*{Making Debt Relief Work: A Test of Political Will
 
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Oxfam International Position Paper - Apr 98
Making Debt Relief Work: A Test of Political Will
Executive Summary}  

Two years ago the adoption by the Governing Boards of the 
International Monetary Fund (IMF) and the World Bank of the Heavily 
Indebted Poor Countries (HIPC) initiative appeared to signal the 
beginning of the end of the debt crisis in the world's poorest 
countries. The World Bank's President, James Wolfensohn, described 
the initiative as "very good news for the poor of the world." Along 
with others, Oxfam International welcomed the new HIPC framework. We 
believed that, implemented with political resolve and subject to 
some changes, the initiative had the potential to facilitate a 
transition to debt sustainability, with attendant benefits for 
poverty reduction, investment and economic growth. 

Unfortunately, the potential remains unrealized. Debt relief under 
the HIPC initiative has brought important benefits for a small 
number of countries - such as Uganda, where savings from debt relief 
have helped finance new education programs that will help get two 
million children into school. But for the vast majority of poor 
indebted countries it is delivering too little too late. 
The danger now is that, after promising so much, HIPC will join the 
long list of failed efforts to resolve the debt crisis in Africa and 
other regions. Above all, that will be a tragedy for the citizens of 
countries crippled by debt, who are paying for the policy failures 
of creditors in the form of lost opportunities for education, health 
and employment: 
In Ethiopia, where over 100,000 children die annually from easily 
preventable diseases, debt payments are four times more than 
public spending on health care. 

In Tanzania, where 40% of people die before the age of 35, debt 
payments are six times more than spending on health care. 
In Africa as a whole, where one out of every two children doesn't 
go to school, governments transfer four times more to northern 
creditors in debt payments than they spend on the health and 
education of their citizens. 

Failure to revitalize HIPC will also cast a shadow over the IMF, the 
World Bank and their major shareholders in the Group of Seven 
countries. The stark contrast between the dynamic response of the 
industrialized countries to the crisis in East Asia and the inertia 
on display in relation to debt problems in Africa and elsewhere, has 
raised serious questions about their commitment to economic reform 
and poverty reduction in the world's poorest countries. In East 
Asia, over $100 bn has been mobilized in the space of a few months, 
with the IMF bending its rules in every conceivable direction to 
ensure rapid disbursement. In the case of the highly indebted poor 
countries in Africa and elsewhere, it has apparently been impossible 
to drive forward an initiative which will cost around $7bn over five 
years. 

This paper sets out Oxfam's assessment of the HIPC initiative to 
date. It argues that the framework for debt relief needs to be 
amended to provide earlier and deeper levels of debt reduction, and 
to provide incentives for debtor governments to convert savings from 
debt into poverty reduction initiatives. In this context, the 
sustainability thresholds set for determining debt sustainability 
require urgent review, as do the criteria for eligibility. The 
narrow focus on trade-related measurements of debt sustainability 
needs to be widened to incorporate human development dimensions, 
including the conflicting claims of debt and priority social sector 
investments on government revenues. In Oxfam International's view, 
debt servicing should be regarded as unsustainable when it absorbs 
resources needed to meet targets for improving human and social 
development and to provide the foundations for sustained growth. 
Looking beyond the reform of the HIPC framework, there is a more 
urgent problem to be confronted: namely, the erosion of political 
will. The HIPC framework was the product of a concerted campaign led 
by the World Bank, the US, the UK, New Zealand, Canada, Australia, 
Netherlands, the Nordic countries, and other creditors to overcome 
resistance to debt reduction from the IMF, Japan, Germany, and 
Italy. Today, the political alliance behind HIPC has fragmented, 
leaving the World Bank and Britain as isolated advocates for action 
by the Group of Seven countries. The challenge is to restore the 
political will needed to transform the commitments made in HIPC into 
resources to save lives in some of the poorest countries in the 
world. 

