Jubilee Act for Responsible Lending and Expanded Debt Cancellation Act of 2007 Would Help Reduce Global Poverty
WASHINGTON, D.C. – U.S. Senators Bob Casey (D-PA), Dick Lugar (R-IN) and Chris Dodd (D-CT) today introduced bipartisan legislation that would expand on existing debt cancellation programs for the world’s poorest countries. The Jubilee Act for Responsible Lending and Expanded Debt Cancellation Act of 2007 would expand bilateral and multilateral debt cancellation for an additional 25 nations and ensure that the benefits from debt cancellation will not be eroded.
“Too many countries spend more money on regular debt payments than on health care for their people,” said Casey. “As long as impoverished nations are forced to make onerous debt payments, they are trapped in a vicious cycle where their scarce fiscal resources are taken away from the domestic programs that will eliminate the need for future debt. This legislation will help these nations get out of debt and help them free up resources to reduce poverty.”
“This legislation continues our effort to fight poverty and help poor countries achieve the Millennium Development Goals,” said Lugar. “The results of the two previous rounds of debt relief are impressive – more children are in school, more families have access to clean water and health care, and communities are benefiting from infrastructure improvements.”
“The most basic human needs fall by the wayside while governments in the developing world struggle to pay off staggering debt to wealthy nations,” said Dodd. “As a leader in the global community, the United States has the power to improve the lives of men, women, and children around the world by taking simple steps to eliminate the debt that is crippling their countries. The bill Senators Casey, Lugar, and I are introducing today will help these governments emerge from the shadow of crushing debt to focus on what matters most: improving the lives of their citizens.”
In 1999 and 2005, the international community came together to organize debt cancellation for Heavily Indebted Poor Countries (HIPC), however a number of impoverished developing nations were left out of those debt cancellation efforts.
Of the 66 nations that are so impoverished that they are eligible to borrow from the World Bank’s low-income lending arm and have a per capita annual income of below $1025, only 41 of those nations qualify for the HIPC designation. Accordingly, this legislation instructs the Secretary of Treasury to commence negotiations within the International Monetary Fund and other relevant international institutions to negotiate comprehensive debt cancellation for the remaining 25 poorest nations not already eligible for the debt cancellation approved under previous initiatives. Among these 25 nations are Mongolia and Georgia.
The legislation includes a series of provisions to ensure that debt cancellation would be carried out in a responsible fashion:
Recipient governments must dedicate the proceeds from debt relief towards effective poverty reduction mechanisms, including health care, education and clear water services. In other words, the debt relief cannot go towards benefits for the wealthy elites or unnecessary military expenditures in these nations;
No nations that support international terrorism, engage in weapons of mass destruction proliferation, fail to cooperate on drug interdiction or engage in human rights abuses would be eligible for this debt cancellation;
Measures to help ensure that nations which benefit from debt cancellation do not acquire new debt and thus return to square one, including implementation of effective policy reforms, prioritizing grants over lending in future development assistance, adoption of a legal framework to prevent some creditors from profiting from debt relief by servicing new loans and a crackdown on so-called vulture funds that seek to purchase existing debt at market prices and then redeem it for full value;
Maximum transparency in debt cancellation and follow-on use of debt proceeds by recipient governments.
The overall cost of debt cancellation for these additional 25 nations is estimated at approximately $28 billion owed to the World Bank and the International Monetary Fund, of which the United States is responsible for a fractional share. The bilateral debt obligations of these nations to the United States comprise of $1.7 billion in total or roughly $64 million in lost revenues to the United States during the first year of implementation.
The Jubilee Act for Responsible Lending and Expanded Debt Cancellation Act of 2007 is supported by the 80 religious denominations and faith communities, human rights, environmental, labor and community groups organizations which make up the Jubilee USA Network.
“We welcome and fully support the legislation introduced today in the Senate, which would expand the promise of debt cancellation to more countries that need it to fight poverty," said Neil Watkins, National Coordinator of Jubilee USA Network, an alliance of 80 faith-based, human rights, and development groups. "The bill also gets at some of the problems with the current World Bank and IMF debt relief initiative by cutting out economic policy conditions which hurt the poor and by taking action against unscrupulous vulture funds.”
This bill is also cosponsored by Senators Joe Biden (D-DE), Barack Obama (D-IL) and John Sununu (R-NH).