[House Report 110-575]
[From the U.S. Government Publishing Office]
110th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 110-575
======================================================================
JUBILEE ACT FOR RESPONSIBLE LENDING AND EXPANDED DEBT CANCELLATION OF
2008
_______
April 10, 2008.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Frank of Massachusetts, from the Committee on Financial Services,
submitted the following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany H.R. 2634]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 2634) to provide for greater responsibility in
lending and expanded cancellation of debts owed to the United
States and the international financial institutions by low-
income countries, and for other purposes, having considered the
same, report favorably thereon with an amendment and recommend
that the bill as amended do pass.
CONTENTS
Page
Amendment........................................................ 1
Purpose and Summary.............................................. 6
Background and Need for Legislation.............................. 7
Hearings......................................................... 14
Committee Consideration.......................................... 14
Committee Votes.................................................. 14
Committee Oversight Findings..................................... 15
Performance Goals and Objectives................................. 15
New Budget Authority, Entitlement Authority, and Tax Expenditures 15
Committee Cost Estimate.......................................... 15
Congressional Budget Office Estimate............................. 15
Federal Mandates Statement....................................... 16
Advisory Committee Statement..................................... 16
Constitutional Authority Statement............................... 16
Applicability to Legislative Branch.............................. 17
Earmark Identification........................................... 17
Section-by-Section Analysis of the Legislation................... 17
Changes in Existing Law Made by the Bill, as Reported............ 20
Additional Views................................................. 25
Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Jubilee Act for Responsible Lending
and Expanded Debt Cancellation of 2008''.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) Many low-income countries have been struggling under the
burden of international debts for many years.
(2) Since 1996, when the Heavily Indebted Poor Countries
Initiative (HIPC) was created, more than 30 nations have seen
some form of debt relief totaling approximately
$80,000,000,000.
(3) Congress has demonstrated its support for bilateral and
multilateral debt relief through the enactment of comprehensive
debt relief initiatives for heavily indebted low-income
countries in--
(A) title V of H.R. 3425 of the 106th Congress, as
enacted into law by section 1000(a)(5) of the Act
entitled ``An Act making consolidated appropriations
for the fiscal year ending September 30, 2000, and for
other purposes'', approved November 29, 1999 (Public
Law 106-113; 113 Stat. 1501-311) and the amendments
made by such title;
(B) title II of H.R. 5526 of the 106th Congress, as
enacted into law by section 101(a) of the Act entitled
``An Act making appropriations for foreign operations,
export financing, and related programs for the fiscal
year ending September 30, 2001, and for other
purposes'', approved November 6, 2000 (Public Law 106-
429; 114 Stat. 1900A-5); and
(C) title V of the United States Leadership Against
HIV/AIDS, Tuberculosis, and Malaria Act of 2003 (Public
Law 108-25; 117 Stat. 747) and the amendment made by
such title.
(4) In 2005, the United States and other G-8 nations reached
an agreement to provide cancellation of 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.
(5) The 2005 agreement led to the creation of the
Multilateral Debt Relief Initiative (MDRI). As of April 2007,
22 nations have seen the majority of their debts to the IMF,
World Bank, and African Development Bank cancelled under the
terms of the MDRI. In March 2007, the Inter-American
Development Bank announced it would provide full debt
cancellation to 5 Latin American countries on MDRI terms.
(6) Resources released by debt relief efforts to date are
reaching the poor. Cameroon is using the $29,800,000 of savings
it will gain from the MDRI in 2006 for national poverty
reduction priorities, including infrastructure, social sector
and governance reforms. Uganda is using its $57,900,000 savings
in 2006 on improving energy infrastructure to try to ease acute
electricity shortages, as well as primary education, malaria
control, healthcare and water infrastructure (specifically
targeting the poor and under-served villages). Zambia is using
its savings of $23,800,000 under the MDRI in 2006 to increase
spending on agricultural projects, such as smallholder
irrigation and livestock disease control, as well as to
eliminate fees for healthcare in rural areas.
(7) While debt cancellation has a record of success, there
remains an unfinished agenda on international debt. There are a
number of challenges to both the effective reduction of poverty
and inequality and the achievement of broader debt
cancellation.
(8) 2007 is an important year to address the unfinished
agenda on international debt as the global Jubilee debt
campaign has declared 2007 a ``Sabbath year'', 7 years after
the historic Jubilee 2000 campaign.
