $30 billion in loans each year. And the demonstrators have won a battle in their campaign to reduce the poorest countries' debt so as to free up money for hospitals and schools.

The IMF is due to announce this week that it is relaxing conditions attached to its debt-relief scheme, doubling to 20 the number of countries that can start enjoying its benefits by the end of the year.

"Thanks to public pressure, they will try to be more flexible," says Tony Burdon, a policy adviser to Oxfam, the international poverty-relief charity.

But the new steps fall far short of what is needed, argues Ann Pettifor, director of Jubilee 2000, an international movement that has gathered over 20 million signatures on a petition calling for the cancellation of all the poorest countries' debt.

"We will not settle for the half measures they seem so proud of," Ms. Pettifor told a demonstration in Prague on Sunday. "The richest and most powerful leaders in the world are dragging their feet in helping the poorest at a time when the polarization between rich and poor is greater than it has ever been."

Since thousands of demonstrators disrupted last year's meeting of the World Trade Organization in Seattle, the institutions that set the rules for the global economy, such as the World Bank and the IMF have come under increasing attack.

Yesterday, for instance, some 5,000 to 9,000 protesters gathered, chanting "London, Seattle. Continue the battle." "It is more of a primal scream against globalization than anything else," says Tom Dawson, the IMF's spokesman. "People are afraid of the way the world is moving quicker ... and think someone should be held responsible."

But the IMF has come in for bitter criticism for many years about the way it lends money to third-world countries in crisis, which have to promise to follow IMF economic policy prescriptions.

Those prescriptions have generally involved painful belt tightening: The budget cuts that are demanded mean social programs are scaled back, and governments asked to liberalize their trade and investment rules often fear they are being made to open their countries up to multinationals from the rich countries against whom local firms find it hard to compete.

"In the IMF, third-world countries are only minority shareholders," says William Larralde, head of the Group of 24 developing countries' office at IMF headquarters in Washington. "One tends to see how the majority shareholders' view is the only one taken into account."

Voting rights - currently assigned by financial weight - are one of the items on the IMF agenda this week as the organization seeks to adapt itself and make itself more accountable, international financial officials say.

"I haven't come to turn the fund upside down, but there is a need for further change and even accelerated change" said the IMF's new managing director, Horst Khler, before this week's meeting.

Such changes have been under way for a year already, say both IMF officials and critics, opening the international lender up to new actors who never used to have any say in the way national or international economic policy was made.

"In the bad old days, World Bank and IMF delegations would have to meet just the finance minister and a couple of his flunkies," says Oxfam's Mr. Burdon.

"Now they must meet people from about 50 nongovernmental organizations whenever they visit a country.

"The IMF is finding it a bit hard," he adds. "They never talked to real people."

"IMF representatives are in touch with representatives of civil society whenever programs are being negotiated," adds Mr. Dawson. "The programs that work are the programs that enjoy broad public support."

At the same time, the IMF is trying to get out of governments' hair. "It tended to get more and more involved in micromanagement," complains Mr. Larralde. "Conditionality was getting invasive."

Mr. Khler answered that this week, pledging "we are not going to go too much in detail with conditionality, even try to micromanage economies and societies."

That micromanagement has been one of the obstacles hampering debt relief to the poorest countries, which spend more on servicing their debt than they do on healthcare and education.

The World Bank and IMF launched a scheme to help 41 Heavily Indebted Poor Countries (HPIC's) in 1996, promising to ease their debt burdens if they followed IMF policy prescriptions and drew up specific plans detailing how they would spend the money they saved on reducing poverty.

But the initiative dragged, caught up in bureaucratic tangles about eligibility and strict conditions: Governments had to show a six-year track record of reformist economic policy before being considered for help, while 19,000 African children die every day because money is spent on servicing debt rather than healthcare, according to UN estimates.

Last year, the IMF and World Bank revamped the plan, offering twice as much debt relief twice as fast, but still only 10 countries have been admitted to the scheme, and only one, Uganda, is benefitting fully.

This week, officials say, the IMF will speed up its timetable and relax its rules to make sure another 10 countries become eligible by the end of the year. And none too soon, says Burdon.

"They are not going to deliver on their promises till they buck up," he says. "They are complacent, confused, and not delivering, and we are getting impatient."

Alexandra Poolos contributed to this report from Prague.

(c) Copyright 2000. The Christian Science Publishing Society