Background

See Action Alert on Debt Legislation

• April 2000
• February 2000
• April 1999
• February 1999
• December 1998

April 2000

Debt Reduction Funding Needed Now

Why You Are Receiving This Alert:

While we've accomplished a lot for poor country debt relief, there's still a lot more to do. Our immediate task is to obtain the funding necessary to implement the new debt reduction law approved by Congress last November. Congress is back in session and has begun hearings on the appropriations bills. The legislative session is expected to be shorter than normal because of the Presidential election campaign, so it is imperative to inform Senators and Representatives NOW about the need for substantial appropriations for debt reduction. Please meet or call your Representative and Senators while they are home for Easter recess April 17-28 to urge them to fund debt relief.

Last Year's Legislation:

On November 29, 1999, President Clinton signed legislation which makes important progress towards greater debt relief for many of the world's poorest countries. It authorizes new US bilateral debt relief and US participation in an improved Heavily-Indebted Poor Countries (HIPC) initiative. HIPC is the comprehensive program of debt reduction by bilateral creditors (governments) and multilateral creditors (international financial institutions such as the World Bank and International Monetary Fund) for eligible poor countries. The new program will provide:

• Broader debt relief: More than 30, and potentially as many as 39, of the world's poorest, most indebted countries should be eligible to benefit.
  
  
• Deeper debt relief: The US will cancel 100% of US bilateral debt, subject to appropriation of the necessary funds; and external creditors as a whole are committed to reduce the eligible countries' external debt by a total of 60 to 70 percent.
  
  
• Faster debt relief: Determination of entitlement to begin receiving the new relief should be made for as many countries as possible by the end of the year 2000; three countries have been declared eligible under the new program so far, and the World Bank and International Monetary Fund hope to decide the eligibility of an additional 24 countries this year.
  
  
• Improved debt relief conditions:
  
  1. The financial benefits of debt relief are to be used to combat poverty.
     
  2. Poverty reduction is to become a major objective of the economic and social reform commitments which are preconditions to debt cancellation or reduction.
     
  3. The economic and social reform conditions are to be developed through transparent and participatory processes, including the participation of civil society.

• Supplemental appropriation bill stalled. In our last action alert, we asked you to advocate for debt relief funding in the supplemental appropriations bill. But after the House Appropriations Committee passed a bloated bill -- $7.5 billion more than the President requested, mostly for defense but nothing for debt relief -- the Senate decided to hold off consideration of the bill. Some of its provisions for Kosovo, Colombia, and hurricane relief in North Carolina may be incorporated into the FY 2001 normal appropriations bills.
  
  
• Senate Foreign Relations Committee authorized funding. In a move that surprised many, the Chairman of the Foreign Relations Committee, Senator Jesse Helms, approved an authorization bill for the $600 million requested by the Administration for debt relief.

February 2000

The Issue

"In the spirit of Leviticus (25:8-12), Christians will have to raise their voice on behalf of all the poor of the world proposing the Jubilee as an appropriate time to give thought, among other things, to reducing substantially, if not canceling outright, the international debt which seriously threatens the future of many nations." -- Pope John Paul II

More than 40 of the world's most impoverished and indebted countries are saddled with close to $200 billion in external debt. For many of these countries, their debt payments to the World Bank, the International Monetary Fund (IMF), the U.S. and other donors, are more than four times what their governments spend on health and education. Yet, the majority of people living in the heavily indebted poor countries earn less than $1 a day. So when their governments spend such a high percentage of their budget on debt servicing, they do so at the expense of investing in critical health, education, and infrastructure programs -- the kinds of investments that honor the dignity of every person and contribute to long-term economic growth and poverty reduction..

The USCCB, Catholic Relief Services, other national Catholic organizations, and many dioceses and parishes have been deeply engaged in this issue for three years. They are acting in response to the Holy Father's calls for substantial debt forgiveness on the occasion of the Great Jubilee, and in an effort to live out the commitments made in the 1997 Synod for America to be in solidarity with the Church in the developing world. We seek debt relief, not for its own sake, but in order to alleviate poverty in the poorest countries.

The final year of the old millennium was a year of major progress in the Catholic Campaign on Debt. Working closely with other faith-based and non-governmental organizations, and with a strong grassroots effort at the diocesan and parish level, we were successful in obtaining important new, bipartisan debt reduction legislation in the final days of the 1999 Congressional session.