(9) A critical issue which needs to be addressed on debt is
the way that non-concessional lenders stand to gain financially
from lending to poor countries that have benefited from debt
relief without having paid for past debt relief or facing the
prospect of paying for the future relief of unsustainable and
irresponsible new lending. In these cases, the gains of debt
relief for poor debtor countries are at risk of being eroded.
This takes the form of new lending to countries that have
received debt cancellation from countries including China.
(10) It is also essential that all lenders and borrowers
accept co-responsibility and learn from past mistakes--as
evidenced by the debt crisis itself--by making more productive
investment choices and engaging in more responsible lending and
borrowing in the future. In October 2006, Norway became the
first creditor to accept co-responsibility for past lending
mistakes and cancelled the debt of 5 nations on the grounds
that the loans reflected poor development policy.
(11) A growing number of governments and intergovernmental
bodies, including the United Kingdom, the European Commission,
and Norway, are raising concerns about the harmful impacts of
economic policy conditionality. Many impoverished countries
that have received debt cancellation under the HIPC and MDRI
initiatives have done so at a high social cost, because they
have had to implement economic policy conditions such as
privatization of public utilities and other basic services,
adhere to budget ceilings imposed by the IMF, and comply with
other harmful requirements. Some of these policies have had the
effect of limiting fiscal space for productive investment and
threatening growth and human development. Several countries
currently eligible for debt cancellation under the HIPC or MDRI
programs are facing extended delays in receiving cancellation
because they are struggling to comply with such requirements
from the IMF and World Bank.
(12) There is also an urgent need to look beyond the
constraints of current debt relief initiatives to address the
need for expanded debt cancellation. The current initiatives
allow countries to qualify for relief based on economic
criteria rather than human needs. A January 2007 report by the
United Nations Human Rights Council found that eligibility for
debt cancellation should be expanded to cover all low-income
countries.
(13) The government of the United Kingdom has proposed that
qualification for the MDRI be extended to the 67 nations which
qualify for assistance exclusively from the International
Development Association. To be eligible for cancellation,
countries must meet requirements pertaining to public financial
management, anti-corruption measures, and budget transparency.
(14) Since debt cancellation is an essential component of the
United States development assistance strategy and the United
States has been able to lead the debt cancellation efforts of
the international community by example, the United States
should continue to work to improve and expand initiatives in
this area.
(15) The United States has been a leader in supporting debt
relief efforts to date and should continue to work to improve
and expand initiatives in this area.
SEC. 3. CANCELLATION OF DEBT OWED BY ELIGIBLE LOW-INCOME COUNTRIES.
Title XVI of the International Financial Institutions Act (22 U.S.C.
262p-262p-8) is amended by adding at the end the following:
``SEC. 1626. CANCELLATION OF DEBT OWED BY ELIGIBLE LOW-INCOME
COUNTRIES.
``(a) In General.--The Secretary of the Treasury shall commence
immediate efforts, within the Paris Club of Official Creditors, the
International Monetary Fund (IMF), the International Bank for
Reconstruction and Development (World Bank), and the other
international financial institutions (as defined in section
1701(c)(2)), to negotiate an agreement to accomplish the following:
``(1) Cancellation by each international financial
institution of all debts owed to the institution by eligible
low-income countries, and, to the extent possible, financing
the debt cancellation from the ongoing operations, procedures,
and accounts of the institution.
``(2) Cancellation by the United States of all debts owed to
it by eligible low-income countries.
``(3) Ensuring that any waiting period for the enhanced debt
cancellation is not excessive.
``(4) Ensuring that the provision of debt cancellation to
eligible low-income countries is not followed by a reduction in
the provision of any other development assistance to the
countries by international financial institutions and bilateral
creditors.
``(5) Encouraging the government of each eligible low-income
country to allocate at least 20 percent of its national budget
towards poverty-alleviation programs such as the provision of
basic health care services, education services, and clean water
services to all individuals in the country.
This subsection shall not be interpreted to authorize the Secretary of
the Treasury to enter into an agreement to accomplish any of the
foregoing without express congressional authorization to do so.
``(b) Establishment of Framework for Creditor Transparency.--The
Secretary of the Treasury shall commence immediate efforts, within the
Paris Club of Official Creditors, the International Monetary Fund, the
World Bank, and the other international financial institutions (as so
defined), to ensure that each of the institutions--
``(1) continues to make efforts to promote greater
transparency regarding the activities of the institution,
including credit, grant, guarantee, and technical assistance
operations, following a policy of maximum disclosure; and
``(2) supports continued efforts to allow informed
participation and input by affected communities, including
translation of information on proposed projects, provision of
information (including draft documents) through information
technology application, oral briefings, and outreach to and
dialogue with community organizations and institutions in
affected areas.
