one does not need to be in favor of/interested in the National Summit on
Africa to use this general information on important developments in the
debt relief movement.
Subject: [wa-afr] Leonard H. Robinson, Jr. attends a debt relief briefing
-----Original Message-----
From: regional desk2 [mailto:[log in to unmask]]
Sent: Tuesday, May 16, 2000 1:09 PM
Subject: Action Alert
May 16, 2000
Dear Friends of Africa,
Yesterday, Leonard H. Robinson, Jr. and Bernadette Paolo attended a debt
relief briefing at the White House convened by Gene Sperling, Director
of the National Economic Council, and Tim Geither, Under Secretary for
International Affairs at the Department of the Treasury. The purposes
of this meeting were to give advocates of debt relief legislation an
overview of the Administration's initiatives on International Debt
Relief and Poverty Reduction and an update on the budget/appropriation
process.
Excerpts from the written material provided for participants of this
meeting are included in this communiqué. Basically, the consensus view
emerging from this meeting is that it is incumbent upon all
Africa-interested parties to raise the temperature in the Congress now
with respect to debt relief and AIDS legislation. Beginning October, the
climate in the Congress will change, as Members focus their attention on
domestic initiatives in preparation for elections. For the first time
in history, there is a strong Africa constituency in place, as evidenced
by the passage of the Africa Growth and Opportunities Act. We can keep
this momentum going by holding legislators accountable for their actions
vis a vis the continent.
While Members of both the House and Senate are cognizant of the need for
international debt relief, they have to indicate their real commitment
through their votes and their allocation of appropriate levels of
spending. Of the $435 million needed for international debt relief,
current levels are at about $75 million.
The National Summit on Africa wants to work in collaboration with
Jubilee 2000, Bread for the World, and a coalition of organizations
representing the faith-based community to insure that the vital matter
of debt relief is dealt with in an equitable and expeditious manner in
the Congress. In order for us to be successful, we will need your
assistance. We ask that you review the information from the White House
and the action alert sent to us by Jubilee 2000. We have to fight if
significant changes impacting on Africa are going to be made. The names
and contact information of the Members of Congress who you should
contact are included in the Jubilee 2000 alert. Please write or call
your Representative in the Congress, and urge them to act. You can make
a difference in what materializes in the Congress during the next two
weeks.
<<...>> DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
May 2000
The Enhanced Debt Initiative:
The Role of Debt Relief in the New Development Framework
Introduction
There is broad consensus that progress on economic growth and poverty
reduction in many of the poorest countries is being held back by
increasingly unsustainable debt burdens. The debate about how to ease
the debt burdens and promote sustainable economic development had led
not just to the creation of a new debt relief initiative, but also a
transformation of International Monetary Fund (IMF) and World Bank roles
in the poorest countries which places growth and poverty reduction more
firmly at the center of their operations. This paper discusses this new
comprehensive debt relief program and poverty reduction framework within
which debt relief is being delivered.
Unsustainable debt: an obstacle to growth and poverty reduction
The legacy of decades of Cold War lending to achieve strategic
objectives and finance exports, combined with war, civil strife, and
poor economic policy by borrowers (especially poor adjustment of
economic policy to the oil price shocks in the 1970s), helped to create
a massive debt overhang that is a deterrent to growth and poverty
reduction in the heavily indebted poor countries (HIPCs).
In 1980, the net present value (NPV) of debt in the HIPCs was $45
billion, today it is nearly NPV $150 million. Since the early 1980s,
HIPCs have consistently spent between 20% and 30% of export earnings on
debt service. As debt service payments began to overwhelm the IfIPCs,
new borrowing to repay old debt began to grow, and the proverbial "debt
treadmill" began. Yet even with this new borrowing, arrears continued to
build. In 1980, total HIPC arrears were about $3 billion, or 6% of NPV
debt. Today HIPC arrears are close to $30 billion, or 25% of NPV debt'.
As a group, HIPCs post some of the world's lowest human development
indicators:
* one in ten children dies before their first birthday
* one in three children is malnourished
* the average person attends only three years of school
* half of all citizens live on less than $1 a day
* HIV infection rates are as high as 20%
While many HIPC countries are making progress on reversing some of these
trends, heavy debt burdens remain a major obstacle to growth and poverty
reduction. To repay old loans, countries must divert scarce budgetary
resources from investments in physical and human capital essential for
growth and poverty reduction. On average HIPCs spend more on debt
service than basic health and education combined 2. A significant amount
of development assistance to these countries now goes to service these
debts.
Heavy debt burdens can also depress long-term growth prospects by
limiting infrastructure improvements necessary to attract private
investment. Servicing such high debts also can lead to high taxes or
substantial new borrowing or rapid creation of money to generate
sufficient revenue for debt service, thus increasing inflationary
pressures.
