Debt relief is urgent. It is, in many ways, a precondition for the poorest countries to make progress in their fight against poverty.. . . We have to ask, however, why progress in resolving the debt problem is still so slow. Why so many hesitations? Why the difficulty in providing the funds needed even for the already agreed initiatives? It is the poor who pay the cost of indecision and delay.
Current Status of Legislation
Senate. On May 9, the Senate Appropriations Committee approved the foreign aid spending bill for FY 2001. Although the Administration had requested $435 million for debt reduction for the world's poorest countries, the Appropriations Committee approved only $75 million for this purpose. All of this funding is to be dedicated to writing off only "bilateral" debt, or debt owed directly to the US government. No money would be appropriated for "multilateral" debt reduction, or money owed to the World Bank and regional development banks such as the African Development Bank, which hold the majority of debt owed by poor, indebted nations.
Over the next month, the Senate might act on debt reduction in two ways:
- The full Senate may act as early as the week of May 15 (though probably later) on the FY 2001 foreign aid appropriations bill. It is essential that funding for debt reduction is increased to at least $435 million, with $360 million of this total devoted to multilateral relief (relief of debt owed to the international financial institutions).
- The Senate Banking Committee is tentatively scheduled to consider S2382, the foreign aid authorizing bill, the week of May 22. The Banking Committee may follow the lead of the Senate Foreign Relations Committee and authorize $600 million for multilateral debt reduction. (These two committees share jurisdiction over parts of the authorization bill.) However, Senator Gramm (R-TX), the chair of the House Banking Committee, is expected to tie funding for debt relief to broad institutional reforms at the International Monetary Fund (IMF). Such reforms could take significant time and would delay or prevent poor countries from receiving debt reduction.
Because legislation in both the Senate and House is moving rapidly, the best message is one that will be applicable to any upcoming bills. Call or fax BOTH your Representative and Senators and ask them to approve $435 million in the FY 2001 foreign aid spending bill -- and $810 million over the next three years -- to fund debt relief for the world's poorest countries. Urge that debt relief not be delayed by efforts to reform the IMF.
If your Senator sits on the Senate Banking Committee, please contact him/her as soon as possible during the week of May 22.
Last year, President Clinton and leaders of other industrial countries agreed to write off $90 billion in debt for 33 poor countries, while promoting greater openness, better budget management, poverty reduction, and economic growth in these countries. This $90 billion in debt cancellation would cost creditors $27 billion primarily due to heavy discounting of the loans and the advantage of purchasing the debt today as opposed to having it accrue interest over the length of the loan. This plan is consistent with HR 1095 and S 1690, legislation introduced last year in the House and Senate, and strongly supported by the US Catholic Conference and Catholic Relief Services.
Unfortunately, Congress has yet to fully fund the US contribution of $920 million over four years toward this global debt reduction plan. Thus far, Congress has authorized $320 million for cancellation of 100% of the bilateral debts owed directly to the U.S. from these countries and appropriated $110 million for the first-year installment in FY 2000. Although the Senate Foreign Relations Committee authorized $600 million needed for reduction of debts owed to multilateral institutions such as the World Bank and African Development Bank (S2382, the foreign aid authorizing bill), the bill is still under consideration by the Senate Banking Committee.
- In the Biblical tradition of Jubilee, Congress should provide the funding necessary to make 2000 a year of great progress toward relieving the heavy debt burden from millions of the world's impoverished people. Delays in debt reduction are causing poor people in countries such as Bolivia, Honduras and Mozambique go without education, health care, and economic development.
- Although reform of the IMF is needed, debt reduction should move forward now to help these struggling countries without tying that reduction to a complex, lengthy process of IMF reform.
- The direct cost to the United States of the $27 billion debt reduction plan is less than four percent -- $920 million. Yet this amount will leverage billions of dollars in contributions from other wealthy nations. Several countries are waiting for the United States to take the lead and are withholding their funding until the United States has made its contribution.
For more information, contact: Kathy Brown or Kathy Selvaggio, Catholic Relief Services, (410) 625-2220, or Barbara Kohnen or Joan Rosenhauer, US Catholic Conference of Bishops, (202) 541-3319.