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African governments owe three times more debt to private lenders than China

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African governments owe three times more debt to Western banks, asset managers and oil traders than to China, and are charged double the interest, according to research released today by Debt Justice. Western leaders through the G7 have attributed the failure to make progress on debt restructuring to China,[1] but the data shows that this is mistaken.

Just 12% of African governments’ external debt is owed to Chinese lenders compared to 35% owed to Western private lenders, according to the calculations based on World Bank data.[2]

Furthermore, interest rates on private loans are almost double those on Chinese loans, while the most indebted countries are less likely to have their debt dominated by China.

The figures have been released ahead of the G20 Finance Ministers meeting on 15-16 July in Indonesia. Campaigners are calling on Western countries, particularly the UK and US, to compel private lenders to take part in the G20’s debt relief scheme, the Common Framework. Three African countries have applied for the Common Framework, none have yet had any debt relief.

Tim Jones, Head of Policy at Debt Justice, said:

“Western leaders blame China for debt crises in Africa, but this is a distraction. The truth is their own banks, asset managers and oil traders are far more responsible but the G7 are letting them off the hook. China took part in the G20’s debt suspension scheme during the pandemic, private lenders did not. There can be no effective debt solution without the involvement of private lenders. The UK and US should introduce legislation to compel private lenders to take part in debt relief.”

Yungong Theo Jong, Head of Programmes at the African Forum and Network on Debt and Development (Afrodad) said:

“Multilateral and private creditors remain the biggest creditors to African governments. Loans from China have increased Africa’s indebtedness, but by far less than Western lenders. All lenders must participate in debt relief. Western governments must lead the way by making private lenders cancel debts.”

The calculations show that the average interest rate on private sector loans is 5%, compared to 2.7% on loans from Chinese public and private lenders.

12 of the 22 African countries with the highest debts are paying private lenders over 30% of their total external debt payments (Cabo Verde, Chad, Egypt, Gabon, Ghana, Malawi, Morocco, Rwanda, Senegal, South Sudan, Tunisia and Zambia). In contrast, debt payments to Chinese lenders are over 30% in just six of the 22 countries (Angola, Cameroon, Republic of Congo, Djibouti, Ethiopia and Zambia).

IMF Managing Director Kristalina Georgieva has called on the UK and US to pass legislation to stop private lenders blocking debt relief agreements.[3] President of the World Bank David Malpass has made similar calls.[4] Virtually all international debt contracts are governed by New York or English law[5], with 90% of bonds of countries eligible for the G20’s debt relief scheme are governed by English law.[6]

In 2020 and 2021 China took part in the G20’s debt service suspension initiative, but the scheme only suspended 23% of the external debt payments of countries which applied, because private and multilateral lenders were not included.[7] Western governments need to make their private lenders take part in debt restructurings to convince China to also move further on debt relief.

Notes

[1] For example the G7 Finance Ministers said in May 2022: “With regards to the implementation of the Common Framework, it remains essential that all relevant creditor countries including non-Paris Club countries, such as those, like China, with large outstanding claims on low-income countries facing debt sustainability challenges, contribute constructively to the necessary debt treatments as requested.” http://www.g7.utoronto.ca/finance/220520-communique.html

[2] All the figures and calculations are in the briefing ‘Who is African governments’ external debt owed to?’ available at https://debtjustice.org.uk/wp-content/uploads/2022/07/Who-African-governments-debt-is-owed-to_Media-Briefing_07.22.pdf

Summary tables are:

External debt of African governments by creditor grouping, and average interest rate

Creditor grouping External debt to creditor grouping as percentage of total external debt Average interest rate
Private creditors (excluding those based in China) 35% 5%
Chinese creditors (public and private) 12% 2.7%
Other governments 13% 1.4%
Multilateral institutions 39% 1.3%

 

Share of external debt payments from 2022 to 2028 by creditor grouping (% of total external debt payments), 22 African countries with external debt payments over 15% of government revenue

Private (not including China) China public and private Other governments Multilateral
Angola 29% 59% 2% 10%
Cameroon 18% 34% 13% 35%
Cabo Verde 33% 2% 25% 40%
Chad 33% 8% 14% 44%
Congo, Rep 6% 50% 24% 21%
Djibouti 0% 64% 11% 25%
Egypt 36% 3% 16% 45%
Ethiopia 23% 45% 7% 25%
Gabon 40% 16% 7% 37%
Gambia 0% 0% 25% 75%
Ghana 56% 11% 8% 24%
Kenya 29% 27% 11% 33%
Malawi 72% 5% 4% 20%
Mauritania 0% 14% 30% 57%
Morocco 36% 1% 14% 49%
Mozambique 7% 28% 33% 33%
Namibia 43% 4% 5% 48%
Rwanda 37% 9% 20% 34%
Senegal 37% 9% 20% 34%
Sierra Leone 0% 5% 14% 82%
South Sudan 81% 11% 0% 8%
Tunisia 31% 0% 24% 45%
Zambia 45% 37% 8% 10%
Median 32% 11% 14% 34%

