President Clinton Celebrates Enactment of International Debt Relief Funding

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President Clinton Celebrates Enactment of International Debt Relief Funding

Today, President Clinton will celebrate enactment and full funding of his FY 2001 budget request for international debt relief. Following the signing of the FY 2001 Foreign Operations Appropriations bill, which includes the debt relief funding, the President will be joined in a White House East Room ceremony by a broad and bipartisan coalition of religious leaders, non-governmental organizations, Members of Congress, labor unions, and advocates for Africa. The President will cite unsustainable foreign debt as a key factor contributing to global poverty -- which leaves nearly half the human race, an estimated 2.8 billion people, to survive on less than $2 a day -- and will again urge an unrelenting battle to help developing nations overcome this poverty. The bill the President will sign into law today includes $435 million for U.S. participation in the Cologne Debt Initiative as well as full authorization for the International Monetary Fund to tap investment proceeds from limited off-market gold sales to finance its participation in the Initiative. Under the initiative, known as the enhanced HIPC initiative, savings from debt relief will be directed to education, health care, AIDS prevention, and other critical needs in qualifying countries. The bill which the President will sign into law today includes $435 million for U.S. participation in the Cologne Debt Initiative as well as full authorization for the International Monetary Fund to tap investment proceeds from limited off-market gold sales to finance its participation in the Initiative. Under the initiative, known as the enhanced HIPC initiative, savings from debt relief would be directed to education, health care, AIDS prevention, and other critical needs in qualifying countries.

ENACTMENT OF THE PRESIDENT’S INTERNATIONAL DEBT RELIEF BUDGET REQUEST ENSURES IMPLEMENTATION OF THE COLOGNE DEBT RELIEF INITIATIVE. Last fall, Congress approved only $110 million of the $920 million the President requested over four years to cover the cost of U.S. participation in the expanded international debt relief efforts launched at the Cologne G-7/G-8 Summit. Congress provided no funds for the HIPC Trust Fund, a multilateral facility to supplement the resources of regional development banks, such as the Inter-American Development Bank, which are unable to finance loan write-downs on their own. It also failed to provide full authorization for the IMF’s participation in the initiative. Faced with the prospect that the landmark U.S.-led global poverty reduction initiative would falter, the President this year requested $435 million in appropriations, including $360 million for the HIPC Trust Fund, and the remaining needed authorization for the use of IMF gold sale investment proceeds to finance debt relief. This action ensures that countries like Bolivia and Honduras, which had seen progress on their debt relief stalled pending U.S. funding, will see their plans implemented.

THE PRESIDENT WILL THANK RELIGIOUS, NGO, DEVELOPMENT, CONGRESSIONAL, AND OTHER LEADERS WHO SUPPORTED DEBT RELIEF AND URGE THEM TO WORK TOGETHER TO BUILD AMERICAN SUPPORT FOR GLOBAL POVERTY REDUCTION. The President will recognize the extraordinary work of the Jubilee 2000 Coalition, made up primarily of religious groups, but also others long active in fighting poverty, and will thank the bipartisan coalition of leaders including Members of Congress, labor and business groups, and other leaders that helped pass debt relief this year. The President will argue that an intensified battle against global poverty -- which leaves 1.2 billion people to live on less than a dollar a day -- is in America’s interest on moral, economic, and security grounds, and will urge the unusually diverse coalition to continue its efforts. He will cite Administration initiatives to expand funding for infectious diseases, including a near doubling of assistance for combating HIV/AIDS in the FY 2001 Foreign Operations Appropriations bill he will sign before the ceremony, as well as to increase support for expanded access to basic education and information technology in developing countries.

THE U.S. HAS BEEN AN INTERNATIONAL LEADER ON DEBT RELIEF FOR DEVELOPING NATIONS. In March 1999, President Clinton presented a plan to a U.S.-Africa Summit in Washington that became the basis for the G-7 agreement in Cologne, Germany (known as the Cologne Debt Initiative) to triple the amount of debt relief available for poor countries, reducing their debt by about 70% or $90 billion -- from an estimated $127 billion to as low as $37 billion -- in return for firm commitments to channel the benefits into improving the lives of all their people. Last September, building on that agreement, the President announced that the U.S. would unilaterally exceed the terms of the G-7 initiative and entirely cancel the $5.7 billion in U.S. government debt owed by qualifying countries. The Cologne Debt Initiative called for only 90% debt reduction for certain types of bilateral debt. In addition, the U.S. has supported efforts to expedite the process of qualifying countries for the expanded Heavily Indebted Poor Country (HIPC) program.

INTERNATIONAL DEBT RELIEF WILL HELP FREE UP SCARCE RESOURCES FOR HEALTH AND EDUCATION IN DEVELOPING NATIONS. For the average HIPC country, the share of scarce government revenue devoted to debt service (primarily interest payments) could fall by 25% to 50%. For example, Mozambique’s debt is expected to be reduced by some $3.5 billion, which could cut in half the share of government revenues allocated to external debt service, and free about $96 million in budgetary resources each year. These savings are equivalent to double the 1998 health budget in a country where children are more than 3 times as likely to die before the age of five as they are to go to secondary school. In Uganda, enhanced debt reduction could allow health and education spending to increase by 50% from 1998 to 2001 and rural development expenditures to more than double.

AS MANY AS 33 HEAVILY INDEBTED POOR COUNTRIES REPRESENTING 430 MILLION PEOPLE COULD ULTIMATELY BE AFFECTED. The 33 countries that could potentially benefit from debt relief are Honduras, Mauritania, Nicaragua, Tanzania, Benin, Bolivia, Burkina Faso, Cote d’Ivoire, Guyana, Mali, Mozambique, Senegal, Uganda, Cameroon, Chad, Republic of Congo, Ethiopia, Ghana, Guinea, Guinea-Bissau, Laos, Madagascar, Malawi, Niger, Rwanda, Sierra Leone, Togo, Zambia, Central African Republic, Burundi, Congo DR, Sao Tome, and The Gambia.

ELEVEN COUNTRIES HAVE QUALIFIED FOR EXPANDED DEBT RELIEF SO FAR. These are Benin, Bolivia, Burkina Faso, Honduras, Mali, Mauritania, Mozambique, Senegal, Tanzania, Cameroon, and Uganda. Another nine could qualify by the end of 2000 (Chad, The Gambia, Guinea, Guyana, Guinea-Bissau, Malawi, Nicaragua, Rwanda, and Zambia). That is the goal set by the G-8 with U.S. support at the July Okinawa Summit. The majority of the remaining HIPCs have not made progress toward qualifying because of their engagement in conflict. Others have been slow to develop their poverty reduction strategies, which are necessary to ensure that the savings from debt relief go toward productive investments to reduce poverty, like basic education and health care, rather than military spending. Still others have not requested the extra debt relief.