``(c) Establishment of Framework for Responsible Lending.--The
Secretary of the Treasury shall commence immediate efforts to--
``(1) develop and promote policies to ensure all creditors,
with no distinction, will contribute to preserving the gains of
debt relief for low-income debtor countries;
``(2) provide that the external financing needs of low-income
countries are met primarily through grant financing rather than
new lending;
``(3) seek the international adoption of a binding legal
framework on new lending that--
``(A) guarantees that no creditor can take or expect
to take financial advantage of acquired or newly
awarded debt relief through the terms and rates of such
lending to beneficiary countries;
``(B) is binding on all creditors, whether
multilateral, bilateral or private;
``(C) foresees, as a sanction for creditors who
violate it, an equitable share in the burden of the
losses from any future debt relief needed by the
sovereign debtor to whom lending was irresponsibly
provided;
``(D) provides for decisions on irresponsible lending
to be made by an entity independent from the creditors;
and
``(E) enables fair opportunities for the people of
the affected country to be heard; and
``(4) support the development of responsible financing
standards where creditors and aid/loan recipients alike adhere
to standards to assure transparency and accountability to
citizens, human rights, and the avoidance of new odious debt,
while encouraging the development of renewable energy and
helping countries to transition away from dependence on oil.
``(d) GAO Audit of Debt Portfolios of Countries With Questionable
Loans.--
``(1) In general.--The Comptroller General of the United
States shall undertake an audit of the debt portfolios of
previous governments in countries such as the Democratic
Republic of Congo and South Africa, where there is significant
evidence that odious, onerous, or illegal loans were made to
the government. Each such audit shall--
``(A) consider debt owed to the World Bank, the IMF,
and the other international financial institutions (as
so defined), export credit debts owed to governments,
and debts owed to commercial creditors, and assess
whether or not past investments produced the intended
results;
``(B) investigate the process by which the loans were
contracted, how the funds were used, and determine
whether United States or international laws were
violated in the contraction of these loans, and whether
any of the loans were odious or onerous; and
``(C) be planned and executed in a transparent and
consultative manner, engaging congressional bodies and
civil society groups in the countries.
``(2) Report.--Within 2 years after the date of the enactment
of this section, the Comptroller General of the United States
shall prepare and submit to the Committees on Financial
Services and on Foreign Affairs of the House of Representatives
and the Committees on Banking, Housing, and Urban Affairs and
on Foreign Relations of the Senate a report that contains the
results of the audits undertaken under paragraph (1).
``(e) Availability on Treasury Department Website of Remarks of
United States Executive Directors at Meetings of International
Financial Institutions' Boards of Directors.--The Secretary of the
Treasury shall make available on the website of the Department of the
Treasury the full record of the remarks of the United States Executive
Director at meetings of the boards of directors of the International
Monetary Fund, the World Bank, and the other international financial
institutions (as so defined), about cancellation or reduction of debts
owed to the institution involved, with redaction by the Secretary of
the Treasury of material deemed too sensitive for public distribution,
but showing the topic, amount of material redacted, and reason for the
redaction.
``(f) Report From the Comptroller General.--Within 1 year after the
date of the enactment of this section, the Comptroller General of the
United States shall prepare and submit to the Committees on Financial
Services and on Foreign Affairs of the House of Representatives and the
Committees on Banking, Housing, and Urban Affairs and on Foreign
Relations of the Senate a report on the availability of the ongoing
operations, procedures, and accounts of the IMF, the World Bank, and
the other international financial institutions (as so defined) for
canceling the debt of eligible low-income countries.
``(g) Annual Reports From the President.--Not later than December 31
of each year, the President shall submit to the Committees on Financial
Services and on Foreign Affairs of the House of Representatives and the
Committees on Foreign Relations and on Banking, Housing, and Urban
Affairs of the Senate a report, which shall be made available to the
public, on the activities undertaken under this section, and other
progress made in accomplishing the purposes of this section, for the
prior fiscal year. The report shall include a list of the countries
that have received debt cancellation, a list of the countries whose
request for debt cancellation has been denied and the reasons therefor,
and a list of the countries whose requests for debt cancellation are
under consideration.
