Pruebas finales

As indicated earlier, table 7 provides the data for six broadly available and broadly accepted debt indicators averaged over three years (2000–2002) for all African countries. For comparison purposes, data are also included for the non- African HIPCs. While the data always include private external debt, they always exclude (due to data constraints and subsequent comparability reasons) all domestic debt. Table 7 shows that a number of non-HIPC African countries have, based on at least two debt indicators, relative high debt levels and can thus be considered to be debt-distressed. Beyond the African HIPCs the debts of which are considered to be sustainable under the HIPC framework, such as Angola and Kenya, the most obvious case of a non-HIPC debt-distressed African country is Nigeria (see boxes 1 and 2).

Box 1

K K K K

KENYAENYAENYAENYAENYA: HIPC : HIPC : HIPC : HIPC : HIPC WITHWITHWITHWITHWITH “ “ “ “ “SUSTAINABLESUSTAINABLESUSTAINABLESUSTAINABLESUSTAINABLE” ” ” ” ” DEBTDEBTDEBTDEBTDEBT

In 1970, Kenya’s total external debt was less than $500 million. Ten years later it stood at $3.4 billion. It continued to grow sharply during the 1980s and the early 1990s, reaching a maximum of $7.4 billion in 1995. It then decreased slowly to about $6 billion in 2001, of which about $5 billion was public and publicly guaran- teed (see World Bank, 2002).

In addition to a large external debt, Kenya had about $2.5 billion (KSH 222 billion) of domestic public debt as of December 2001.41 _{Kenya’s domestic public debt has}

increased sharply during the last few years, reflecting the recent deterioration of the country’s fiscal balance, from a surplus of 1 per cent of GDP in 1999 to a deficit of 2.7 per cent of GDP in 2002, largely due to a fall in revenues, a contraction in donor inflows, a decline in the productivity of public outlays, and a rise in public debt service payments. Given that the deficit has — due to lack of external financ- ing — been financed increasingly through domestic borrowing, the stock of domes- tic debt increased to nearly 30 per cent of GDP in November 2002.

According to the HIPC framework, Kenya is not eligible for HIPC debt relief as its debt is considered to be sustainable. Yet Were (2001) shows that, even ignoring domestic debt, the country’s external debt has had a negative impact on its eco- nomic growth. The HIPC framework neglects not only Kenya’s large domestic debt but also the financing required to eradicate or at least to significantly reduce the country’s extreme poverty, which is the declared goal of Kenya’s new Government. Given that 62 per cent of Kenya’s population (of about 30 million) live on less than $2 a day, and that more than one quarter lives below $1 a day, debt relief could go

a long way towards reducing Kenya’s extreme poverty. For example, Nafula (2002) demonstrates that debt relief would help the country to achieve universal primary education.

Finally, as Birdsall and Williamson (2002, pp. 131–2) illustrate in more detail, the argument for odious debt is strong in the case of Kenya, as a corrupt ruling elite ex- propriated billions of dollars in waste and in amassing personal fortunes, partly with the knowledge and support of Kenya’s creditors.

Box 2

N NN

NNIGERIAIGERIAIGERIAIGERIAIGERIA: N: N: N: N: NONONONONON-HIPC -HIPC -HIPC -HIPC -HIPC DEBTDEBTDEBTDEBTDEBT---DISTRESSEDDISTRESSEDDISTRESSEDDISTRESSEDDISTRESSED A A A A AFRICANFRICANFRICANFRICANFRICAN C C C C COUNTRYOUNTRYOUNTRYOUNTRYOUNTRY

Nigeria is one of the poorest countries in the world. With a GNI per capita of $290, Nigeria ranks far below the average HIPC. According to UNDP’s human poverty in- dex, the country, with an index of 34.0, is also poorer than 10 eligible HIPCs. Yet the IMF and the World Bank have not classified Nigeria as an IDA/PRGF-only coun- try, as it is argued that Nigeria does not, due to its large oil resources, rely on IDA/ PRGF resources. Though it is formally a “blend country”, which is defined as a country that is eligible for IDA resources on the basis of per capita income but has limited creditworthiness to borrow from the International Bank for Reconstruction and Development (IBRD, the World Bank’s non-concessional window), Nigeria is not supposed to borrow on other than highly concessional terms.42

It is by now widely recognized that natural resources do not always bring the ex- pected benefits of growth and development. Indeed in some of the poorest coun- tries, resources have been a curse, as they tend to invite corruption and induce civil conflicts that are difficult to tackle through weak governance structures and in countries with low rates of literacy.43 _{Indeed, Nigeria’s oil revenues have not been}

sufficient to generate enough income for growth and poverty reduction. As Sala-i- Martin and Subramanian (2003) show, Nigeria’s poverty rate (measured by the share of the population subsisting on less than a $1 a day) increased from about 36 per cent in 1970 to about 70 per cent in 2000.

With an average NPV debt-to-export ratio of 163 per cent and an average NPV debt-to-gross national income (GNI) ratio of 82 per cent, it is also clear that Nigeria is severely indebted, and it is classified as such by the World Bank’s Global Devel- opment Finance. Furthermore, owing to its status as a relatively open economy due to high oil exports, the country’s external debt indicators (like the NPV debt-to-ex- port ratio) do not adequately reflect the fiscal burden of its external debt. Consider- ing that data on Nigeria’s government revenues are not publicly available, some insights could be gained into Nigeria’s debt distress by looking at its debt service-to- GNI ratio. With an average of 4.9 per cent during the period 1999–2001, the coun- try’s debt service-to-GNI ratio is higher than that of at least half of all the eligible HIPCs.

Chapter III

How sustainable is African HIPCs’ debt

after debt relief?