The New Law

On November 29, 1999, President Clinton signed a new law which provides new funding for debt owed to the U.S. Government and new authority to reduce debt owed to the International Monetary Fund.

The major features of the new law are:

Funding for Debt Relief

Debt Owed the U.S. Government (Bilateral Debt)

• Directs the President to cancel 100% of debt owed to the United States (bilateral debt) by eligible countries, subject to the appropriation of the necessary funds by Congress
  
  
• Appropriates $110 million for bilateral debt relief in FY 2000 (ending September 30, 2000)
  
  
• Requires the financial benefits from bilateral debt relief to be used to combat poverty

• Approves the revaluation by the IMF of a portion of its gold holdings, and the use of about 2/3's (i.e., about $1 billion) of the income generated by the investment of the profits exclusively for relief of IMF debt under the Cologne Initiative (the new program of more generous debt relief agreed to by the G-7 countries at the Summit Meeting in Cologne last June)
  
  
• Approves the use of the U.S. share (about $300 million) of funds in the IMF's Special Contingency Account (SCA-2) for relief of IMF debt under the Cologne Initiative

• Forty-four (44) countries are potentially eligible for cancellation of bilateral debt; priority will be given to approximately 39 of the 44 which are eligible for bilateral and multilateral debt relief under the Cologne Initiative
  
  
• The Administration should use best efforts to ensure that determination of eligibility for debt relief under the Cologne Initiative is made for as many countries as possible by the end of the year 2000; the IMF and World Bank hope to decide the eligibility and amount of debt relief for about 27 countries by that time

• Countries are not eligible for bilateral debt relief if they have excessive military expenditures, support terrorism, fail to cooperate on narcotics control, or are gross violators of human rights
  
  
• Bilateral debt relief is conditioned on a country's commitment to programs of economic reform and poverty reduction, and requires these programs to be designed and adopted through transparent and participatory processes
  
  
• Calls on the Administration to use best efforts to ensure that multilateral debt relief includes these same conditions concerning economic reform and poverty reduction

April 1999

This update summarizes two major action items on debt, several key events you should know about, and new resources that will be useful for your work. It also includes a response form which we strongly encourage you to fill out and send back. Remember that you can find this update, along with action alerts, backgrounders, and other useful and up-to-date information on our website, www.USCCB.org/sdwp.

1. Legislative Action Needed
   
   The two major action items for this month and next are legislation on debt and Hurricane Mitch.
   
   
   1. Legislation on debt
      
      Many of you have already received by email and fax the action alert on H.R. 1095, the Debt Relief for Poverty Reduction Act of 1999. It was introduced March 11 by Representative James Leach and six other prominent Republican and Democrat Representatives. Its main component:
      
      
      • Provide deeper debt relief for more countries than offered under the Heavily Indebted Poor Country Initiative;
        
      • Reduce the maximum waiting period for debt relief from six to three years;
        
      • Specify a decision making process that takes the needs of the poor into account; and,
        
      • Ensure that the benefits of debt relief reach the poor by establishing human development funds.
      
      We worked for many months with Catholic Relief Services, Bread for the World, Oxfam, and many faith-based groups to get this bill introduced in Congress. Now we need co-sponsors in the House -- and soon we will need sponsors in the Senate. Contact your Representative and Senators and ask them to co-sponsor the bill. See the Action Alert and bill summary, included in this mailing, for specific advocacy points.
      
      
   2. Hurricane Mitch Relief
      
      Both the House and Senate have drafted their versions of an Emergency Supplemental Appropriations bill to benefit victims of Hurricane Mitch, Hurricane Georges, and several domestic emergencies. The House version, H.R. 1141, allocates just under a billion dollars for Central American and Caribbean nations recovering from the devastation of hurricanes and victims of the earthquake in Colombia. The Senate version, S. 544, allocates slightly more in spending for the victims. The two versions of the bill are now being reconciled in a conference committee.
      
      The legislation is very problematic. The House and Senate leadership have chosen to require offsets to pay for the bill instead of funding the legislation outside the normal budget as they have in past years. Thus, the House bill proposes cuts in existing foreign aid, including development assistance for other poor countries, while the Senate proposes deep cuts in U.S. poverty programs to offset the costs of the assistance package.
   