``(h) Eligible Low-Income Country Defined.--In this section, the term
`eligible low-income country' means a country--
``(1) that is eligible for financing from the International
Development Association but not the World Bank, and does not
qualify for debt relief under the Enhanced HIPC Initiative (as
defined in section 1625(e)(3)) and under the Multilateral Debt
Relief Initiative;
``(2) that has transparent and effective budget execution and
public financial management systems which ensure that the
savings from debt relief are spent on reducing poverty;
``(3) the government of which does not have an excessive
level of military expenditures;
``(4) the government of which has not repeatedly provided
support for acts of international terrorism, as determined by
the Secretary of State under section 6(j)(1) of the Export
Administration Act of 1979 (50 U.S.C. App. 2405(j)(1)), or
section 620A(a) of the Foreign Assistance Act of 1961 (22
U.S.C. 2371(a));
``(5) the government of which is cooperating on international
narcotics control matters; and
``(6) the government of which (including its military or
other security forces) does not engage in a consistent pattern
of gross violations of internationally recognized human
rights.''.
SEC. 4. LIMITATION ON CONDITIONALITY OF DEBT RELIEF FOR ELIGIBLE LOW-
INCOME COUNTRIES.
Title XVI of the International Financial Institutions Act (22 U.S.C.
262p-262p-8) is further amended by adding at the end the following:
``SEC. 1627. LIMITATION ON CONDITIONALITY OF DEBT RELIEF FOR ELIGIBLE
LOW-INCOME COUNTRIES.
``(a) In General.--The Secretary of the Treasury shall commence
immediate efforts within the Paris Club of Official Creditors, the
International Monetary Fund (IMF), the International Bank for
Reconstruction and Development (World Bank), and the other
international financial institutions (as defined in section
1701(c)(2)), to ensure that debt cancellation is provided to eligible
low-income countries (as defined in section 1626(h)) without any
conditions except requiring the government of such a country to--
``(1) take steps so that the financial benefits of debt
relief are applied to programs to combat poverty (in particular
through concrete measures to improve economic infrastructure,
basic services in education, nutrition, and health,
particularly treatment and prevention of the leading causes of
mortality) and to redress environmental degradation;
``(2) make policy decisions through transparent and
participatory processes;
``(3) adopt an integrated development strategy to support
poverty reduction through economic growth, that includes
monitorable poverty reduction goals;
``(4) implement transparent policy making and budget
procedures, good governance, and effective anticorruption
measures;
``(5) broaden public participation and popular understanding
of the principles and goals of poverty reduction, particularly
through economic growth, and good governance;
``(6) promote the participation of citizens and
nongovernmental organizations in the economic policy choices of
the government; and
``(7) produce an annual report disclosing how the savings
from debt cancellation were used, and make the report publicly
available and easily accessible to all interested parties,
including civil society groups and the media.
``(b) Annual Reports to the Congress.--Not later than December 31 of
each year, the President shall submit to the Committees on Financial
Services and on International Relations of the House of Representatives
and the Committees on Foreign Relations and on Banking, Housing, and
Urban Affairs of the Senate a report, which shall be made available to
the public, on the activities undertaken under this section, and other
progress made in accomplishing the purposes of this section, for the
prior fiscal year.''.
SEC. 5. SENSE OF THE CONGRESS.
It is the sense of the Congress that to further the goals of debt
reduction for low-income countries, in addition to the efforts
described in this Act, the United States should pay off outstanding
arrearages of $595,800,000 to the International Development Association
and regional development banks, and become current on all debt
reduction efforts, including those carried out by the International
Development Association and under the Enhanced Heavily Indebted Poor
Countries Initiative and the Multilateral Debt Relief Initiative.
Purpose and Summary
H.R. 2634, the ``Jubilee Act for Responsible Lending and
Expanded Debt Cancellation of 2008,'' authorizes the Secretary
of the Treasury to commence immediate efforts to negotiate with
the Paris Club and the international financial institutions to
establish an agreement that provides full cancellation of the
debts of eligible low-income countries, including those owed to
the United States. Provisions of the bill stipulate that the
agreement shall finance debt cancellation from the ongoing
operations and accounts of the international financial
institutions in a timely way and without a reduction in any
other development assistance to the countries by these
institutions or bilateral creditors. They also stipulate that
the Secretary shall work to require the government of each
eligible low-income country to allocate the savings from debt
cancellation towards poverty-reducing expenditures, and engage
a broad cross-section of civil society groups in determining
how the funds should be allocated. The legislation requires an
annual public report disclosing how the savings from debt
cancellation were used. It also requires that, once a
multilateral agreement is reached, Congress will have to
authorize it.
