Foreign debt cancellations are expected to reach new highs in France’s 2014 development aid budget, with Somalia, Zimbabwe, Chad, Ivory Coast and Sudan in line for a complete deletion of their national debt.
Last week, French MPs told two ministers – Pascal Canfin, in charge of development policy, and Benoît Hamon, in charge of the social economy – that the country’s development aid budget was “scattered” and “non-transparent”.
The MPs, on the foreign affairs committee of the French National Assembly, were speaking during the the latest assessment of the 2014 budget.
The parliamentarians discussed debt relief for the ‘most indebted poor countries’, the PPTE, in French. “Debt cancellations almost tripled between 2013 and 2014,” Socialist MP Jean-René Marsac told the committee. “Which countries benefit from it?” he asked, adding that many NGOs also shared that concern.
France carries more PPTE debt than any other country.
The government is expected cancel €1.79 billion of PPTE debt in its 2014 budget, up from €607 million the year before. This represents a 16% share of France’s total development aid budget for next year, €9.8 billion.
The countries in the French debt cancellation programme continue to pay their debt back to France but when the refund is completed, France transfers the corresponding amount back by assigning it to programmes to fight poverty.
22 countries currently benefit from the programme.
“In 2014, an estimated five countries could see their debt completely erased: Somalia, Zimbabwe, Chad, Ivory Coast and Sudan,” Hamon said. “The debt relief is almost immediate, since we are transferring loans made in the past into donations”.
France is not fulfilling its objective
Anti-poverty groups welcomed the increase of debt cancellation, but the picture is not completely rosy for French foreign aid.
Despite France committing to allocate 0.7% of its gross national income to development aid by 2015, it has not reached more than 0.46% so far.
“The good intentions of the government are not reflected at all in the 2014 budget: -6% in 2013 and again -6% in 2014,” said Jean-François Mancel, special rapporteur for the Parliament’s Finance Committee, referring to France’s total aid statistics.
Hamon said however that the French contribution to development aid would reach 0.7% “as soon as the economic climate improves”. He stressed that France was “far from countries like Spain or the Netherlands which have drastically cut into the development aid budgets because of the crisis”.
Development aid has been one of the main victims of EU countries’ austerity policies.
According to a report by anti-poverty group AidWatch, development aid funding fell to its 2007 average across the bloc in 2013. 19 of the 28 member states have reduced their contributions to international aid, including France, Spain and Italy.
But the picture is not entirely bleak. AidWatch says that several European countries have substantially increased their foreign aid, including Latvia (+17% ), Luxembourg and Poland (+14%), Austria and Lithuania (+8% ), and the UK (+7%).
Three European countries have already met their commitment to spend 0.7% of their gross national income on development aid: Denmark, Luxembourg and Sweden.
The UK is expected to meet to the target by next year. “In the same economic environment [as ours], the UK will reach its 0.7% goal in 2014,” Mancel said, pointing to a lack of political will on the French side.
France’s had expected to make up much of its development aid budget based on revenue from the financial transactions tax (FTT), which was enacted last year. However, FTT revenue has disappointed and looks unlikely to compensate for this year’s declining budget.
“The innovative funding [schemes] that were foreseen as additional funding have become alternatives to declining budgets. This is a major problem,” said Mancel.
Hamon replied that in 2011 and 2012, “0% of the FTT was allocated to development aid. Today it is 15%. And I hope we can go further in the future,” he said.