   Contact your Representative and Senators and tell them:
   
   
   • The victims of Hurricane Mitch need emergency funding NOW;
     It is not acceptable to cut domestic or international poverty programs in order to assist the victims of Hurricane Mitch.
   
   For more information, see the action alert on Hurricane Mitch posted on our website.
   
   
   
2. Upcoming Events
   
   The two key upcoming events are the G-7 Summit and the Spring meetings of the World Bank and IMF.
   
   
   1. G-7/8 Summit
      
      The leaders of the world's major industrialized countries -- the US, Canada, Germany, UK, France, Japan, and Italy, known as the G-7, meet every year to discuss issues of major concern. A year ago, Russia was admitted as the 8th member of the group, so the annual meeting is sometimes referred to as the G-7/8 Summit.
      
      This year, the G-7/8 Summit will be held in Cologne, Germany. One of the top issues on the agenda for this meeting is international debt. In preparation, most of the G-7 governments have already submitted proposals to be discussed that call for deeper debt relief for more countries.
      
      MISEREOR, the German relief and development counterpart to CRS, is hosting many events to take place around the Summit. A representative of USCCB is expected to take part in a meeting with the German Chancellor Gerhard Schroeder. This meeting will be held prior to the Summit and will focus on the issue of debt. Other bishops from G-7 nations and developing countries will also be present. The German bishops' conference is organizing a high-level two-day conference on globalization. There will also be many events for activists to take part in. If you plan to go or want more information, visit the Jubilee 2000 website at www.j2000usa.org.
      
      The G-7/8 Summit is a key opportunity to lobby the Administration, whose support for the new legislation, H.R. 1095, will be crucial. To date, the Administration has not been particularly supportive of substantial debt relief, despite a new proposal issued last month. (See our website for the statement issued by Archbishop McCarrick and Bishop Ricard on the proposal.)
      
      Between now and early June, we strongly encourage you to send a letter to the Secretary of the Treasury, Robert Rubin, from your diocese, your parish leaders, and/or your bishop. Ask Secretary Rubin to show leadership within the G-7 by supporting substantial debt relief for the world's poorest countries. Tell him about the new legislation. You can use talking points from action alerts and other materials from our website or check our website after April 30 for a sample letter. The letters should be sent to: The Honorable Robert E. Rubin, Secretary of Treasury, 1500 Pennsylvania Ave., NW, Washington, DC 20220. The salutation should read Dear Secretary Rubin.
      
      
   2. Spring Meetings of the World Bank and IMF
      
      At the end of April, Finance Ministers from around the world will come to Washington to take part in the annual Spring meetings of the World Bank and IMF. One of the items on their agenda will be the Heavily Indebted Poor Country (HIPC) Initiative. For the past few months, the World Bank and IMF have been collecting comments on this debt relief initiative from religious groups and other NGOs around the world, and they have held consultations with NGOs in several cities around the world. (You can find our submission to the HIPC Review on our website.)
      
      We are pleased that the two institutions have taken into account our concerns about the Initiative, as well as those of many other organizations and individuals. But we will find out how committed the institutions are to expanding the Initiative to include more countries, offer more debt relief, and do so in a shorter time, after the Spring Meetings. Stay tuned for new information on this important meeting.
   
   
3. New Resources!
   
   
   1. NEW BISHOPS' STATEMENT: A Jubilee Call for Debt Forgiveness
      
      On March 24, the Administrative Board of the U.S. Conference of Catholic Bishops approved a new statement on debt. "A Jubilee Call for Debt Forgiveness" updates the bishops' 1989 statement on debt and becomes the basis for our policy on the issue. The statement will be released in early May and will be available from our Office of Publishing and Promotion Services for $1.95 per copy. It will also be put on the web. We strongly encourage you to get a copy of this statement as soon as it's out.
      
      
   2. Catholic Campaign on Debt Packets
      
      Many people have called requesting additional copies of the Catholic Campaign on Debt kits, which were mailed to you several weeks ago. We're pleased with the overwhelming response and the level of interest in this issue among dioceses and parishes that it demonstrates. With the help of CRS, we are able to offer a limited number of additional packets at no charge. However, quantities are limited and we encourage you to reproduce the packet locally if you can. If you'd like to look into ordering additional packets, please call Mina Behari at 202-541-3199.
      