*partie=titre Making HIPC work for the poor - an agenda for reform *partie=nil 
If the HIPC framework is to realize its potential it needs to 
provide earlier and deeper debt relief. Oxfam International proposes 
a five point plan of action to: 
1, Provide earlier debt relief by cutting the current timeframe, 
before a country receives debt relief, from six to three years, with 
credit being given for past performance. The Completion Points for 
Ethiopia, Guinea Bissau, and Tanzania should be brought forward to 
2000, and for the remaining countries to 2001-2002. 
2, Provide deeper debt reduction by lowering the existing debt 
sustainability thresholds - the levels to which debt is reduced to. 
Ranges of 15-20 per cent for debt servicing, 150-200 per cent (NPV- 
net present value) for debt/export, and 150-200 per cent (NPV) for 
debt/revenue should be adopted. 
3, Agree new measures for determining debt sustainability based on 
establishing a ceiling for the proportion of revenue and government 
expenditure absorbed by debt, taking into account human welfare 
levels and the capacity of debtors to finance social sector 
investment. 
4, Delink eligibility for benefiting from HIPC from compliance with 
IMF reform programs. Also show more flexibility in allowing debtor 
countries to count their interrupted track records with the IMF 
towards their eligibility to HIPC. Given the poor social and 
economic record of IMF programs, conditionality criteria which are 
more appropriate to debtors countries need to be developed, and the 
use of HIPC to extend IMF policy influence should be curtailed. 
5, Establish a new poverty reduction window in the HIPC framework. 
This would provide governments with earlier and deeper debt relief, 
if they commit to use savings from debt servicing for poverty 
reduction initiatives. 

We accept that such an agenda would increase the costs of debt 
relief. But it is eminently affordable. The sale of a small 
proportion of IMF gold reserves could meet a significant share of 
the additional costs, as could the funds which have been released by 
the slippage in disbursing resources under the Enhanced Structural 
Adjustment Facility. The real barrier to action aimed at ending the 
debt crisis crippling some of the world's poorest countries is not a 
shortage of financial resources, but a failure of political will. 
This failure now threatens to consign a large swathe of the 
developing world to a future of unsustainable debt, with attendant 
implications for poverty, human welfare, social stability, and 
growth. Ultimately, none of us will be immune to the international 
consequences of such trends. That is why the future of HIPC should 
be of concern to us all.
 
*partie=titre The HIPC initiative promised much... *partie=nil 
The HIPC framework was adopted in October 1996 following recognition 
by the Group of Seven countries that existing debt initiatives had 
failed. It marked a significant advance over previous approaches to 
debt relief in three ways: 
It provided a comprehensive and integrated framework. For the 
first time debt relief was to be provided in a systematic 
operation by all creditors, bringing to an end the process of 
negotiations through different creditor clubs. 
It extended to multilateral creditors. The steady growth of 
multilateral debt stock was at the heart of the debt problems 
facing poor countries, with the Bretton Woods agencies refusing to 
countenance debt reduction on the ground of their 'preferred 
creditor' status. For the first time, the HIPC framework required 
multilateral creditors to reduce their claims. 
It provided a basis for reducing debt obligations to levels 
consistent with ability to pay. Sustainability thresholds were 
established to replace creditor rules aimed at maximizing 
repayments and minimizing the costs of debt relief, the aim being 
to provide a once-and-for-all 'exit' from debt problems. The 
sustainability thresholds were supplemented by vulnerability 
indicators, such as dependence on commodities, public debt, and 
reliance on aid. The original HIPC framework was based on two 
measurements of debt sustainability related to export capacity. 
These were supplemented during 1997 by a fiscal threshold. The 
three criteria are: 
- A present value debt stock to export ratio above 200-250 per 
cent 
- A debt service to export ratio above 20-25 per cent 
- A present value debt to government revenue ratio - or fiscal 
threshold - above 280 per cent (subject to the country having 
exports equivalent to more than 40 per cent of GDP and revenue 
collection levels in excess of 20 per cent of GDP). 

In order to avert problems of 'moral hazard', the HIPC process was 
subject to strengthened conditionality, with debtors required to 
adhere to two consecutive IMF adjustment program over a six year 
period in order to qualify. This doubled the compliance period 
previously required for Paris Club debt relief. However, some 
flexibility was built into the rules in the form of an 
acknowledgment that credit could be given for past track record. 