The Paris Club, an informal group comprised mainly of industrialized
nations, began forgiving official bilateral debt in l989/1990. However,
repeated rounds of debt rescheduling and outright forgiveness were
unable to resolve the debt problem in the poorest and most indebted
countries in a comprehensive manner, in large part because debt owed to
the International Financial Institutions (IFIs), which hold about 45% of
HIPC debt, was left untouched. In recognition of that these efforts had
been insufficient, the Paris Club and the IFIs together launched the
HIPC Initiative in 1996. The HIPC Initiative was the first coordinated
bilateral and multilateral debt relief initiative. Under the original
HIPC Initiative, eligible countries would receive debt stock, reduction
after six years of economic performance under an IMF program .
By 1999, after only seven countries had begun to benefit from the
program, critics argued that HIPC was progressing far too slowly and was
flawed in other key respects including:
* Too few countries would benefit
* Debt relief was not deep -enough
* Delivery of relief was too slow
* The link to poverty reduction was weak
* Attention to deeper structural impediments to economic
growth was insufficient
* Conditionality was excessive and inappropriate
In March 1999, President Clinton proposed a new and expanded HIPC
Initiative. At the June 1999 at the Cologne Summit, the United States
led the effort to redesign the HIPC Initiative to provide deeper,
broader, and faster debt relief This "enhanced" HIPC Initiative also
seeks to transform the framework of conditionality for debt relief and
ongoing concessional lending.
Conclusion
Debt relief under the HIPC program is not a panacea for the myriad
challenges HIPC countries face. While the program cannot guarantee that
countries won't fall back into unsustainable debt again, it does, go a
long way toward minimizing that probability. By providing substantial
debt relief to countries with a demonstrated commitment to ongoing
macroeconomic stability, needed structural reforms, openness to trade
and, investment, investment in human capital, transparent policy making,
and sound debt management, HIPC can help countries translate old debt
into new opportunities for a better future.
Without Congressional action on necessary authorizations and
appropriations, these opportunities will not be realized. The
broad-based, bipartisan support for debt relief witnessed last year must
be renewed in order to maintain U.S. leadership for this new approach to
debt relief and poverty reduction.
Jubilee 2000/USA Campaign
ACTION ALERT -- May 10, 2000
Calls Urgently Needed to Members of Senate Banking Committee, up to and
including the week of May 22
Issue Summary:
On May 9 the Senate Appropriations Committee approved a foreign
operations appropriations bill that included only $75 million for debt
relief, whereas what had been required in order to fulfill the US
government's commitment for the Cologne Debt Initiative was a total of
$435 million ($210 million for Fiscal Year 2000 supplemental and $225
million for FY 2001). One reason given for the failure to appropriate
sufficient funds was that the Senate Banking Committee has not
authorized a contribution to multilateral debt relief, to be provided
via the Cologne Initiative.
During the week of May 22, the Senate Banking Committee will consider
debt relief for impoverished countries. The current official debt relief
program, the Cologne Debt Initiative, is lacking funds needed to reduce
debts owed regional development banks, such as the African Development
Bank. The US contribution to the Initiative is falling considerably
short, and it's costing lives in indebted, impoverished countries.
The Committee will have the opportunity to authorize expenditures to
finance full participation by the US in the Cologne Debt Initiative, as
it "marks up" or considers the Helms-Biden foreign aid authorization.
There is considerable danger that some members of the Committee will
seek to mandate added conditions on countries that would receive debt
relief. There is also a danger that some members will delay full
financing by insisting on getting their way, now, on changes in the role
of the International Monetary Fund and the World Bank.
While Jubilee 2000/USA is insisting on definitive cancellation of
crushing debt, without harmful conditions, the Campaign strongly
believes that full financing of the Cologne Initiative could deliver
substantial debt relief for some countries that are desperately in need,
as an initial step forward. The Campaign welcomes a debate on the powers
of the IMF and the World Bank, but believes that debt relief financing
should not be held hostage to that debate. (See more info in Background,
below)
Take Action!
For residents of the relevant states (see list below), contact Committee
members by phone and fax, up to and including the week of May 22. FLOOD
THOSE OFFICES WITH CALLS! Urge members of the Banking Committee to
approve full financing of the Cologne Debt Initiative, without added
conditions that harm people or the environment, as a step toward the
Platform goals of Jubilee 2000. Contact the staff person in the
Senator's office who handles Banking Committee affairs. In the case of
Senators who have asterisks (*) by their names, thank them for the
support they have shown so far for debt relief and urge them to maintain
the effort.
==> If you do not live in one of these states, call your Senators'
foreign policy aides and urge that they contact the office of Senator
Phil Gramm to say "please proceed with authorizing full funding for debt
relief programs."