[3] “We also are pressing for some of the changes, legal changes that need to happen in New York, in London, to close loopholes for vulture funds and others to prevent debt resolution. We are discussing how we can bring more contingency measures in debt agreements, how to press for more debt transparency.”
https://www.imf.org/en/News/Articles/2022/04/21/tr220421-transcript-of-the-imfc-press-briefing

[4] “Given the depth of the pandemic, I believe we need to move with urgency to provide a meaningful reduction in the stock of debt for countries in debt distress. Under the current system, however, each country, no matter how poor, may have to fight it out with each creditor. Creditors are usually better financed with the highest paid lawyers representing them, often in U.S. and UK courts that make debt restructurings difficult. It is surely possible that these countries—two of the biggest contributors to development—can do more to reconcile their public policies toward the poorest countries and their laws protecting the rights of creditors to demand repayments from these countries.” https://www.worldbank.org/en/news/speech/2020/10/05/reversing-the-inequality-pandemic-speech-by-world-bank-group-president-david-malpass

[5] https://www.imf.org/~/media/Files/Publications/PP/2017/pp113017third-progress-report-on-cacs.ashx

[6] https://debtjustice.org.uk/press-release/g20-debt-suspension-request-90-of-bonds-governed-by-english-law

[7] https://debtjustice.org.uk/press-release/g20-initiative-leads-to-less-than-a-quarter-of-debt-payments-being-suspended

Source: debtjustice.org.uk

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Joint CSO Statement Calls on IFC and MIGA to Strengthen its New Approach to Remedial Action Policy

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IFC and MIGA’s proposed Approach to Remedial Action was supposed to explain how the institutions would address the well-known human rights and environmental harms caused by some of their investments. Instead, IFC and MIGA’s response to the well-documented remedy gap is to publish a short paper that heralds its existing prevention and mitigation practices and does not admit that the institutions have a human rights obligation to remedy harms to which they have contributed. Thankfully, the document is only a proposal subject to public consultations, and we call upon IFC and MIGA to make significant changes.

IFC and MIGA have known for years that some of their investments cause environmental and social harm and that under international human rights standards, those who contribute to harm should contribute to providing remedy. An independent expert review, led by a former IFC president and requested by the World Bank’s board, confirmed this standard and recommended that the institutions contribute to and promote access to remedy for project-related harms. The review deemed IFC and MIGA’s current accountability system inadequate and remedial actions practically nonexistent. We are surprised, therefore, that the Approach to Remedial Action commits to very few new actions.

The proposed Approach includes some necessary elements, including a commitment from IFC and MIGA to facilitate and support clients’ remedial actions, explore and pilot arbitration, and exercise leverage over clients, including through contractual provisions and the use of various financing instruments. IFC and MIGA largely failed to respond to the board’s assignment, however, as they left out the following necessary components:

  1. Types of remedy: Despite “Remedial Action” in its title, the proposed Approach does not provide a plan for delivering any type of remedy. Further, the draft policy does not include any examples of remedy that IFC and MIGA have provided in the past or how IFC and MIGA will contribute to and promote specific types of remedy available in the future. Remedy can take many forms, including compensation, apology, rehabilitation, satisfaction, and commemoration, among others. The Approach must detail how IFC and MIGA are prepared to provide each type of remedy when the circumstances arise.
  2. Financial contribution by IFC and MIGA: Even though it is evident that remedy often costs money, “the Approach does not contemplate a systemic process for the financing of direct contribution to remedial action” (page v). This is a major gap. IFC and MIGA refer vaguely to directly financing remedy in “exceptional circumstances,” but don’t define them. IFC and MIGA don’t even commit to directly remedying the cases in which its accountability mechanism, the Compliance Advisor Ombudsman (CAO), found that projects did not comply with the IFC’s own Sustainability Policy and, as a result, contributed to harm. In line with the recommendations of the external review and per international standards, IFC and MIGA are obligated to financially contribute to remedy when their actions or inactions contribute to harm or when a client cannot provide financial contributions.
  3. Access to remedy after the end of a project: While the proposed Approach to Remedial Action references its draft Responsible Exit Principles, it does not describe specific actions IFC and MIGA will take to provide access to remedy after a project is complete. We expect IFC and MIGA to commit to not exiting a project subject to an ongoing CAO process without the consent of community complainants or until all remedial actions have been delivered to communities, commitments not included in the draft Responsible Exit Principles. This directly contradicts established norms and must be amended accordingly. Further, the proposed Responsible Exit Principles fail to adequately recognize the importance of including impacted communities as full stakeholders in the process. Delivering responsible exit depends on IFC and MIGA’s ability to provide holistic and inclusive remedy in line with communities’ expectations.
  4. Addressing the past: Even though IFC and MIGA’s failure to remedy harm in the past is the impetus for this proposed Approach, the institutions appear to only commit to implementing their remedial obligations going forward, with the document stating that IFC and MIGA would implement this approach to “new” projects. This fails the communities who are currently experiencing harm and need remedy.