*partie=titre ...And some countries are benefiting *partie=nil 
Six countries have so far been declared eligible for the HIPC debt 
relief on the basis of debt sustainability analysis. These countries 
are Uganda, Bolivia, Guyana, Burkina Faso, Cote d'Ivoire, and 
Mozambique. Where HIPC has been implemented, it has generated 
important benefits. For example, in Uganda savings from debt 
servicing will be transferred to financing for the government's 
universal primary education initiative. Moreover, the World Bank has 
agreed to 'front-load' its contribution to debt reduction. This 
means that, in the present financial year, an additional $9m will be 
released, rising to $12m per annum for 1999 and 2000. While these 
are modest sums, they have the potential to generate real benefits 
in terms of improved educational outcomes. Poverty reduction 
initiatives will also benefit in other countries: 
-In Bolivia the government has committed itself to transferring 
savings from HIPC debt reduction of $448m (NPV) to a national 
program for rural poverty reduction. 
In Burkina Faso the $115m (NPV) savings from debt reduction will 
be used to increase spending on basic health and education. 
-In Mozambique a $1.5bn (NPV) reduction in debt stock will help to 
reduce budget pressures and expand resources available for health 
and education. This is in a country where debt repayments are four 
times more than spending on health and three times more than 
spending on education. 
-In Guyana the $253m (NPV) debt reduction will reduce fiscal 
pressures in a situation where 45 per cent of revenue has been 
earmarked for debt servicing. 
-In Cote d'Ivoire, 345m (NPV) debt reduction will allow the 
government to invest in a literacy campaign and health care. 
But HIPC isn't fulfilling its potential.


Despite the important gains outlined above, the advances which have 
been made fall far short of what was expected from HIPC - even for 
countries like Uganda - and further short still of what is needed to 
achieve debt sustainability. Of the six countries that have entered 
HIPC (Uganda, Bolivia, Guyana, Burkina Faso, Cote d'Ivoire, and 
Mozambique) only the first three of these will reach their 
Completion Points (i.e. actually receive debt relief) this year. 
Mozambique and Cote d'Ivoire will not benefit until 1999 and Burkina 
Faso until 2000. Mali is still under consideration with a 
possibility of 1999 or 2000 completion point. 
For a larger group of countries, there is little prospect of debt 
relief for several years. *{On current schedules, the situation is as 
follows: 
Completion Point 2001 2002 2003 (or beyond) 
Zambia Madagascar Rwanda 
Ethiopia NigerCongo 
Guinea Bissau Nicaragua Burundi 
Mauritania Tanzania 
Sao Tome} 

It is still unclear when Senegal, Togo, Vietnam, Honduras, Yemen, 
and Cameroon will qualify or if they will even qualify at all. 

*partie=titre Debt/export thresholds have been set too high *partie=nil 
During the 1990s, the scheduled debt service ratio for sub-Saharan 
Africa has been around 30 per cent. Actual payments have been in the 
range of 15-20 per cent, resulting in a continued build-up of 
arrears. The upshot is that, for many countries, HIPC will only 
reduce debt service to levels above those which are being paid at 
present, with the result that debt will continue to impose a severe 
strain on foreign exchange and fiscal resources. This in turn will 
undermine long-term growth and development prospects. For a country 
such as Mozambique, a 20 per cent debt service ratio would represent 
double the level of actual debt repayments during the 1990s. Oxfam 
International believes that the present value debt to export 
threshold should be lowered to 150-200 per cent; and the debt 
service threshold to 15-20 per cent. 

