News Feature

Moment of Opportunity for Africa

A continent often tormented by civil war and poverty, Africa is faced with another huge challenge, debt servicing. The huge amount of debt it owes to the developed world has been a great burden to the economies of African countries. It has created a sense of uncertainty and humiliation to its people and affected negatively its relation with the developed world.

Coupled with the recurrent armed conflicts that devastate its economy, Africa's major problem, the debt question, inhibits the continent from aspiring to bring about speedy economic development.

Ethiopia, being one of the sub-Saharan countries encounters the same challenge of debt, affecting its overall development. The debt burden pressing down the efforts of the incumbent government mainly is inherited from the previous governments, and this has continued influencing its endeavors undesirably.

The G8 nations (The United States, Britain, France, Germany, Canada, Italy, Japan and Russia) that deliberated at Gleneagles, Scotland, on the issues of debt cancellation and aid for Africa, as well as climate change among others, from 6-8 July 2005 have agreed to fully cancel the debt of 18 eligible countries, including Ethiopia, owed to the World Bank, the International Monetary Fund, the Africa Development Bank and donor nations.

The G8 countries also agreed to double aid for Africa by 2010 and to improve the investment climate and make trade work for Africa.

The G8 leaders termed the deal as " a moment of opportunity for Africa".

The Chairman's Summary Report welcomed the substantial progress Africa has made in recent years. According to the report, more countries have held democratic elections and the economic growth is accelerating.

During the Summit, the G8 leaders expressed their renewed commitment to help Africa.  We and African partners had a common interest in building on the progress to create a strong, peaceful and prosperous Africa; we share a strong moral conviction that this should be done, and we have agreed the actions that we will take" they declared.

Nigerian President and current head of the African Union Olusegun Obasanjo hailed the Summit a success. He said, " African issues were being tackled realistically".

On 11 June 2005 the world's richest countries agreed on a historical deal to write off more than 40 billion Dollars of debt owed by the poorest nations. Finance Ministers of the G8 industrialized nations signed the debt relief package that aimed at lifting Africa out of poverty.

Following the agreement by the Finance Ministers, the Ethiopian Finance and Economic Cooperation Minister Sofian Ahmed appreciated the cancellation of the debt Ethiopia owed as " very encouraging". Ethiopia would enjoy more than 4.4 billion USD debt write off as per the decision reached during the G8 member states ministerial conference.

Poor countries like those in the sub-Saharan Africa are paying more in debt service to advanced nations than they are receiving from them in aid. And this has long forced, the report from Jubilee Research at the New Economics Foundation explains, "African countries to transfer a large proportion of their precious resources in unproductive debt payments which otherwise could have been used to build schools, present health services and expand it in developmental projects to make progress in their fight against poverty".

The importance of debt relief to Africa is said to be immense for its overall development agenda. Debt relief, the late pope John Paul II said " is a precondition for the poorest countries to make progress in their fight against poverty."

World Bank Vice Presedent for the Africa Region, Gobind Nankani during the launching of the African Development Indicators said that it was stressed in the ADI 2005 data the " need for rich nations to urgently deliver on their promises of more generous aid, debt relief and wide trade opportunities for Africa if we are to see the continent achieve meaningful progress towards the Millennium Development Goals".

It is usually agreed that debt write-off schemes should be supplemented by the opening-up of the markets for agricultural exports for developing countries.

Some analysts are skeptic about the proper use of debt relief, while others argue that the debt relief will be used properly to meet the targeted aim.

While arguing that 100 percent forgiveness of debt sends the wrong message to some leaders who misuse aid money only represents a very small portion of the reality, the report by the Jubilee Research indicates that the debt relief delivered to date has resulted in large increases in spending on education and health in Africa- and no increase on defense.

The debt relief benefits those eligible heavily indebted poor countries by relieving them off the burden of debt that for years has depressingly affected their economic progress.

At the Kananaskis Summit in 2002 the G8 had agreed an African Action Plan (AAP) that contained commitments on promoting peace and security; strengthening institutions and governance; fostering trade, economic growth and sustainable development; implementing debt relief; improving health and increasing agricultural productivity; and improving water resource management.

The G8 and African leaders have expressed hope during the Gleneagles summit that the measures that are set out in the comprehensive plan would result in the doubling of the size of Africa's economy and trade by 2015, increased domestic and foreign investment, the saving of millions of lives a year (through the provision of basic health care, universal access to treatment of AIDS by 2010...), and generating employment and other opportunities for young people.

It is believed that such mechanisms would undoubtedly help developing nations like Ethiopia in their endeavor to reach the MDGs.

Ethiopia is registering a progressive economic growth for the last few years, and the debt relief would contribute to further accelerate its development efforts. The debt relief Ethiopia enjoyed, according to Getachew Admassu, Public Relations and Conference Service Head with the Ministry of Finance and Economic Development, would help the country to save and redirect 110 million USD it was paying annually in debt service to the implementation of other poverty reduction related projects and programs.

The increase in aid shall bring with it other opportunities that assist the country in many ways. Backed by the fulfillment of the necessary conditions for a fair trade and the capacity to increase global competitiveness, the country aspires to march towards speedy economic development.