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. |