WASHINGTON (September 20, 2004) Proposals to cancel the external debts of some of the world's poorest countries are encouraging but should not come at the expense of other needy countries' ability to borrow from international financial institutions, the chairman of the bishops' international policy committee said in a letter released today.
"We understand that the multilateral creditors may be expected to recover their losses from the cancellation by reducing new lending to poor countries," Bishop John H. Ricard, SSJ, said in a letter to U.S. Treasury Secretary John Snow. "This would mean that the debt cancellation would provide no new resources for development. We would be very concerned about such an outcome because, for us, debt cancellation is not about adjusting accounts but about combating poverty."
The Bush Administration is reportedly backing a proposal that would cancel 100 percent of the external debts of at least 27 of the worlds' poorest countries. Critics argue that under the proposal, international financial institutions like the World Bank and the International Monetary Fund would be forced to swallow the cost of financing these cancellations, leaving them unable to provide assistance to other needy countries.
"We would urge that, instead of poor countries, in effect, financing their own debt relief, the debt cancellation be financed through additional resources from the donor countries or from other sources," Bishop Ricard advised.
The full text of Bishop Ricard's letter to Secretary Snow follows:
Secretary John Snow
Secretary of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
September 20, 2004
Dear Secretary Snow:
As you prepare for the upcoming meeting of G-7 Finance Ministers in Washington, I am writing on behalf of the United States Conference of Catholic Bishops to urge you to support decisive action at this time to complete the unfinished agenda concerning debt relief for the world's poorest countries.
Prior to the meeting of G-8 leaders in Sea Island, Georgia, in June, I wrote asking the leaders of the most powerful nations of the world to develop concrete measures to strengthen the Heavily Indebted Poor Countries (HIPC) program. While HIPC has provided important benefits to a substantial number of countries, it has failed to achieve the promise of a "fresh start" for the poor. Current levels of debt repayment coupled with a high degree of vulnerability to external shocks continue to leave poor countries in danger of serious set-backs along the path to poverty reduction and sustainable human development.
Thus, we are encouraged by consideration of proposals for 100% cancellation of the debt of the HIPC countries to multilateral creditors. At the same time, we understand that the multilateral creditors may be expected to recover their losses from the cancellation by reducing new lending to poor countries. This would mean that the debt cancellation would provide no new resources for development. We would be very concerned about such an outcome because, for us, debt cancellation is not about adjusting accounts but about combating poverty.
Our support for debt cancellation stems from our moral obligation to promote to the maximum the dignity of every human being, especially the most vulnerable. This vision coincides with the Jubilee injunction of Pope John Paul II to all the countries of the world to "reduce substantially, if not cancel outright, the international debt which seriously threatens the future of many nations."
Our fellow bishops from Africa and Latin America remind us that debt repayments are draining resources urgently needed for health, education, water and other basic services. Deeper debt reduction is essential to addressing this problem – but only if it provides additional resources rather than coming at the expense of development aid. We would urge that, instead of the poor countries, in effect, financing their own debt relief, the debt cancellation be financed through additional resources from the donor countries or from other sources, such as for example, revaluation of IMF gold holdings.
We urge you to take the opportunity provided by the meeting of G-7 Finance Ministers to complete the unfinished agenda on debt relief in a way that offers new hope to some of the world's poorest and most forgotten people.
Most Reverend John H. Ricard
Bishop of Pensacola-Tallahassee
Chairman, Committee on International Policy
United States Conference of Catholic Bishops