LONDON, JUNE 5, 2004 (Zenit.org).- Amid concern over economic stagnation in many African countries the British government is continuing to push a development plan to increase aid levels to the continent.
The initiative aims to spur efforts to meet the financing goals set out at a U.N. meeting held in Monterrey, Mexico, in 2002. The Monterrey meeting in turn was held to put in place measures to help developing nations meet the U.N.-set Millennium Development Goals for 2015.
Launched in January 2003, the British Treasury and Development ministries propose the establishment of an International Finance Facility. A main role of the IFF would be to act as a financing mechanism to provide up to an additional $50 billion a year in development assistance between now and 2015. Other functions would include issuing bonds to raise additional funds and ensuring the eventual repayments to bondholders.
The IFF in particular aims to provide developing countries with firmer guarantees of aid, thereby enabling their governments to deal with the underlying causes of poverty, instead of adopting a band-aid approach. The British Treasury noted that without additional resources, African countries will not meet most of the Millennium Development Goals.
Details of the proposal contained in a document published April 8 by the British Treasury explained that, of the extra $50 billion called for under the IFF, at least $10 billion a year is estimated to be needed to achieve education for all. A further $10 billion is required to combat HIV/AIDS, malaria and tuberculosis. And up to $25 billion a year is needed to combat maternal and child mortality.
The document noted that about 770,000 children die from measles every year, while others are left blind, deaf or brain damaged. Yet the cost per child of vaccination, including injection equipment, is a mere 26 cents. Just $25 per child will enable immunization against six major diseases — diphtheria, whooping cough, tetanus, polio, measles and TB.
The scheme could increase the dependency of countries on aid in the short to medium term. Yet, the proposal affirmed that experience in some nations has shown that extra aid enables them to increase economic growth, enabling an eventual reduction in aid. The British Treasury document argued that if aid to sub-Saharan Africa were doubled from the current $13 billion to $26 billion by 2006, and if gross domestic product grows at 4%, then revenue growth could start to substitute for the higher aid flows and sustain the higher total spending per capita by about 2020.
Details of how the IFF will work still need to be finalized. The International Monetary Fund and the World Bank are now examining the proposal, with a report due this September.
Debt relief promoted
Meanwhile, the British Treasury chief Gordon Brown has also been lobbying for additional debt relief for poor countries. During a meeting of finance ministers of the Group of Eight, he obtained U.S. agreement to speed up debt relief, the Guardian newspaper reported May 24.
Progress on the initiative to alleviate Third World debt has been slow, and falling commodity prices have left many poor countries struggling even after they have had some debts written off.
And for his part, British Prime Minister Tony Blair has formed a Commission for Africa. Blair set up the commission earlier this year to take a fresh look at why Africa has been the only continent to see its poverty increase over the last 25 years, the Guardian noted May 5.
Political instability has been an important factor in the lack of economic progress in many African countries. Now that democracy has been strengthened in the continent, there are hopes that economic benefits will follow.
The Christian Science Monitor said in an April 27 article that 43 of the 48 countries in sub-Saharan Africa have held at least one multiparty election during the past decade, compared with 1990, when just three nations were solidly democratic.
Newly re-elected South African President Thabo Mbeki is a champion of “good governance,” noted the article. Mbeki is promoting the New Partnership for African Development, and the African Union, both of which seek to extend good government and democratic practices.
Mixed bag of economic news
The British proposals come amid varying reports on the economic situation in Africa. In an April 19 press release, the World Bank noted that Africa’s economic growth slowed to 2.4% last year. The World Bank, in its report “Global Development Finance 2004,” put the blame on a climate-related agricultural downturn, and setbacks from armed conflicts. However, the report predicted that economic growth in sub-Saharan Africa will pick up this year, rising to 3.4%, and again in 2005, when it is expected to rise to 4.2%.
The report also observed that Africa’s infrastructure needs are particularly acute. To comply with the Millennium Development Goals, annual economic growth of 7% is needed, and the region will also need $18 billion a year in infrastructure financing.
Another World Bank study, “African Development Indicators 2004,” showed that the continental growth figures conceal notable differences between countries. An April 7 press release from the World Bank noted that 13 sub-Saharan countries averaged more than 5% growth for the period 1995-2002, while many others saw their economies contract.
The divergences stand out clearly in the data for gross national income per head. The average income level for 2002 was $307 in the sub-Saharan countries. But levels ranged from under $100 per head in the Democratic Republic of Congo to more than $7,000 in Seychelles. And while maternal mortality was as low as 45 per 100,000 births in Mauritius, it reached 2,300 per 100,000 births in Rwanda.
Overall, the World Bank calculates that fully half of the region’s inhabitants still live in extreme poverty and Africa still houses about three-quarters of the world’s poorest countries.
A positive bit of news was that net aid to Africa rose about 35% in 2002 from a year earlier. “However, on a per-capita basis, it was $27 in 2002, way below the $40 in 1992,” said Alan Harold Gelb, the World Bank’s chief economist for the Africa region. Progress was also reported in education, with enrollments in primary schools reaching 87%, from 80% in 1980. And illiteracy rates dropped from 47% in 1997 to 37% in 2002.
One difficulty African countries face in climbing out of poverty is their heavy dependence on commodity exports. This leads to most countries being “boxed into a commodity trap that condemns them to poverty and indebtedness,” said a study published by the U.N. Conference on Trade and Development (UNCTAD). The Financial Times reported on the study last Feb. 27.
The study observed that only one of the region’s top 20 non-fuel exports — garments — is among the world’s 20 most dynamic products. Of the 14 main non-fuel commodities of interest to Africa, 12 suffer from high price volatility and nine have seen long-run price falls. UNCTAD attributes part of the blame on farm subsidies in rich countries that have led to an oversupply and falling world prices for cotton, groundnuts and sugar.
Resolving Africa’s economic problems will not be easy, and many factors, national and international, are involved. With the fate of over 700 million people in sub-Saharan Africa in the balance, local leaders and the international community face a grave responsibility.