Download Locations:
Summary:
In recent decades, the rapid growth in poor country debt has emerged as a foreign policy concern. There have been many efforts to help reduce poor country debt. In 1988, a group of major creditor nations, known as the Paris Club, agreed for the first time to cancel debts owed to them instead of refinancing them on easier terms as they had done previously. In 1996, the International Monetary Fund (IMF), the World Bank, and the regional development banks agreed to allow a portion of debts owed to them by a select group of countries to be cancelled. This effort is known as the Debt Relief Initiative for Heavily Indebted Poor Countries (HIPC). At the Gleneagles Summit of the Group of Eight (G8) nations in July 2005, the HIPC effort was expanded to provide 100% cancellation of all multilateral debt for countries that have completed the HIPC program. This expanded effort is known as the Multilateral Debt Relief Initiative (MDRI). Some analysts believe that existing multilateral debt relief initiatives are insufficient. They want debt relief for more countries than are currently eligible. To this end, Members of the 110th Congress introduced the Jubilee Act for Responsible Lending and Expanded Debt Cancellation of 2008 (H.R. 2634/S. 2166). The bill has been approved by the House of Representatives and reported favorably by the Senate Foreign Relations Committee. The act seeks to expand HIPC/MDRI debt relief to an additional 24 countries, which are eligible to receive 100% of their World Bank assistance from the International Development Association (IDA), the World Bank's low-income lending facility. So-called "blend" countries, those eligible to receive World Bank assistance from the concessional and market-rate windows of the World Bank, would not be eligible for Jubilee debt relief. The act directs the Secretary of the Treasury to undertake negotiations with other bilateral creditors and with the multilateral agencies in order to provide complete debt relief for the 24 countries. Proponents of the legislation argue that on equity and policy grounds, a strong case can be made that the so-called Jubilee countries should have access to the same level of debt relief as provided to the equally-poor HIPC countries. Critics counter that the proposed legislation raises several policy concerns. First, even if the United States approves the proposal, multilateral debt relief would require the assent and collaboration of other donor nations, many of whom have expressed little interest in a new round of multilateral debt relief. The proponents of the legislation want the international financial institutions (IFIs) to absorb the cost of additional debt relief from existing resources. It is not clear if other major countries would agree to such a plan. Also, the IFIs' capacity to maintain the present size of their programs might be constrained if debt relief were funded out of existing resources. Lastly, many analysts question the ability of debt relief -- absent broader social, economic, and governance changes in the poor countries -- to achieve poverty reduction and growth. The proponents argue, nonetheless, that it is unfair and wrong that one group of very poor countries should have their debts forgiven totally while another very similar group must repay in full. This report will be updated as events warrant.
Related Bills:
H.R.2634
S.2166
XML