The fiscal criteria in HIPC are inadequate and poorly designed
In contrast to the export-related criteria selected for debt 
sustainability, the fiscal threshold does not set an upper and lower 
limit; and the ceiling has been set much higher than the debt/export 
ceiling (i.e. 280 per cent rather than 200-250 per cent). Equally 
serious are the problems associated with the export/GDP and revenue 
collection/GDP targets, which trigger entitlement to debt relief 
under the fiscal criteria. These are unrelated to the budgetary 
burden associated with debt (which the fiscal threshold was designed 
to address) - and they exclude all but five HIPC countries. This has 
given rise to the justified claim that the fiscal threshold were 
designed to accommodate French interests in seeing Cote d'Ivoire 
qualifying for HIPC debt relief, without opening the door to wider 
claims. Cote d'Ivoire did not qualify on either debt service or debt 
stock grounds, but has a high debt/revenue ratio (and exceptionally 
high ratios for export/GDP and revenue/collection GDP). In practice, 
the fiscal criteria are designed to reward countries for strong 
export performance (which, given the link between exports and 
revenues is related to revenue collection performance), rather than 
to address in a systematic way the budget instability associated 
with debt. For example, over one quarter of budget revenue in 
Tanzania is absorbed by external debt servicing, representing more 
than government spending on health and education. This diversion of 
resources is at the core of Tanzania's debt problems. Yet the 
country's failure to meet the revenue collection and export targets 
set under the HIPC fiscal dimensions precludes the country from 
seeking debt relief on fiscal grounds. Oxfam International believes 
that the fiscal threshold should be lowered to a present value range 
of 150-200 per cent (i.e. consistent with the debt/export range), 
and that the present qualification criteria on revenue collection 
and export performance should be withdrawn. 

Tanzania's situation illustrates another problem with the fiscal 
threshold. Because the threshold is based on debt stock/revenue 
criteria it does not capture the impact of debt servicing on public 
finances. Viewed from a human development perspective, it is real 
spending on debt, and the implied opportunity costs for social 
sector investments, which needs to be considered. 
There are no human development indicators for debt sustainability
As a group, the countries eligible for debt relief under the HIPC 
initiative have some of the world's worst human welfare indicators. 
All but six are in the low human development category, as measured 
by the UNDP's Human Development Index. Compared to the average for 
all developing countries: 
children are 30 per cent less likely to reach their first birthday 
women are three times more likely to die during pregnancy and 
childbirth illiteracy rates are 25 per cent higher 
access to safe water and health facilities is around one third 
lower.
 
The fiscal burden of external debt is a major constraint on the 
capacity of governments to improve human development and reduce 
poverty. Twenty-nine out of the thirty-two countries for which 
comparable data are available spend more than 10 per cent of 
domestic revenue on debt servicing. In countries such as Tanzania, 
Mozambique, Zambia, Honduras, and Nicaragua, debt repayments have 
been absorbing more budget resources than health and education 
combined. In Oxfam International's view, debt servicing should be 
regarded as unsustainable when it absorbs resources needed to meet 
targets for improving human and social development, and to provide 
the foundations for sustained growth. Such targets could be based on 
internationally agreed indicators - such as those adopted by the 
World Summit for Children or by the OECD's Development Assistance 
Committee, with ceilings set on the level of domestic revenues which 
can be absorbed by debt based on human development indicators. While 
this is an issue which needs wider discussion and analysis, Oxfam 
International believes that a debt/revenue threshold range of 10-15 
per cent should be incorporated in the HIPC framework. At the same 
time, as we argue below, there is scope for introducing a new 
poverty reduction window into HIPC aimed at giving debtor 
governments an incentive to transfer savings on debt into poverty 
reduction initiatives.
 
*partie=titre Problems of design have been compounded by inadequate 
implementation... *partie=nil 
Any framework for international cooperation is as effective as the 
political will to make it work - and the HIPC framework is no 
exception. Evidence to date suggests that political resolve has been 
conspicuous by its absence. 

Oxfam International argued at the outset that the reinforcement and 
extension of IMF conditionality was unacceptable. This was partly on 
the basis of evidence that IMF programs had failed to generate 
growth and impacted negatively on poverty; and partly out of concern 
over the potential for delaying implementation of HIPC. If a three 
year track record had previously been deemed sufficient to avert 
'moral hazard' in Paris Club debt relief, why extend it to six 
years? And what of those countries which had already established 
long-track records of compliance? In October 1996, the IMF-World 
Bank Development Committee partially addressed these concerns by 
promising that "maximum flexibility" would be shown to countries 
with a strong adjustment record. 

