British Chancellor of the Exchequer Argues for Large-Scale Debt Relief for Africa

British Chancellor of the Exchequer Gordon Brown made waves in January with his announcement that Great Britain would seek large scale debt relief for poverty-stricken African nations. Brown said that ultimately his government hoped to negotiation 100 percent debt relief for such nations.

On a trip to Africa, Brown signed a debt relief deal with Tanzania in which the UK agreed to pay 10 percent of Tanzania’s repayment debts to the World Bank and the Africa Development Bank. The annual payments on Tanzania’s debt amounts to about 3.5 million pounds.

In exchange, Tanzania agreed to use the money it would have spent servicing its debt on health, education and poverty reduction for its people.

The BBC quoted Brown as saying,

We make this offer unilaterally, but we are now asking other countries to join us. Our wish is to have 100% debt relief and we hope that America, Japan, France and other European countries will follow great Britain in this effort. We hope that we are in a position to get all other countries to sing up to a new package of debt relief.

. . .

What we offer Tanzania today we offer to the whole developing world tomorrow. Although there is no international agreement yet, Britain will relieve those countries still under the burden of this debt by paying our share — 10 percent — of their payments to the World Bank and African Development bank in their stead.

Later in his trip, Brown announced that Great Britain was canceling 80 million pounds in debt that Mozambique owes the UK, and would also pay 10 percent of Mozambique’s debt as well. In all, Great Britain plans to reach the same deal with 70 developing countries at a cost to itself of 1 billion pounds annually.

Not everyone, however, thinks that debt relief is the ultimate solution to poverty in the developing world. Former UK international development secretary Clare Short warned that although the debt relief was a good start, it should not be seen as a “mystical solution” to poverty. The BBC quoted short Short as noting that relieving debt in this case is simply a roundabout way to giving foreign aid, and will not solve the problem of “failed states” such as Sudan and the Democratic Republic of Congo.
According to Short,

Debt relief and aid alone without really strong action to end conflict, arms supply, start building order, the basic institutions of a state, leave the poor outside the whole development system.

Short also noted that there are very poor countries that don’t have significant debt, and that if the World Bank or other institutions began writing off developing country debt, there would be less money available to give to other countries that may need it.

It’s kind of odd given the notable lack of success over the past 30 years to see Great Britain suddenly reach the conclusion that throwing money at developing world poverty is the way to solve the problem. Certainly, the UK actions are likely to create short term improvements as many of the aid programs of the 60s, 70s, and 80s did, but making those short term benefits lead to long-term transformation is going to be a lot trickier.

Sources:

Brown’s Pound 1bn Africa debt pledge. The BBC, January 14, 2005.

Brown wipes Pound 80 m Mozambique debt. The BBC, January 15, 2005.