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FinalCall.com News
World News
Bill would cancel debt for 25 nations
By Emad Mekay
Updated Jul 14, 2008 - 4:00:00 PM
WASHINGTON (IPS/GIN) - Anti-debt campaigners are praising the Senate Foreign Relations Committee for approving a law aimed at expanding debt cancellations to an additional 25 poor nations.
The supporters of the proposed legislation say it could prove effective in fighting poverty, stopping environmental degradation and easing the traditional strict economic conditions that accompanied loans and often led to economic chaos.
The Senate Foreign Relations Committee, which supervises U.S. funding for international financial institutions, passed the Act for Responsible Lending and Expanded Debt Cancellation on June 24.
The act, known both as the “Jubilee Act” and the “Casey Bill” (in reference to Sen. Bob Casey, D-Penn.), paves the way for approval by the full Senate.
Some 25 low-income countries that are not eligible for debt cancellation under current debt-forgiveness initiatives, such as Mongolia and Georgia, stand to benefit from the bill.
The legislation takes the unusual step of instructing U.S. officials at international financial institutions such as the World Bank, the International Monetary Fund and the Paris Club of bilateral creditors not to seek to impose the traditional conditions that have often been blamed for economic crises in many developing nations.
Critics say international financial institutions have typically imposed conditions benefiting multinational companies and local elites. These included user fees for water, sanitation, primary education and health care, as well as for the treatment for HIV/AIDS, tuberculosis and malaria.
Those institutions, with enormous influence on borrowing governments in the most impoverished nations, have also urged the passage of laws undermining workers’ ability to organize and deterred government spending on essential health care or education expenditures by imposing national budget caps.
The new act takes those institutions to task on a number of other issues, including creditor transparency and responsible lending.
It warns, for example, against pushing poor nations back into the red through new loans. Instead, it says future external financing needs should be met mainly through grants. It also warns of “vulture funds,” which have traditionally sought to buy sovereign debt at a discount with the intent to litigate collection at a large profit.
Under the bill, the U.S. Government Accountability Office, a congressional oversight agency, will audit the debt portfolios of previous governments in certain countries, including South Africa and the Democratic Republic of Congo, where there are allegations that odious loans were made to the government. The GAO report will be made public in two years.
The act was hailed as “life-saving” and “historic” by anti-debt campaigners who have long argued that debt penalized poor people and increased hunger around the world.
“We are thrilled to see such strong bipartisan support for the Jubilee Act in the Senate Foreign Relations committee,” said Neil Watkins, national coordinator of the Jubilee USA Network, a coalition of development groups that is now lobbying for passage of the act by the full Senate.
The bill does require beneficiaries to manage their economies better. Countries receiving debt relief will have to allocate at least 20 percent of their national budget toward poverty-alleviation programs such as the provision of basic health care, education and clean water services.
The U.S. treasury secretary will certify annually as to how the savings from debt cancellation were used in poor nations.
“In other words, the debt relief cannot go toward benefits for the wealthy elites or unnecessary military expenditures in these nations,” according to a statement from Sen. Casey’s office.
Countries that are classified as terrorism sponsors, countries that are proliferating weapons of mass destruction and countries involved in human rights abuses are excluded from benefiting from the bill.
The international debt crisis has made headlines over the past several years with mounting evidence of its effects on poor families across the globe.
After extensive campaigning by debt activists, the United States and other members of the Group of Eight industrialized nations reached an agreement to cancel 100 percent of the debts owed by eligible poor nations to Paris Club members, the IMF, the World Bank and the African Development Bank. The Inter-American Development Bank reached an agreement in early 2007 to provide similar treatment.
The initiatives created the “Multilateral Debt Relief Initiative,” which has so far benefited only 27 countries. The new bill said there is widespread evidence that those initiatives had already started to make a dent in poverty in countries benefiting under the deals.
Cameroon, for example, is funding its national poverty reduction plans with an extra $29 million gained from debt forgiveness, while Uganda channeled $57.9 million in savings in 2006 on improving energy infrastructure, primary education and malaria control. Zambia has reinvested $23 million it gained from a debt write-off in agricultural projects, such as smallholder irrigation and livestock disease control.
Related links:
IMF policies leave legacy of hunger, insecurity (FCN, 07-09-2008)
The impoverishment of Black Africa (FCN, 12-08-2003)
The IMF enslavement of Black Africa (FCN, 11-24-2003)
The IMF Moves Against West Africa's Monetary Union (BlackElectorate.com)
