Starve the children and pay the debt

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Let me put a face to the abstraction. It is that of Virgilina. The day I met her she had a cloth tied under her chin, fastened in a knot on the top of her head like an old-fashioned mumps victim. The only treatment she had for toothache was this one, which her ancestors had brought from Italy four generations before. She had no money for medicine.

She had no money for food for her children either. She and her husband lived with them on the roadside in Brazil. By a modern tarmac highway they lived in a hut made from sticks and black bin-liners. They lived off bruised fallen oranges gleaned from the plantations nearby, supplemented by a meagre charity hand-out and what few vegetables they could grow from cultivating the four-foot- wide roadside verge.

Once they had had land. But they had been evicted by a rancher and his gunmen. The action was illegal, but the Brazilian government had not intervened or even objected. The rich man produced cash crops and Brazil needed cash to pay off its massive share of Third World Debt.

It is the face of Virgilina and her three children which lies behind the neutrality of terms like "international debt". Once Third World Debt was news. In the late Seventies, it threatened to send the world's banks crashing like a line of dominoes. But the international financial policy- makers and bankers found a way of juggling their risks so that it ceased to be a problem.

Only to the poorest people in the world - on to whose shoulders the burden has been transmitted - is Third World Debt still a pressing issue. To them it is still a chronic inhibition to development. For every pounds 1 the poor nations get in aid from the West, they send us pounds 3 in debt repayments. The money is raised by cuts in health, education and agricultural development budgets. Negotiating the unending complex rescheduling deals diverts the best brains in Third World administrations from more fundamental economic problems.

For the past decade the international community, through the World Bank and the International Monetary Fund, has told poor nations that debt relief will come if they put their house in order with harsh economic structural adjustment programmes. Yet those which complied, such as Uganda and Bolivia, Burkina Faso and the Ivory Coast, are now finding that the goalposts are about to be moved.

Until recently things looked promising. The British government was consistently pushing for debt relief in international forums. The new president of the World Bank, James Wolfensohn, had come spectacularly on-side. The US government seemed convinced. Then, at a private seminar sponsored by Cardinal Hume in London last year, the head of the IMF, Michel Camdessus, a devout Catholic, showed every sign of having been converted to the cause. It seemed that the traditional opposition - from Japan, Germany and Italy - might be outflanked.

Then a new official arrived at the US Treasury and threw its policy into reverse. David Lipton, fresh from deals with Eastern Europe, decided that debt relief should be used as a lever for even further market reforms. Despite the fact that Bolivia has pursued them for 13 years and Uganda for 10, it looks as though the decision will be made at the spring meetings of the Bank and the Fund in Washington this week to delay their relief for two years.

The consequences could be grave. It is not simply that the policy will run directly counter to that outlined in Uganda by Hillary Clinton last month when she said: "The economic and democratic transitions that are taking place now in Africa will succeed only if African children are educated." The added interest payments Uganda will pay over the extra two years would provide primary education for four children in each family.

As well as having a negative impact on their standing in markets, the change could undermine the work of Third World leaders who have pushed for reform, playing into the hands of intemperate opponents. If the compliant nations are to be made to wait, what of Ethiopia and the rest? Across the globe a billion poor people like Virgilina will pay the price.

Paul Vallely