...Such as the inflexible interpretation of 'track record'
Unfortunately, the practice has been "minimum flexibility" and 
maximum indifference to the real needs of debtors. For example, 
Bolivia and Uganda began their HIPC negotiations with around a 
decade of stringent compliance with structural adjustment programs 
behind them. Both were regarded by the Bretton Woods agencies and 
creditors as model reformers - and both urgently needed debt relief 
to consolidate economic reform, and to make the social investments 
needed to spread the benefits of growth more widely. They could have 
been provided with debt relief in 1997. Instead, they had to wait 
for an additional year from their Decision Point. In Uganda's case, 
this cost around $190m, undermining the government's efforts to 
finance its basic education program. 

*partie=titre And an unrealistic time frame *partie=nil 
As suggested by the schedule summarized above, the 
'three-plus-three' formula for compliance with IMF programs has 
delayed the potential benefits from HIPC. Even in the best case 
scenario, most countries will not receive debt reduction until after 
2000. To make matters worse, delivery is likely to be even slower. 
As an IMF-World Bank staff paper has noted, the HIPC initiative is 
now moving from "a small cluster of countries that merit exceptional 
treatment...to cases which normally require a three year period 
between Decision point and Completion Point." In other words, Uganda 
and Bolivia were best case scenarios. Even this gloomy prospect 
understates the danger of protracted delay. Since 1986, two-thirds 
of IMF programs have broken down before their completion, pointing 
to scope for significant future slippage. 

There are at least four sets of policy problems which urgently need 
to be addressed if HIPC implementation is going to work effeciently: 

The need for a shorter time frame. Forcing countries to wait for up 
to six years for debt relief is counterproductive and inequitable. 
It is counter-productive because debt sustainability is needed to 
support economic reform and to promote economic self-reliance; and 
it is inequitable because it subordinates the needs of poor people 
to the budgetary claims of creditors. The time-frame for eligibility 
should be reduced from six years to three years. 

The design of ESAF programs is inconsistent with the achievement of 
sustained growth and poverty reduction. IMF programs have been 
associated with worsening investment performance and poor growth. At 
the same time, poverty-focused social sector investment has been 
subordinated to the pursuit of short-term monetary targets aimed at 
achieving low inflation. Oxfam International therefore calls for a 
more balanced approach to conditionality under HIPC, in which a 
country's record on trying to reduce poverty and the scope for more 
growth oriented policies are accorded a higher priority. 

The interpretation of track-record is arbitrary and inconsistent. In 
practice, the IMF is able to issue decrees evaluating performance 
under its programs and dictate eligibility - or otherwise - for 
HIPC. This has already caused serious problems. For example, the IMF 
has declared Ethiopia off track in its present adjustment program, 
even though most of the country's donors do not accept this view. 
Tanzania went off track in one aspect of its IMF program during 
1994. However, prior to starting a new program in 1996, Tanzania had 
a record of seven years of compliance with the IMF and had carried 
through one of the most far-reaching economic reform programs in 
Africa. Despite this, the IMF has declared that the country had no 
track record until 1996, and that it will therefore not qualify for 
debt reduction under HIPC until 2000. Despite the claims of natural 
justice, debtors have no right of appeal. 

Creditors are pursuing inconsistent agendas. The stated purpose of 
the HIPC initiative is to reduce debt to sustainable levels. 
However, several creditor countries appear to see HIPC as a means to 
other ends, with the reinforcement of IMF conditionality prominent 
among them. For example, the US sought to delay the Completion Point 
for Uganda and Mozambique by an additional year, citing the need for 
debt relief to be seen as a reward for good performance. The 
argument is ill-conceived and damaging to HIPC. Both Uganda and 
Mozambique have been strongly commended over a long period by the 
IMF for 'good performance', and in both countries efforts to delay 
debt reduction were regarded as punitive and threatening to economic 
reform. Moreover, there would appear to be little logic in depriving 
Uganda of resources through debt relief, and then providing 
additional aid, as the US has recently done for education. 
There have also been problems over 'burden sharing'.