      
   3. Debt & Families
      
      The bishops' Office for the Third Millennium and Jubilee Year 2000 requested that we produce a handout on debt for families. Enclosed is a copy of the handout, which you should feel free to adapt and copy if you find it useful.

February 1999

Contact:
Barbara Kohnen, bkohnen@USCCB.org, tel. (202) 541-3153
Gerry Flood, gflood@USCCB.org, tel. (202) 541-3167
Kathy Selvaggio, kselvaggio@catholicrelief.org, tel. (410) 625-2220

Below is a summary of what we're doing on the debt issue in various areas: the Catholic Campaign, new legislation, and Hurricane Mitch. Also, please be aware that the International Policy Committee approved a draft statement on debt at their last meeting. Provided the Administrative Board approves it, we will issue the updated USCCB statement on debt later this year.

Campaign to Forgive Debt

The new materials for our debt campaign will be available in early February. They will be posted on our website immediately and will be sent to you by mail along with the Jubilee pledge. The materials can be easily copied and distributed, and are written for a variety of audiences, including parishes and schools. A page of quotes, for use as bulletin inserts, will be included. We also encourage you to use the educational materials of Bread for the World, which is doing its 1999 Offering of Letters on the debt issue. Their materials can complement our campaign.

Legislation

For several months, the USCCB has been working with Catholic Relief Services, Bread for the World, Jubilee 2000 USA, and several Congressional offices to draft legislative language that we hope will be introduced and passed in the next Congress. Several Representatives -- both Republican and Democrat -- have expressed their interest in supporting it. Please contact your members, especially those on the Senate Foreign Relations Committee, the House Banking & Financial Services Committee, and the House International Relations Committee. Urge them to support legislation that includes:

• Providing deeper debt relief for more countries than offered under the Heavily Indebted Poor Country Initiative;
  
• Authorizing $700 million over three years for multilateral debt relief; and $250 million over two years for bilateral debt relief (estimated amount needed for the necessary US contribution to reduce about $4 billion of multilateral debt and $2.5 billion of bilateral;
  
• Reducing the maximum waiting period for debt relief from six to three years;
  
• Specifying a decision making process that takes the needs of the poor into account; and,
  
• Ensuring that the benefits of debt relief reach the poor by establishing human development funds.

Related Issues:

Hurricane Mitch. In early February, the Administration will outline the details of its overall package of assistance and debt relief for the Central America region. Our top concern with respect to debt is that the Administration commit to providing real and substantial debt relief -- not simply to postpone repayments or to provide the level of debt relief that Honduras and Nicaragua, especially, would have received under the HIPC Initiative if Hurricane Mitch had not happened. We will update you on their commitment.

Conference on the Ethical Dimensions of International Debt. This unprecedented gathering of Catholic leaders, the heads of international financial institutions, advocacy groups, and key U.S. officials focused on the moral and human dimensions of debt. The summary of discussion will be published and made available on the website soon. For a brief synopsis of the event, see the press release issued by the USCCB's Department of Communications on October 28. It is posted on the USCCB's website under Communications.

Other efforts. With generous funds from the Raskob Foundation, we have made a grant to the Justice and Peace Commission of Zambia and are considering another grant to the Justice and Peace Commission of Malawi to set up campaigns on debt. For more information, see the J&P Zambia website at www.ccjp.org.zm. Catholic Relief Services is also involved at the field level in southern Africa, Central America, and elsewhere. For more information, contact Kathy Selvaggio at tel. 410-625-2220 or kselvaggio@catholicrelief.org.

Talking Points

Note: the Update on International Debt, also in this packet, contains background information that might be useful in your visits. For additional information on the origins of the debt crisis, a Catholic position on debt, and analysis of the HIPC Initiative, see the document "Putting Life Before Debt" at www.catholicrelief.org.