The legislation requires the Secretary of the Treasury to
commence efforts to achieve multilateral agreements on creditor
transparency and responsible lending. In addition, the
Secretary of the Treasury shall promote greater transparency
regarding the operations of the international financial
institutions by, for instance, disclosing to the public a
maximum level of information and supporting enhanced
participation of, and input by, communities affected by these
operations.
The legislation defines eligibility for debt cancellation
and requires that debt cancellation to eligible low-income
governments is not conditioned on any agreement by such a
government to implement policies except those explicitly
outlined in the bill, such as those that foster transparent and
participatory policies to achieve poverty reduction through
economic growth; ensure sound budget procedures, good
governance and effective anticorruption measures; and produce
and disclose to the public an annual report disclosing how the
savings from debt cancellation were used.
The legislation requires Government Accountability Office
(GAO) audits of the debt portfolios of countries where there is
evidence that odious, onerous, or illegal loans were made to
the government, and a GAO report financing sourcing for debt
cancellation. The legislation requires annual reports from the
President on the progress toward achieving debt cancellation
and requires that the Treasury Department make public its
comments in the international financial institutions' boards of
directors as they pertain to debt cancellation.
Finally, the legislation expresses the sense of the
Congress that to further the goals of debt reduction for low-
income countries, in addition to the efforts described in this
Act, the United States should pay off outstanding arrearages of
$595.8 million to the multilateral development banks and debt
reduction efforts.
Background and Need for Legislation
This Committee has for a number of years worked in a very
bipartisan way on the issue of debt relief for the world's
poorest countries as an essential component in the overall
effort to help alleviate the desperate poverty and misery that
exists in many parts of the world. Reducing debt and freeing
resources from debt service for investment in basic human needs
are not just a moral or humanitarian imperative; they can be
good economic policy. Debt reduction can complement development
assistance by reducing the overhang of debt permanently. By
contributing to a more sustainable debt profile, carefully
designed debt reduction can help improve the capacity of
governments to meet the needs of their people. It can help
create a more attractive environment for private investment and
improve the conditions for sustainable development in general.
Millions of the world's poor live in countries where
crushing foreign debt obligations, almost exclusively to
official bilateral and multilateral creditors, stand in the way
of economic growth and poverty reduction. While there has been
much progress made here, there are still millions of children
and other vulnerable people in Africa, Latin America and Asia--
in the poorest countries in the world--who continue to go
without food, sanitation, or basic medical care. By directing
the Administration to begin advocacy within the international
community to provide complete debt cancellation for an
additional group of the world's poorest countries, the
Committee believes that H.R. 2634, the Jubilee Act for
Responsible Lending and Expanded Debt Cancellation of 2008,
reflects the compassion and understanding that good policy
calls for.
HIGHLY INDEBTED POOR COUNTRIES INITIATIVE (HIPC)
The international financial institutions such as the
International Monetary Fund (IMF) and the World Bank used to
object to the idea that any debts owed to them should be
forgiven at all. But in 1996, at the urging of the G8, the
World Bank and the IMF launched the first ``Highly Indebted
Poor Countries Initiative (HIPC),'' which identified 41 of the
world's poorest countries--many of them in Africa, many ravaged
by AIDS--for debt relief in order to help alleviate the
suffering and misery of millions of the world's most vulnerable
people.
The HIPC Initiative was the first coordinated effort to
include all creditors, particularly the international financial
institutions, in addressing the debt problems of poor
developing countries. The goal of the original HIPC Initiative
was solely to bring countries' debts to ``sustainable'' levels,
which was defined mainly in terms of the net present value of a
country's debt in relation to its exports.
As a condition of receiving debt relief under the initial
HIPC program, a country had to establish a 6-year record of
macroeconomic policy reform under existing IMF and World Bank
lending arrangements before it received any relief. Once the
World Bank and IMF determined that a country had successfully
established a satisfactory track record of policy reform
implementation, their overall debt burden was reduced to a
``sustainable'' level, meaning that in the future,it was
assumed that they would be able to make debt payments on time and
without rescheduling.