The HIPC framework is based on the principle of proportional burden 
sharing, with creditors financing debt reduction commensurate to 
their share of debt stock. In practice, this principle has proven 
difficult to enact, again contributing to delay. 

In the case of Mozambique, one of the world's poorest countries, the 
Boards of the IMF and the World Bank agreed that a $1.5bn reduction 
in debt stock was needed to achieve sustainability. However, the 
large share of bilateral debt meant that the Paris Club rule 
allowing for an 80 per cent reduction in eligible debt stock was 
inadequate to cover its members' share of the cost. After a 
protracted delay, which at one stage appeared set to derail action 
on Mozambique, the Paris Club agreed to provide Naples terms (i.e. 
80 per cent debt reduction) plus a $170m aid package. This left a 
shortfall of $100m, which is likely to be covered by multilateral 
and bilateral creditors, after the UK, Canada, and the World Bank 
offered to break the log jam and offer resources. Leaving aside the 
specific issues raised by Mozambique, the episode both underlined 
the Paris Club's woeful incapacity to take decisive action and 
pointed to an apparent willingness on the part of the Group of Seven 
countries to allow HIPC to drift. Given that the Paris Club will 
need to go beyond 80 per cent debt reduction for at least five more 
countries (Guinea Bissau, Madagascar, Nicaragua, Rwanda, and Sao 
Tome), a more flexible formula must be found. 

...And dealing with Russian debt and regional development banks
Another problem which emerged in dealing with Mozambique, and which 
will re-emerge in other contexts, is that of reconciling Russia's 
debt claims now that the country has joined the Paris Club. Given 
that Russia is an important creditor for countries such as Ethiopia, 
Tanzania, and Guinea Bissau this does not bode well for the future. 
Finally, several multilateral institutions face difficulties in 
financing their share of debt reduction under the HIPC framework. In 
the case of Bolivia, the Inter-American Development Bank's resource 
constraints appear to have been instrumental in raising the debt 
sustainability threshold to a level (220 per cent for present value 
of debt to exports) regarded by most independent observers as too 
high. In sub-Saharan Africa, the African Development Bank faces even 
more acute financing problems which must be urgently addressed. 
But the most serious failure has been a lack of political will
Potentially the most serious challenge ahead is that of mobilizing a 
political constituency for achieving debt sustainability. As the 
architect and principle driving force behind HIPC, the World Bank 
has a central role to play in prompting Group of Seven countries 
into more meaningful action. The British Government, which has 
signaled through its Mauritius mandate a concern to accelerate 
implementation, also has the scope for influencing the future course 
of events. As host to this year's Group of Seven summit, it is well 
placed to ensure that the debt problems of poor countries are given 
the prominence they deserve. 

On the other side of the fence, HIPC has acquired powerful enemies. 
Japan and Germany have opposed the initiative from the outset and, 
along with Italy, have sought systematically to delay implementation 
and minimize benefits. All three countries argued vehemently against 
a change in Paris Club rules to accommodate the financing 
requirements for debt relief in Mozambique; and all three have 
sought to delay debt reduction to the latest feasible date. In the 
case of Germany, such behavior suggests a short historical memory. 
The country was the beneficiary of one of the most generous and 
incisive debt relief plans under the 1953 London Agreement, which 
wrote off much of the country's pre-war debt and helped to support 
post-war reconstruction.
 
In one sense, though, the crisis facing HIPC cannot be placed solely 
at the door of Germany, Japan, and Italy, destructive as their 
influence has been. The adoption of the original framework was the 
product of a strategic alliance between the World Bank, the US, the 
UK, Australia, New Zealand, Netherlands, Canada and the Nordic 
countries. Since 1996, this alliance has fragmented. The US has 
sought to delay when a country actually receives debt relief because 
of a concern to reinforce IMF conditionality, thereby strengthening 
the hand of those seeking to undermine the initiative. The US has 
also been sidetracked by more pressing concerns in Asia and even 
President Clinton's trip to Africa failed to highlight debt as a 
problem. Canada has taken a back seat and allowed the initiative to 
drift, with the honorable exception of Guyana. In the case of 
Bolivia, though, Canada blocked deeper debt relief. 