Senate Banking Committee Members
http://www.senate.gov/~banking/
Republicans:
Phil Gramm, TX Chairman 202/224-2934
fax: 202-228-2856
Richard Shelby, AL Telephone: (202) 224-5744
Fax: (202) 224-3416
*Connie Mack, FL (202) 224-5274
Fax (202) 224-8022
Robert Bennett, UT (202) 224-5444
Fax 202 - 228-1168
*Rod Grams, MN (202) 224-3244
(202) 228-0956 (FAX)
Wayne Allard, CO 202-224-5941
Fax: 202-224-6471
Mike Enzi, WY Phone (202) 224-3424
Fax: 202-228-0359
*Charles Hagel, NE 202-224-4224
202-224-5213 (FAX)
Rick Santorum, PA (202) 224-6324
(202) 228-0604 Fax
Jim Bunning, KY 202/224-4343
Fax: 202/228-1373
Mike Crapo, ID Phone 202-224-6142
FAX 202-228-1375
Democrats
*Paul Sarbanes, MD Ranking Member (202) 224-4524
FAX (202) 224-1651
Christopher Dodd, CT (202) 224-2823
Fax: (202) 224-1083
John Kerry, MA 202-224-2742
Fax:202-224-8525
Richard Bryan, NV 202-224-6244
fax: 202-224-1867
*Tim Johnson, SD Phone: (202) 224-5842
Fax: (202) 228-5765
Jack Reed, RI (202) 224-4642
Fax: 202-224-4680
Charles Schumer, NY (202) 224-6542
Fax: 202-228-3027
Evan Bayh, IN (202) 224-5623
Fax:
John Edwards, NC 202-224-3154
Fax: 202-228-1374
Additional Talking Points:
-- The United States has not contributed its fair share to the
international debt plan. Congress should approve $810 million over the
next 3 years, at a minimum. If all creditors do their part, $90 billion
in debt will be written off for as many as 33 of the world's poorest
countries.
-- Every dollar the U.S. contributes to the Cologne Debt Initiative will
leverage more than $20 dollars from other international creditors.
Contributions are needed to help the regional development banks do their
part in the international debt plan. More than 17 countries have already
made a contribution and several others have made pledges to the trust
fund contingent on the U.S. contribution.
-- The appropriations for the multilateral trust fund should be
designated for the regional development banks, such as the
Inter-American Development Bank and the African Development Bank, in as
much as the World Bank and IMF have reserves sufficient to meet their
responsibilities under the current debt relief plan.
-- Debt relief will help countries like Mozambique and Bolivia carry out
their poverty reduction efforts, fighting infectious diseases, putting
more children in school and rebuilding roads and bridges lost to recent
floods.
-- Discussion of the powers and appropriate role of the IMF and World
Bank is welcome, but full support for the debt reduction under the
Cologne Initiative should be provided first.
Additional Background:
At the beginning of this year President Clinton submitted a request for
$5.1 billion in supplemental funding that included $210 needed for debt
cancellation for FY2000.
Senate Majority Leader Trent Lott has opposed Senate consideration of a
FY2000 supplemental budget bill. However, as the Senate Banking
Committee considers issues related to international lending agencies
next week, there is now an opening to urge inclusion of $210 million in
debt relief financing for this fiscal year, as well as the $225 needed
for FY2001, for a total of $435 million. On Tuesday, May 9th, the Senate
Appropriations Committee failed to approve full financing for the
Cologne Debt Initiative (approving only $75 million) deciding to defer
to the Banking Committee, meeting next Wednesday.
The Banking Committee, under the chairmanship of Senator Phil Gramm
(R-TX), will be considering issues raised by the Meltzer Commission, a
bi-partisan panel that recommended full debt cancellation for the HIPC
nations -- a unanimous recommendation -- as well as changes in the
functions of international lending agencies, some of which may serve to
strengthen the ability of the IMF to impose harsh conditions on
borrowing nations.
We must urge Congress to support this appropriation for debt relief at a
minimum, and to work during the year for even broader and deeper debt
cancellation. The United States must contribute its share to the
international debt cancellation initiative, a contribution that will
cost little and leverage much. If we make this contribution, every $1
from the US will be matched by over $20 from other creditors. The
crushing debts of impoverished countries should be canceled this year.
Creditors must not use poverty reduction requirements, the Poverty
Reduction Strategy Papers, or issues of international financial
institution reform as an excuse to delay debt relief.
For the full Jubilee 2000/USA position statement see
<http://www.j2000usa.org/updates/clinton4.html>
Will Cusack
Western Regional Desk
National Summit on Africa
1819 H Street, NW, Suite 810
Washington, DC 20006
(800) 934-3418 phone
(202) 861-8645 fax
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