This approach of making desperately impoverished countries
continue debt service payments on a so-called ``sustainable''
level of debt was viewed by many as misguided on both
theoretical and practical grounds. Not only did this approach
pay little attention to the negative human consequences of a
government's continued payments on its remaining debt, but a
government's ability to pay back its ``sustainable debt'' was
also based on overly optimistic, often flawed assumptions by
the international financial institutions about a country's
future economic growth, external trade dynamics, and the
availability of financial resources.
THE ``ENHANCED'' HIPC INITIATIVE
In response to widespread criticism of the original
program, in June 1999 at the G-7 summit in Cologne, Germany,
the World Bank and IMF endorsed proposals to modify the HIPC
Initiative. The ``enhanced'' HIPC Initiative represented a
major advance over the original HIPC program, promising much
more debt relief, more rapidly, and to more countries. Also, in
response to concerns that the original Initiative was
insufficiently linked to poverty reduction, the modified HIPC
incorporated a new framework to strengthen the poverty focus of
development programs and to promote country ownership,
transparency and civil society participation in their design
and implementation
This Committee worked very closely with the Administration
to assure that the Enhanced HIPC Initiative included a greater
focus on poverty reduction efforts. Countries receiving debt
relief were now be required to use money freed up by debt
relief for poverty reduction as specified in a three-year
national Poverty Reduction Strategy approved by its lenders.
Before the HIPC Initiative, eligible African countries
were, on average, spending slightly more on debt service than
on health and education combined. Now they have markedly
increased their spending on health, education, and other social
services, and, on average, such spending is more than 5 times
the amount of debt-service payments.
MULTILATERAL DEBT RELIEF INITIATIVE (MDRI)
Despite these gains, after nearly a decade of HIPC, many of
the participating countries continued to suffer under excessive
debt burdens. Thus, in 2005, the G8 countries agreed to tackle
this residual debt through the MDRI by canceling 100 percent of
debts owed by the HIPC countries to the IMF, the World Bank and
the African Development Fund. In March 2007, the Inter-American
Development Bank has agreed to cancel the debts of the five
Latin American countries.
In fact, most of these countries are servicing their
obligations, but only because the multilateral institutions
have offered them new grants and loans to help them repay their
old ones. Many have argued that the current cycle of defensive
lending--in which a chunk of new money lent by the World Bank
is sent straight back to Washington as debt-service payments on
old debt--is absurd. This recycling of funds keeps up
appearances on the balance sheets of the Bank and the Fund,
making bad loans look better than they really are. But it is
also complicated and inefficient, consuming the time and energy
of creditors and debtors. It is far better to write off the
debts altogether, cleaning up the accounts for both creditors
and debtors alike.
The Bush Administration played a critical and leading role
in creating the Multilateral Debt Relief Initiative at the G-8
Summit in 2005. President Bush highlighted the efficacy of debt
relief in his 2007 State of the Union speech, stating ``let us
continue to support the expanded trade and debt relief that are
the best hope for lifting lives and eliminating poverty.''
Under the MDRI agreement, no additional net assistance is
provided because any savings from forgiven multilateral debt
service obligations will be netted out of future International
Development Association (IDA) flows to that country. So the
effect on cash flow for debtor countries would be neutral
because the World Bank will simply net out any debt service
from new IDA credits to each country.
PURPOSE AND NEED FOR LEGISLATION
Debt cancellation is a proven means to reduce poverty. In
recent years, recipient governments have invested released
funds in health care, education, infrastructure, job creation
and economic development programs. Debt relief under two
international initiatives has helped reduce significantly the
debt burden of heavily indebted poor countries in Africa and
freed up additional resources for poverty-reducing and social
expenditures
Before the HIPC Initiative and the MDRI, eligible countries
were, on average, spending slightly more on debt service than
on health and education combined. To date, 23 countries have
reached their completion points and have received irrevocable
debt relief. Ten other countries have reached the first step in
the process and are receiving interim relief on its debt
service falling due. Together, these countries have increased
markedly their expenditures on health, education and other
social services and, on average, such spending is about five
times the amount of debt-service payments.
H.R. 2634, THE JUBILEE ACT FOR RESPONSIBLE LENDING AND EXPANDED DEBT
CANCELLATION OF 2008.
This legislation instructs the Secretary of Treasury to
commence negotiations within the international financial
institutions to negotiate comprehensive debt cancellation for
an additional 24 of the world's poorest countries that are not
already eligible for the debt cancellation approved under the
current initiatives. The bill explicitly states that the Act
authorizes the Secretary of the Treasury to commence immediate
efforts to negotiate an agreement, but it does not authorize
the implementation of any agreement. Once a multilateral
agreement is reached, Congress will have to authorize it by
law.