The Approach to Remedial Action is risk-averse from an institutional perspective but expects a risk tolerance from rightsholders. Communities adversely affected by development projects have a right to remedy that is co-designed by them. Prioritizing the bottom line over the people these development institutions serve is unacceptable and a missed opportunity.

IFC and MIGA have an opportunity to demonstrate leadership among development finance institutions and the wider financial sector by bringing this proposal in line with prevailing international human rights norms. A failure to do so would mark a concerning precedent and setback for the realization of the right to remedy. We hope that IFC and MIGA provide sufficient opportunities for civil society and project-affected communities to provide feedback on the draft policy, and deliver a revised proposal that meets the moment.

—–

Endorsed by:

  • Accountability Counsel
  • Bank Information Center
  • Center for International Environmental Law (CIEL)
  • American University Center for Human Rights and Humanitarian Law
  • Sustentarse (Chile)
  • Association of ESPOD Morocco
  • Inclusive Development International
  • NGO Forum on ADB
  • Recourse
  • ATGL Tunisia
  • Social Justice Platform
  • Studies and Economic Media Center
  • Oxfam
  • Yemeni Observatory for Human Rights
  • Green Development Advocates (GDA)
  • Foundation for Environmental Management and Campaign against Poverty (FEMAPO)
  • Observatory of Food Sovereignty and Environment
  • Observatoire d’Etudes et d’Appuis a la responsabilité Sociale et Environnementale (OEARSE)
  • Centre for Citizens Conserving Environment & Management (CECIC)
  • Centre for Nature Conservation and Development (CNCD)
  • Synaparcam (Synergie Nationale des Paysans et Riverains du Cameroun)
  • Bretton Woods Project
  • TINDZILA
  • Espace de Solidarité et de Coopération de l’Oriental
  • Wedyan Association For Society Development
  • Association Talassemtane for Environment and Development (ATED)
  • Resonate! Yemen
  • Lumière Synergie pour le Développement (LSD)
  • IFI Synergy Group
  • Gender Action
  • urgewald
  • Community Assistance in Development (COMAID)
  • Crude Accountability
  • Interamerican Association for Environmental Defense (AIDA)
  • Fundeps – Fundación para el Desarrollo de Políticas Sustentables
  • Action Research for Rural Development (RADER)
  • Global Labor Justice-International Labor Rights Forum (GLJ-ILRF)
  • International Trade Union Confederation
  • International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations (IUF)
  • Centre for Financial Accountability, (India)
  • Just Ground
  • Util
  • Abna Alnazihein Organization
  • Social Justice Platform
  • Yemeni Observatory for Human Rights

Source: Accountability Counsel

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Press Release – CICDHA: UN Human Rights Committee calls on China for mechanisms to investigate and punish harmful activities of its companies and banks abroad

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This past February, a delegation of 11 Latin American civil society organizations from the Collective on Chinese Finance and Investment, Human Rights and Environment (CICDHA) and representatives of affected communities, in collaboration with the International Service for Human Rights (ISHR) and FIAN International, participated in the third evaluation of the People’s Republic of China (PRC) by the United Nations (UN) Committee on Economic, Social and Cultural Rights (CESCR), in Geneva. The organizations requested the CESCR to recommend that the PRC respects, protects and fulfills its extraterritorial obligations related to economic, social, cultural and environmental rights contained in the ESCR Covenant and other UN instruments it has signed and recognized. This obligation includes the activities of Chinese state-owned and semi-state-owned companies and banks, as well as projects in which they participate in Latin America.

Last January, CICDHA and ISHR submitted to CESCR a report documenting the impacts of Chinese corporate activities in 14 projects developed in 9 Latin American countries: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Peru and Venezuela. The report demonstrates violations of the rights of indigenous peoples, the right to health, a healthy environment, water, food, housing, labor rights, and various civil and political rights, which are protected by UN treaties, covenants and conventions. Furthermore, the report states that “…China is one of the largest investors in Latin America and has an enormous responsibility to avoid the negative effects of the projects in which its companies participate or which are financed by its banks”.