New Legislation: Debt Relief for Poverty Reduction Act of 1999

We are working with others to shape a Debt Relief for Poverty Reduction Act of 1999 which we expect to be introduced in this session. If the bill meets our criteria, we hope to support it vigorously throughout the year. Co-sponsors will be needed for the bill as soon as it's introduced. For your February visits, please tell your Representative and Senators about the bill, especially those on the Senate Foreign Relations Committee, the House Banking & Financial Services Committee, and the House International Relations Committee. We expect the bill to expand the amount of relief offered under the current Heavily Indebted Poor Country (HIPC) Initiative in these ways:

1. Authorizes spending $700 million over three years for multilateral debt relief and $250 million over two years for bilateral debt relief. Multilateral debt is owed to the World Bank, International Monetary Fund, Inter-American Development Bank, and other international financial institutions. In this bill, bilateral debt refers to the debt owed to the U.S.;
   
   
2. Redefines "heavily indebted" so that 45 (instead of about 16) of the world's poorest countries would qualify;
   
   
3. Increases the amount of debt relief to ensure that debt service would not be made at the expense of critical investments in human development;
   
   
4. Reduces the waiting period for debt relief from a maximum of six to three years so that today's poor people see the benefits of debt relief;
   
   
5. Calls for the participation of debtor nation citizens' organizations in decisionmaking processes regarding the terms and conditions of debt reduction. This provision gives voice to those who had none in the contracting of the debt; and,
   
   
6. Creates a Human Development Trust Fund, which requires that the savings to a country resulting from debt relief be deposited in a special fund so that people living in poverty actually receive the benefits of debt relief.

1. Why should we care about international debt?
   
   
   • Debt deepens poverty. Countries can choose where they spend their money. But many poor and heavily indebted countries -- where people live on less than $1/day -- are forced to spend their scarce resources on debt repayments rather than on basic human needs, such as health care, schools, food production, and environmental protection. For these countries, repaying the debt means sacrificing their children's future.
     
     
   • The Vatican, bishops' conferences, and development workers believe debt relief is essential. In As the Third Millennium Draws Near, Pope John Paul II says: ". . . in the spirit of Leviticus, Christians will have to raise their voice on behalf of all the poor of the world, proposing the jubilee as an appropriate time to give thought, among other things, to reducing substantially, if not canceling outright, the international debt which threatens the future of many nations." In Jewish and Christian traditions, the jubilee year fell every 50 years. It was a time to free slaves, return land to its rightful owners, and forgive debts. The jubilee year symbolizes a new era, a fresh start for the poor, an opportunity reestablish justice and equity throughout the world.

2. Will debt reduction benefit poor people?
   
   Countries became indebted because of the worldwide financial crisis, but also because of corruption and mismanagement. Unfortunately, the poorest people who bore no responsibility for making the loans are forced to share the burden of paying them back, as their governments reduce investments in health and education in order to repay the debt. The benefits of debt reduction or cancellation should get back to the people in the form of more spending on health, education, and other basic necessities. We believe that conditions on debt relief should be shaped by the people who will be affected together with governments and creditors.
   
   
3. Isn't there a financial cost to debt relief?
   
   Yes. When debts are forgiven, the creditor absorbs a loss. But in the case of the poorest countries, it's not a lot. Thirty-five countries in Africa owe $226 billion, less than the U.S. FY 1998 defense budget. And, they owe only $4.5 billion to the US. Yet, their debt repayments represent an enormous portion of their annual income. Consider:
   
   
   • African governments spend four times as much on debt repayment as they do on health care. Uganda, a typical example, spends $3.50 per person each year on health and education combined but $17 on debt repayments to creditors like the U.S., the World Bank, and the International Monetary Fund.
     
     
   • Mozambique can make only 1/5 of its scheduled payments. This amount represents more than twice the government's spending in education and four times its spending on health. Yet, almost 2/3 of the population does not have safe drinking water, 2/3 of adults are illiterate, 1/2 don't have access to the formal health system.
   
   Countries that have a lower debt overhang are often considered attractive to investors, so reducing debt can mean that the country has a better chance of benefiting from the global system of trade and investment that depends so heavily on the assessment of a country's financial health.
   
   
4. Has the U.S. ever provided debt relief before?
   
   Yes. In the past, the U.S. government has substantially reduced debts owed by Poland, Jordan, and Egypt, and in recent years, the U.S. has provided some debt relief for poor countries. Private creditors have also written off some debt of poor countries. Yet, many poor countries continue to be burdened by heavy debts. After World War II, Germany's debt was also substantially reduced in order to allow it to rebuild. The same political will is needed for the world's poorest countries, which are rebuilding after their own wars, collapses of their economies, and natural disasters.

