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Debt Has a Child's Face: Children pay the price

Debt has a child's face. Debt's burden falls most heavily on the minds and bodies of children, killing some, and stunting others so that they will never fully develop. It leaves children without immunization against fatal, but easily preventable, diseases. It condemns them to a life without education or — if they go to school — to classrooms without roofs, desks, chairs, blackboards, books, even pencils. And it orphans them, as hundreds of thousands of mothers die in childbirth each year, die as a result of inadequacies in health care and other services that poverty perpetuates.

Certainly, developing country governments that favour their own elites over their poor also bear much responsibility. But debt's demands make it hard for many governments to restructure their budgets towards more child-centred priorities even when they want to, and make it well-nigh impossible to succeed even if they do. Sub-Saharan Africa, for example, spends more on servicing its $200 billion debt than on the health and education of its 306 million children. The pattern is economically senseless and morally indefensible.

Each baby in Mauritania begins life encumbered with a debt of $997, in Nicaragua with $1,213, in the Congo with $1,872. The average for developing countries as a whole is $417. Yet in 1990 — nearly a decade ago — 71 Heads of State and Government, meeting at the World Summit for Children, committed themselves to "measures for debt relief " as part of a "global attack on poverty." They said that it is essential "to continue to give urgent attention to an early, broad and durable solution to the external debt problems facing developing debtor countries."

These world leaders endorsed the Convention on the Rights of the Child, adopted by the United Nations General Assembly the previous year, and now ratified by all but two nations, and they committed themselves to a series of goals by the end of the year 2000. These included halving malnutrition among under-fives and cutting their death rates by a third, halving maternal mortality rates, enabling every child to attend primary school and immunizing 90 per cent of the world's infants.

Debt gravely imperils these goals. Solving the debt crisis will not, of itself, mean that these targets are met: National policies are absolutely vital. But without a solution of the debt problem, there is no chance that the right national policies can be implemented or that goals can be reached by the year 2000, or any time in the predictable future.

Debt is not intrinsically bad: Indeed, money lent, borrowed and spent wisely spurs growth and improves people's lives. Nor is there anything new about debt crises: Ancient Greek city states defaulted after borrowing from the temple of Delos.

The current crisis, however, because it affects many of the world's poorest countries, makes their debt levels especially crippling.

The seeds of crisis were sown in the early 1970s, when OPEC countries dramatically raised oil prices — and deposited their increased earnings in Western banks. With interest to pay on these deposits, banks quickly embarked on a search for borrowers in developing countries. They found that the developing world wanted cash to invest in infrastructure and industry, and to pay for oil at its higher price.

So in a world seemingly awash with money, private loans — often unwise — were touted around developing countries; rich countries and international financial institutions, like the World Bank and the International Monetary Fund (IMF), also extended loans to less credit-worthy low-income countries.

Developing countries were tempted, also unwisely, by low interest rates, often below the rate of inflation. Confident that their commodities would continue to fetch high prices and that interest rates would remain low, they gambled that repayment would be easy. Much of the borrowed money went to inappropriate projects, to buy arms, or even into private overseas bank accounts. The poor, women and children, saw little of it.

Commodity prices instead fell sharply, interest rates increased and, in 1979, oil prices rose again. As the cost of servicing their debts escalated and their revenue plummeted, developing countries frantically borrowed more to try to meet their obligations and stave off ruin. But every percentage point increase in interest rates in the 1980s added more than $5 billion to what debtor countries had to pay each year. Killing arrears accumulated.

In a mathematical construct that only lenders could embrace and find just, between 1983 and 1990, indebted developing countries repaid the staggering amount of $1,000 billion. Astoundingly, despite this enormous transfer of wealth, their debt burden, which was some $800 billion in 1983, reached $1,500 billion by 1990 and nearly $2,000 billion by 1997 because of debt service arrears and new borrowing.

The crisis has been global, but it is gravest in sub-Saharan Africa, which owed $84 billion in 1980 and now owes $200 billion, an impossible drain on its fragile economies.