The website of Jubilee 2000-United Kingdom lists 57 countries that have Jubilee 2000 campaigns for the cancellation of the unpayable debt of the poorest countries by the year 2000. [1] No country from the Middle East and North Africa (MENA) appears on this list. [2]
This should surprise us. External debt has been a heavy burden for many MENA countries. Overall, 14 percent of regional export earnings go to debt service. [3] In Lebanon, debt service accounts for 47 percent of the government’s budget. [4] Jordan, Morocco, Tunisia and Turkey all spend more on debt service than they do on education; all spend twice as much on debt service than they do on health care (see Table 1). Sudan and Yemen are among the 41 countries identified as Heavily Indebted Poor Countries [HIPCs] by the World Bank; Morocco is among the 11 countries identified by Jubilee 2000-UK as urgently in need of debt cancellation.
Since most HIPCs are in sub-Saharan Africa, one might assume that the peoples of the Middle East and North Africa have little stake in the success of the Jubilee 2000 campaign, which may directly benefit only the poorest countries. And yet Latin America, with only Bolivia, Nicaragua and Honduras on the HIPC list, has a vibrant Jubilee 2000 movement, even in “higher income” countries like Brazil.
Progressives should relish the prospect of Islamic involvement in an international movement for economic justice, which has thus far been dominated by various Christian churches. There have been a few sparks in the region: No less a progressive media star than Egyptian writer Nawwal El-Sa‘adawi has called on African countries to stop paying their debts to the West.
The campaign for debt cancellation has broad implications for people in the Middle East. It challenges the global role of the IMF and the World Bank and enhances the prospects for opposition to the economic model being promoted and imposed throughout the developing world by the IMF and US Treasury on behalf of Wall Street and multinational corporations. If debt campaigners succeed in forcing the IMF and the World Bank to cancel debt from their own resources, it will affect future relations between the US-run IMF and other countries. It is precisely for this reason that the IMF, the World Bank and the US Treasury vigorously oppose the movement to cancel debts, which everyone knows are unpayable, because they correctly perceive cancellation as a threat to their ability to impose their agenda on developing countries. From the point of view of the IMF and US Treasury, debt cancellation would set a “dangerous precedent”: Like Cold War dominoes, all developing countries might demand more freedom and a better deal.
Current negotiations over unpayable debt provide the mechanism by which poor countries are held hostage by the IMF. Under the IMF-World Bank “HIPC initiative,” to qualify for debt relief, countries must comply with six years of the IMF’s structural adjustment programs. At the end of this period, they may be eligible for debt relief.
If debt campaigners can win significant cancellation of debts, the IMF and the World Bank’s power over developing countries will be broken, or at least reduced. IMF austerity programs, World Bank privatization schemes and US/IMF insistence on reckless deregulation of capital and trade flows — misleadingly labeled “economic reforms” in the US press — are widely recognized to be detrimental to the growth and development of the poorest countries. [5] But if the IMF is forced to admit that its policies have not worked for the poorest countries, this would imply that the IMF model — a haphazard mix of deregulation justified by simplistic economic theory, an extremist monetarism (e.g., very high interest rates) and demands for market access by Western banks and multinational corporations — might not be in the best interests of developing countries generally. [6]
Under the current HIPC initiative, even those countries that do receive debt relief after six years of structural adjustment do not have their debts erased; they merely have them reduced to a “sustainable” level. In practice, “sustainability” as defined by the IMF and the World Bank means that poor countries pay as much money as can be scheduled without defaulting.
According to the World Bank’s definition of sus-tainability, it was sustainable for Ireland to export food under armed guard during the British-imposed famine, since it was physically possible. Debt campaigners, on the other hand, have argued that “sustainability” should take into account governments’ ability to meet their populations’ basic needs.
Countries of the Middle East have indeed made demands — or perhaps one should say requests — for debt cancellation. During the US mobilization for the Gulf War, Egypt’s reward for its participation in the alliance against Iraq was significant debt cancellation by the IMF, the US and other countries.
The Egyptian example illustrates three key points. First, the 1991 debt cancellation gave the Egyptian economy a significant boost. A Journal of Commerce editorial noted that “since 1991, the Egyptian economy has boomed as it has shaken off the burden of high debts.” [7]
Second, obstacles to debt cancellation are essentially political. When it suited US interests, there was no lack of resources to cancel Egypt’s debt, no hand-wringing about dangerous precedents, no worries about “moral hazards” or necessary economic reforms. The US alone canceled $7 billion owed by Egypt. [8] In comparison, the entire debt owed by HIPCs to the IMF is estimated at $7.8 billion. [9] The entire debt of HIPCs to the US is $6.8 billion. [10]
Third, the present arrangements pose dangers not only to the Middle East but also to the entire world. Egypt’s participation in the Gulf War provided critical political cover for the US, which was able to claim that its policy had the support of a key Arab and Muslim country. Egyptian support for the US war effort may have lessened widespread opposition to US policies in Arab and Muslim countries, in Europe and Russia, and even in the US. History might have been different had Egypt not been bought off with debt cancellation. The results of the Gulf War in the region included deep and enduring divisions within the Arab camp, diminished hopes for common action, lost remittances from workers in Gulf countries, a devastating war on Iraq and years of crippling economic hardships, severe economic setbacks for Jordan as a result of the Western embargo and the subsequent loss of its major trading partner — Iraq — when it acquiesced to the anti-Iraq sanctions.