December 1998

Contact: Barbara Kohnen, bkohnen@USCCB.org, tel. (202) 541-3153

As we get closer to the Year 2000, the Department is gearing up for a major campaign on international debt. Together with Catholic Relief Services, we will try to get new legislation passed by the US Congress to allocate more funds for debt relief and to provide deeper debt relief, sooner, to more poor countries. We will continue to lobby the US Administration and the international financial institutions to provide more generous relief. And, to make your work easier, we will produce materials for you to use in your dioceses and parishes. Below is a summary of our recent activities and plans for next year.

Legislation

Thanks to all of you who contacted your Representative or Senator to call for more debt relief in the Foreign Operations Appropriations bill and for those of you who have called to ask about the status of the new debt legislation.

Congress approved a $33 million appropriation for debt relief in the Foreign Operations Appropriations Bill. The majority of funds will go to the poorest and most indebted countries in sub-Saharan Africa. Though higher than it could have been, this amount represents a small fraction of what's needed to make a difference in peoples' lives.

The NEW legislation is still being developed. Together with Catholic Relief Services, Bread for the World, Jubilee 2000 USA, and several Congressional offices, we have been drafting bill language that we hope will be passed in the next Congress. We will need your help getting co-sponsors as soon as the bill is finalized and approved by the USCCB. Thank you for your patience and do expect a bill in the near future.

Campaign Materials

By mid-January, we will have new materials on debt available to you. Check our website or your mailbox! We will make them so that they can be easily copied and distributed.

You may know that Bread for the World has decided to do its 1999 offering of letters on the debt issue. They have developed a debt kit, also available at the end of January. We will coordinate with them to avoid duplication, so do take a look at their materials. We also encourage you to gather information through CRS, Jubilee 2000, and other organizations working on the issue. Their materials can generally be found on the web.

Hurricane Mitch

Together with CRS, we have sent letters to the US government and the international financial institutions advocating very generous reconstruction assistance and debt relief for Central America in the aftermath of Hurricane Mitch. (See enclosed letter to Secretary of the Treasury Robert Rubin.) We will continue to monitor what's happening and use this opportunity to raise the important issue of rebuilding by using all available financial and humanitarian instruments.

Conference on the Ethical Dimensions of International Debt

This historical conference took place October 23-24 at Seton Hall University. (See the Oct. 28 press release posted on the USCCB's website under Communications.) It brought together about 60 people, including senior representatives of just about every actor who has a role to play in international debt -- the World Bank, the International Monetary Fund, the Inter-American Development Bank; the US Treasury and State Department; the governments of key creditors including Germany, Italy, and the UK; government representatives of debtor nations including Zambia, Uganda, and Honduras; senior officials of private investment banks; economists from academia; representatives of NGOs from the US, Europe, Africa, Latin America; and, six US bishops, the Vatican, and Archbishops from Honduras and Zambia.

The meeting was inspired and guided by the Holy Fathers' call for debt relief as an integral dimension of the celebration of the Jubilee, and it was co-sponsored by Seton Hall University and the Pontifical Council for Justice and Peace. We focused on three cases -- Uganda, Zambia, and Honduras -- to give us concrete examples of the ethical and policy challenges posed by debt and to explore how to move forward on debt relief with government officials, the international financial institutions, and representatives of civil society in those countries.

Though the meeting was off-the-record, a summary of discussion with comments not attributed will be available early next year (check our website and your mailings.)

Projects with Partners

With generous funds from the Raskob Foundation for Catholic Activities, we have made a grant to the Justice and Peace Commission of Zambia and are considering another grant to the Justice and Peace Commission of Malawi to set up campaigns on debt. (See the J&P Zambia website at www.ccjp.org.zm.) Catholic Relief Services is involved at the field level in southern Africa, Central America, and elsewhere, as well as with partners in Europe. Contact Kathy Selvaggio at tel. 410-625-2220 or kselvaggio@catholicrelief.org for more information on CRS' plans and activities.

Email us at sdwpmail@usccb.org
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