As an immediate priority, those countries that made HIPC happen need 
to come together again to strategize about how to reenergize it. 
New poverty reduction window would help to re-energize HIPC
As suggested above, unsustainable debt servicing carries a high 
price in terms of lost opportunities for human development. The 
mirror image of this statement is the proposition that debt relief 
can create the potential for human welfare gains, if the resources 
released are directed towards priority social investments. In order 
to capture the gains of debt reduction for human development, Oxfam 
International has proposed the creation of a poverty reduction 
window in the HIPC framework. Such a window could be opened to 
governments who were willing to commit a significant share of any 
savings from debt - say between 75-100 per cent - into poverty 
reduction initiatives. These might range from spending in basic 
health and education, to the construction of rural feeder roads, and 
rural development programs. The aim would be to provide such 
governments with an incentive to target resources on the poor by 
offering earlier and deeper debt relief. 

Connecting enhanced debt relief to human development targets would 
refocus the debate on the real debt crisis: not the inability of low 
income countries to replenish creditor funds, but the inability of 
tens of millions of people to secure their most basic rights, 
because of the low growth and under-investment debt overhang 
creates. Neither the debt crisis, nor the growing marginalization 
and impoverishment of the most highly indebted poor countries will 
be resolved until it is recognized that human underdevelopment and 
unsustainable debt are part of the same problem. This is why Oxfam 
International is proposing that debt reduction be used to accelerate 
progress towards the human development targets set for 2015 by the 
OECD Development Assistance Committee. 

*partie=titre Basic education for all *partie=nil 
Education could be a starting point in developing a poverty focused 
debt agenda. This is for a number of reasons. First, the 1990 
Education for All conference at Jomtien in Thailand set ambitious 
targets for the attainment of quality primary education for all. 
Since then targets have been set by the OECD's DAC and by the 1995 
conference on women in Beijing to achieve universal primary 
education by 2015. 

As well as being a human right, literacy and numeracy skills are one 
of the most significant factors in poverty reduction, equity, and in 
participation in civil society. Education yields both private and 
social returns. For girls in particular literacy and numeracy have a 
number of developmental 'spill-over' effects, especially in relation 
to child mortality and morbidity rates. Education is also a 
prerequisite of self-reliant development. Raising skill levels in 
the poorest countries is crucial if they are to compete in an 
increasingly knowledge-intensive and globalized economy. 
The case for developing the education-debt linkage is only 
reinforced by the state of education in the world's poorest highly 
indebted countries. Twenty of the HIPC eligible countries are now 
seriously off track for reaching the DAC targets, and HIPCs feature 
amongst the worst performers in education on every count. In 
sub-Saharan Africa, where school enrollment rates are actually 
falling, 56 million children will be out of school by the year 2000. 
Millions more will learn little in schools which are often without 
trained staff and even the most basic equipment and materials. 
Without a concerted effort to resolve the education and debt crisis 
in sub-Saharan Africa, the region's political and economic 
marginalization will continue. 

Oxfam International suggest a two phase approach to convert debt 
into educational opportunity. Creditors would offer enhanced debt 
relief for countries willing to make commitments to invest in 
poverty reduction programs. 

Phase one: An agreement would be reached between debtor 
governments and donors, with the consultation of civil society 
groups, on the costs and timetable for meeting the goal of 
universal education or other poverty targets. A plan of action 
would be prepared and financing gaps identified. 

Phase two: Creditors would provide early debt relief (within a 1-3 
year period), and debt reduction within 100-150% debt to export 
and 10-15% debt service to export ratios, to fill financing gaps. 
Transparent budget procedures would be established for monitoring 
actual expenditures and target performance. 

Such an approach would not represent a barrier to debt relief. It 
would be intended to offer governments committed to human 
development a set of incentives to meet unmet basic needs. Indeed, 
some debtor governments have already offered to undertake this type 
of human development program in exchange for enhanced debt relief. 
For creditors, this approach would allow them to develop a new 
development partnership with governments and demonstrate that they 
are serious about poverty reduction.