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Financial Collapse Dims African Prospects for Debt Relief, Donor Aid

Consequences of the international economic rescue effort will not be felt for several months. But African countries, which so far have only been indirectly shaken by the financial institution collapse, stand to lose long-term pledges of aid, which many international groups have fought long and hard to obtain. Jubilee USA Network director Neil Watkins heads an alliance of groups seeking to erase poverty and eliminate crushing debts in Africa and other developing regions. He says the pessimistic outlook can only be tempered by a resolve from the world community to live up to its pledges of the past several years to continue investing and promoting Africa’s economic growth.

“Clearly, countries are going to have to make due with less. They’re going to have to use existing resources more effectively and are probably going to have to be turning internally to look at domestic sources of revenue, emergency taxes on investment, or domestic resource mobilization, and also really looking at ways that they can reach out to the international community for solidarity and support, both to urge the international community to keep those existing pledges and, indeed, to think about ways that those pledges can be increased,” he noted.

Last week, the World Bank pointed out that high food and fuel prices would raise the number of malnourished people worldwide by 44 million to boost starvation levels to 967 million by the end of the year. Neil Watkins points out that the financial crisis is going to hit Africa especially hard as the severe food emergency, accompanied by sharp price increases, is already having an impact all across the continent.

“It means that some of the markets, some of the loans that might have been promised to African nations, may now be drying up, due to a lack of available credit. So I think that it’s urgent that the international community redouble its efforts to help shield Africa from this problem. If we can mobilize the $700 billion to rescue Wall Street, we think that we should at least be able to provide Africa what we have promised them and in fact go beyond that to make sure that Africa gets back on track to meeting the Millennium Development goals, which are fast nearing 2015,” Watkins said.

Last weekend World Bank and International Monetary Fund (IMF) officials voiced reassurances that developing countries would not be abandoned in efforts to contain the world economic crisis. Watkins praised the integrity and intentions of those finance institutions, but questioned the restraints and flexibility of terms and conditions for borrowing that the Bank and the Fund continue to pose for needy nations.

“One of the problems is that some lending that has come from the IMF and World Bank over the years comes with some very heavy conditionality. In the case of the IMF, it comes on some not very concessional terms. It comes as loans that must be repaid in a fairly rapid fashion, and for countries that are facing an economic downturn, especially very poor countries that are struggling with the food crisis, we certainly would question whether giving countries loans that aren’t concessional to fight the food crisis would be appropriate. More appropriate, we think, would be grants to help countries to be able to feed themselves, to be able to invest in important social sectors such as health care and education,” he said.