O’Donnell holds talks with Government in Mozambique

Mozambique, which is a priority country for the Irish Aid programme, is one of the developing countries which has been most severely affected by the burden of external debt. The Minister is visiting a number of projects financed by Irish Aid as well as meeting with Mozambique’s Foreign Minister Dr. Leonardo Simao, local NGOs, Irish volunteers working in the country and Government and local authority officials.

Minister O’Donnell said today “I have seen throughout my visit to Mozambique the stark and unacceptable effects of the debt crisis on poor countries. Mozambique has made extraordinary efforts in recent years to recover from long years of conflict, yet it has been crippled by the burden of debt. The servicing of this debt deprives Mozambique, and many more of the poorest developing countries, of scarce resources which they cannot do without. All over Africa, Governments are being forced to chose between repaying their debts and providing the most basic social services for their people”.

The Minister added that “the debt crisis facing many developing countries must be tackled as a matter of urgency by the entire international community. We must make every effort to place this issue at the centre of the international agenda”.

In discussions with local NGOs, Minister O’Donnell noted that in 1980, developing countries owed $600 billion; by the end of 1997 this figure stood at $2.2 trillion. Africa’s share of this total amounted to $324 billion - equivalent to over twice the value of all its annual exports. In the 41 most heavily indebted poor countries - the majority of which are in Africa - the debt stock is well over three times the value of exports.

Minister O’Donnell said that the social effects of this debt level on the poorest countries are totally unacceptable. She noted that in Africa as a whole, where half of all children do not attend school, governments transfer four times more to northern creditors in debt payments than they spend on the health and education of their citizens.

Minister O’Donnell strongly welcomed the progress which has been made on alleviating Mozambique’s burden of debt. She said that “the HIPC Initiative has provided welcome relief for a number of countries, including Mozambique, but more needs to be done. Much faith has been invested in the HIPC Initiative, as the first major scheme to tackle the problem of multilateral debt. However, it has been rather slow in operation and, to date, has benefitted only a limited number of countries. Ireland, now that we will soon be a contributor to HIPC, will press for more flexibility and more urgency in its operation”.

The Minister added “Nobody is asking for the overturn of the international financial order. What is needed now is a generous and imaginative response to debt, a response which needs to be made sooner rather than later.” She welcomed the role that Jubilee 2000 and other NGO organisations have played in highlighting the debt crisis and the need for the most urgent and effective international action to address the crisis.

Minister O’Donnell today told the Mozambique Government authorities that Ireland is determined to play a strong role internationally in calling for an urgent and effective response to the unacceptable debt position of developing countries.

The Minister said that the Irish Government had launched a comprehensive new policy on developing country debt. This included a major debt alleviation package comprising substantial contributions to the World Bank/IMF HIPC Initiative and the IMF’s Enhanced Structural Adjustment Facility (ESAF), in addition to substantial provision for debt relief programmes in Mozambique and Tanzania, both of which are priority countries for the Irish Aid programme.

In addition to agreeing to the debt relief package, the Government adopted a number of important principles to guide future Irish policy on developing country debt, including the integration of debt relief into Ireland’s overall ODA strategy, the encouragement of the IMF in particular to operate transparently and flexibly and to take social impacts into account, and continued consultation with the NGO community.

Minister O’Donnell said today that she will continue to press in the EU and the UN for a meaningful international response to the debt crisis. She said “The time has now come for action to address the present untenable situation. Addressing the debt crisis facing developing countries is not only a matter of justice, but is in the long-term interest of the entire international community”.

Note for Editors

In April 1998, Mozambique became one of the first countries to qualify for debt relief under the joint World Bank/IMF HIPC Initiative, launched in October 1996 as the first debt relief scheme to seriously address the problem of multilateral debt. The initiative is aimed at Highly Indebted Poor Countries (HIPCs) which have demonstrated, through a track record of good economic management and reform, that they are capable of achieving debt sustainability in the medium term. All creditors - multilateral, bilateral and commercial- are expected to meet their share of the debt reduction costs. Mozambique is expected to receive debt relief of nearly $3bn in June 1999 which, together with other debt alleviation measures (including $5m paid by Ireland), should reduce Mozambique’s external debt from $5bn in 1996 to about $1bn in late 1999.

Press Section

20 January 1999

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