Last May, when Jordan’s new King Abdullah beseeched the US and other G7 countries to cancel nearly half of Jordan’s $7 billion debt to the West, he was warmly received. Justifying his request, Abdullah invoked Jordan’s peace treaty with Israel and its role in promoting US policy in the region. Indeed, the United States had written off more than $700 million of Jordan’s debts after Jordan signed its peace treaty with Israel in 1994.
No one is against peace, but let us recall the political meaning of the 1994 treaty: Technically, like other Arab countries (excluding Egypt after 1979), Jordan was in a state of war with Israel following the 1973 armistice. The unified position of the Arab countries — again excepting Egypt after Camp David — was that peace with Israel (or more accurately, normal relations, since everyone knew there was no military option), would be realized once outstanding issues had been resolved, most notably the demands of the Palestinians and Israel’s occupation of Gaza, the West Bank, East Jerusalem, the Golan Heights and southern Lebanon. Jordan was never a military threat to Israel. Thus, by signing the 1994 treaty Jordan broke ranks with the other Arab countries and signaled its formal acceptance of the US framework for the region, thus weakening the position of other Arab countries, particularly the Palestinians (who were admittedly at a nadir already).
Even so, by July 1999 the Journal of Commerce reported that Jordan had rescheduled $1 billion in debt yet noted that “[t]he lack of debt [cancellation] is the price Jordan is paying for its stance in the 1990-1991 Gulf crisis. Its perceived support for Iraqi President Saddam Hussein and ambivalent attitudes toward the US-led alliance has cost it dearly. Countries such as Egypt, which supported the United States, received massive debt forgiveness.” [11]
The IMF plays the same role in the economic sphere that NATO plays in the military sphere: a multilateral façade for the implementation of US policies. To reduce US power we must reduce the power of the IMF. Currently each developing country negotiates separately with the US, the IMF and the G7. The IMF functions like a creditors’ cartel, partly because there is no debtors’ cartel to counterbalance it.
Last month in Zimbabwe, Nawwal El-Sa‘dawi and Choolwe Beyani of the African Forum and Network on Debt and Development (AFRODAD) called for just such a cartel. “We shouldn’t pay anything,” said El-Sa‘adawi, while Beyani called for “collective default,” noting that “there is nothing they can do if we collectively say we don’t want to pay back the debt,” but emphasizing that “we have to unite, because as individual countries we cannot do it.” [12]
With much of the Middle East still formally under the rule of monarchs or military dictators, some still hope that the IMF and World Bank can play a progressive role in the region. This view is born of desperation. International financial institutions, controlled by the West, have demonstrated that they can be perfectly compatible, indeed symbiotic, with dictatorships. The comprehension that “there is no benign occupation” applies as much to the IMF as to the Israeli military.
Although some may view calls for collective action by the South as naïve and passé, there is no alternative to collective action; certainly the world will change little as a result of NGOs parleying with the IMF and World Bank about “good governance.” Moreover, broad alliances between Southern and Northern activists have borne fruit on issues ranging from debt to landmines to sweatshops. The resources employed by the IMF and the World Bank to impose their policies have come under attack. The US Congress is skeptical of funding for these institutions, [13] while World Bank bonds — the source of 80 percent of the Bank’s resources — are vulnerable to boycott. [14] “Power concedes nothing without a demand,” as Frederick Douglass said. “It never did and it never will.”
Endnotes
[1] http://www.jubilee2000uk.org/main.html
[2] Non-Arab Muslim countries do appear, however, such as Bangladesh and Pakistan.
[3] World Bank, “Middle East and North Africa: Data & Statistics,” http://www.worldbank.org/data/countrydata/littledata/12.pdf
[4] Roula Khalaf, “Lebanon set for $700m offering,” Financial Times, September 15, 1999.
[5] See Robert Naiman and Neil Watkins, “A Survey of the Impacts of IMF Structural Adjustment in Africa: Growth, Social Spending, and Debt Relief,” Preamble Center Briefing Paper, April 1999, http://www.preamble.org/IMFinAfrica.htm
[6] For example, Timothy Mitchell argues persuasively that IMF policies in Egypt, as in many other countries, have led to increased corruption. Timothy Mitchell, “Dreamland: The Neoliberalism of Your Desires,” Middle East Report 210 (Spring 1999).
[7] Michael Barron, “Jordan’s King Passes First Political Test,” Journal of Commerce, July 27, 1999.
[8] Appropriately enough, these were loans for military purchases. Timothy Mitchell reports that “an impending default on these military loans, causing an automatic suspension in US aid, helped trigger the [economic] collapse in 1990,” which forced the government to accept an IMF “stabilization” plan. Timothy Mitchell, op. cit.
[9] Jeffrey D. Sachs, Testimony, Hearing on Debt Reduction, House Committee On Banking And Financial Services, June 15, 1999, http://www.house.gov/banking/61599wit.htm
[10] Moreover, the debt is carried on the books at 10 percent of its face value, so a $600 million appropriation would wipe out the debt of HIPC countries to the US See previous note.
[12] Lewis Machipisa, “Egyptian Writer Slams Donors,” Inter Press Service, August 4, 1999.
[13] Providing opportunities for advocacy such as Representative Cynthia McKinney’s “Debt Emancipation for Emerging Democracies” Act, which would cancel the debt of HIPC countries and Haiti to the US and cut off US funding to the IMF until it wipes out HIPC debt and closes ESAF.
[14] For more information about campaigns for the boycott of World Bank bonds, contact the Center for Economic Justice at econjustice@preamble.org.
