Mozambique
Background
In 1992, a twelve-year war ended in Mozambique. During this time,
the economy collapsed as people struggled to survive.
Over a million
people died, a third of the population was made homeless, and over
half the schools, health centres and rural shops were destroyed.
Mozambique was the poorest country in the world,
with a massive debt of $5.8 billion. Put another way, that meant
that every person owed
four times their average annual salary. 
Cost to the people
In 1995, Mozambique was only able to pay a fifth of what it was scheduled
to pay in debt service. Even so, this meant that money could not
be spent rebuilding schools and hospitals.
With over half the adult
population being illiterate, a life expectancy of 47, and one
tenth of children dying in their first year, these are severe problems
to address.
Yet in 1996, the amount Mozambique spent on servicing
its debt was more than double the amount it invested in education
and more than four times the amount it spent on health care.
HIPC and its conditions
So Mozambique was determined to qualify for HIPC (Heavily Indebted
Poor Country) relief in April 1998. Its creditors agreed to wipe
off at least $1.44 billion, but according to Ministry of Finance
figures that would still mean that Mozambique would be spending
about $100 million a year on debt servicing. Also conditions were
attached which included an increase in health service user charges
and the rapid introduction of VAT (value added tax). This tax has
been introduced faster than in any other African country, despite
protests at the complexity of the process.
Cancel all debts!
As the Mozambican government has pointed out, the rich north could
easily cancel the entire debt if there was the political will to
do so.
One of the statistics given to show this is that Europeans
spend more on ice cream each year than the total amount of money
needed to provide primary education, clean water and sanitation
for the two billion people on the planet who currently don’t
have access to these things.
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