Marco Antonio Gandarillas, from Latinoamérica Sustentable and member of CICDHA, said “All the projects analyzed are located in areas of high social conflict, great environmental and cultural diversity, particularly in indigenous territories; it is for this reason that the evaluation of the ESCR Committee is crucial for the future of Chinese investments and financing in the region”.

The Collective on Chinese Finance and Investment Human Rights and Environment (CICDHA in Spanish), has been working since 2018, documenting cases and reporting to various international bodies on the systematic non-compliance of China’s extraterritorial human rights obligations in its business activities in Latin America.

During the dialogue with the Chinese state representatives on February 15, CESCR President Michael Windfuhr echoed civil society’s concern by posing the following questions:

“What kind of binding regulations does China put in place to ensure that state-owned companies do not further undermine the human rights of people in other countries? How do victims of human rights abuses [by Chinese business actors operating abroad] access avenues of accountability or grievance mechanisms? How do they assess environmental, social and human rights impacts and mitigate risks and avoid harm [from Chinese funding and international cooperation]?”

The Concluding Observations of March 3rd, 2023, show that the CESCR welcomed several of the suggestions made by  CICDHA and expressed its concern “about the insufficiency of the legal obligations of companies under the jurisdiction of the State party to exercise due diligence on human rights” and recommended that the PRC ensure that companies and banks abroad “are held accountable for violations of economic, social and cultural rights, paying special attention to the territorial rights of indigenous and peasant farmers and the environmental impact…. and that follow-up and control mechanisms be established to investigate and sanction their harmful activities”.

The CESCR also asked the PRC to ensure that victims of abuses have access to effective complaint mechanisms and adequate redress. In addition, it urged the PRC to take steps, in particular with companies involved in the extraction of commodities and construction of infrastructure, “to ensure the legal accountability of corporate entities…in relation to violations of economic, social and cultural rights in the context of their activities abroad.”

The CESCR’s recommendations help pressure the PRC to establish mechanisms to monitor, investigate and sanction human rights abuses by Chinese business and financial activities outside Chinese territory. In addition, they seek to have the PRC enact policies that oblige Chinese companies and financiers to adopt measures to repair, redress and remedy current impacts and to establish monitoring mechanisms to prevent future impacts.

“Having the Committee recommend that Chinese companies and banks be held legally responsible for human rights abuses arising from their operations abroad is not only a step forward in protecting Chinese investment, but also in guaranteeing human rights in any context of transnational capitalism,” said Sofía Jarrín of Amazon Watch, a CICDHA member organization.

CICDHA welcomes the concluding observations of the CESCR, and considers the results of the assessment to be a substantial step forward towards greater accountability for human rights.

Source: amazonwatch.org

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“Development” Projects Yield Starvation and Death in Ethiopia’s Lower Omo Valley

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In a new report, Dam and Sugar Plantations Yield Starvation and Death in Ethiopia’s Lower Omo Valley, the Oakland Institute sounds the alarm on the severe humanitarian crisis faced by Indigenous tribes in the Valley and urges government and aid agencies to provide relief assistance.

With attention centered on the civil war in the country over the last two years, the hunger and health crisis in the Omo Valley caused by the Gibe III Dam and the Kuraz Sugar Development Project has gone ignored.

For years, the Oakland Institute has alerted on the threats posed to the local population — with their traditional livelihoods, environment, and lands destroyed by the so-called “development” projects. New field research now confirms the disastrous impacts as the situation rapidly deteriorates with Indigenous children dying of disease and starvation.

“The very survival of the Kwegu, Mursi, Bodi and other tribes is under threat. Acute hunger is common with the dam’s blockage of the annual flood — a natural event that the inhabitants of the valley relied on for centuries for cultivation — compounded with their loss of land to the sugar plantations,” said Anuradha Mittal, Executive Director of the Oakland Institute. Malnourished villagers are also suffering from deadly diseases — chickenpox and measles outbreaks, malaria, and leishmania. Contamination of the Omo River and its tributaries has led to a resurgence of cholera and polluted drinking water with chemicals, worsening the health crisis. The cattle, wild game, and fish that communities traditionally relied on for subsistence have disappeared. The economic opportunities the projects were supposed to generate have not materialized — exacerbating poverty in the region.

Given this dire situation, it is imperative for the Ethiopian government and humanitarian agencies to immediately turn their attention to the Omo Valley and provide urgent food, water, and medical assistance. “The Indigenous communities of Lower Omo—many forcibly evicted under the previous regime to make way for the construction of the Gibe III Dam and sugarcane plantations— today face starvation and death. Beyond immediate relief, addressing past abuses is essential. After years of broken promises and widespread abuse, any future development in the Lower Omo will have to be based on respect and protection of Indigenous rights,” concluded Mittal.

Source: oaklandinstitute.org

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