Togo and Guinea-Bissau set for $3 billion of debt cancellation

IMF and World Bank decide West African countries have met conditions to receive debt relief.

The West African countries Togo and Guinea-Bissau are set to have $1.8 billion and $1.2 billion of debt cancelled respectively after the IMF and World Bank decided they had met conditions set under the Heavily Indebted Poor Countries’ (HIPC) initiative.

Tim Jones, policy officer at Jubilee Debt Campaign, said:
“Cancellation of some of Togo and Guinea-Bissau’s debt is the result of campaigning by millions of people across the world. Debt cancellation allows countries to use their own resources to fight poverty rather than see them flow out of the country.

“However, the stick of debt and carrot of its cancellation are still used by the IMF and World Bank to impose economic policies on a country. Furthermore new loans have been given which are expected to be repaid regardless of whether or not they succeed in helping a country’s economy to grow and its government revenue to increase. The scourge of debt will not be ended until lenders are forced to take greater responsibility for the debt they create.”

With annual incomes per person of £350 and £550, Guinea-Bissau and Togo are respectively the 5th and 11th poorest countries in the world.

In order to qualify for this debt cancellation, both countries had to implement IMF and World Bank economic conditions. For example, Togo has had to begin a process of privatising four banks. However, not all of the two countries debts will be cancelled. Togo will be left with a debt to the outside world of $300 million, which includes loans given by the IMF and World Bank in recent years.

The debt cancellation should save the Togolese government between $50 million and $70 million in debt repayments over coming years; 5 per cent of government revenue. However, Togo’s government will still be paying close to $50 million in external debt repayments each year over the coming decade. The West African country’s external debt is set to rise again as it is given more new loans. The IMF says this is sustainable because it predicts the Togolese economy will grow faster than Togo’s debt. However, if this does not happen, Togo will still be expected to repay the debt.

32 countries have now had debts cancelled through the HIPC initiative.