The Act would make 24 additional low-income nations not
currently eligible for the HIPC/MDRI initiatives potentially
eligible for debt cancellation from the United States and the
international financial institutions, provided they meet human
rights, public financial management, and budget transparency
criteria and demonstrate their ability to use the money well.
To benefit, countries would also have to engage interested
parties, including a broad cross-section of civil society
groups, in the spending allocation process and produce an
annual report on this spending, making it publicly available
and easily accessible. Countries would be excluded from
receiving the debt cancellation under the Jubilee Act if they:
have an excessive level of military
expenditures;
have repeatedly provided support for acts of
international terrorism;
fail to cooperate on international narcotics
control matters; or
engage in a consistent pattern of gross human
rights violations.
EXPANDED DEBT CANCELLATION FOR QUALIFIED COUNTRIES
Some members of the committee have wondered why additional
debt cancellation is necessary when so much debt relief is
already being provided under HIPC and the more recent
Multilateral Debt Relief Initiative. Others have long argued
that the eligibility criteria for the HIPC Initiative fails to
take into account one key critical factor--poverty. That is,
the HIPCs do not include all the poorest countries, just the
ones that are both poor and heavily indebted. The disparity of
treatment between HIPC countries and non-HIPC countries became
clear when the World Bank and IMF conducted an examination of
so-called ``debt sustainability'' in the poorest countries, the
so-called IDA-only countries, which are only allowed to receive
from the World Bank funds from their most concessionary arm.
The primary objective of the exercise was to determine which
countries should receive their future IDA financing either
wholly or partially in the form of grants.
When the exercise was conducted in 2005, it showed that 42
countries were at sufficiently high risk of debt distress to be
eligible for grant financing, instead of the usual loans. The
list included 29 HIPC countries plus 18 other countries. This
meant that there were 18 non-HIPC countries rated as having a
risk of debt distress equal to or greater than the HIPC
countries. Like the HIPC countries, now they were going to get
some grants going forward. But unlike the HIPCs, they would get
no debt relief. One recent study showed that when using a debt-
poverty ratio, there are 30 countries that are both poorer and
more indebted than the least poor and least indebted eligible
HIPCs.
H.R. 2634 addresses this concern by bringing deep debt
relief within the reach of virtually all of the world's poorest
countries. Some will note that the IDA-only criterion for
eligibility under the bill will capture some countries with
relatively low levels of external debt. But all of these
countries are ones with very high levels of poverty, and thus
they need to maximize the amount of resources that they can
marshal to promote human development and move toward the
millennium development goals for reducing poverty.
CONDITIONS AND REQUIREMENTS
Over the last five years there has been a growing
international consensus that economic conditionality often does
more harm than good. The 2005 Commission for Africa report
stated that the ``use of policy conditionality associated with
external assistance should be strongly reduced.'' The United
Kingdom also recently withheld a portion of its IDA
contribution in protest against some of the conditions imposed
by the World Bank on poor countries.
Still, aid to developing countries nearly always comes with
conditions attached, which countries seeking debt forgiveness
are under particular pressure to adopt. Even if some reforms
are necessary to ensure that money will not be misappropriated,
many conditions impose specific, often harmful economic
policies on developing countries.
Twelve years after the inception of HIPC in 1996, many
advocates point to evidence that shows that a number of
conditions and macroeconomic reform requirements that attach to
both debt relief and lending from the IMF and World Bank
sometimes undermine and even negate the benefits of debt
cancellation. In particular, policies that force countries
applying for debt relief to adhere to strict IMF fiscal and
monetary targets, privatize key industries, liberalize their
markets, and remove subsidies for sensitive commodities like
gasoline and cooking oil have been shown to hurt the poorest
and most vulnerable people in these countries.
The requirement that the countries seeking debt relief stay
on track with a Poverty Reduction and Growth Facility (PRGF)
loan from the IMF is of particular concern. PRGF loans include
macroeconomic policy conditions such as maximum inflation
targets and public spending limits, specific levels of currency
reserves that must be attained, and caps on public wages. These
conditions give the IMF the power to dictate spending levels in
a number of sensitive sectors, which in some cases can
undermine democratic processes within a country.
H.R. 2634 mandates that debt cancellation be provided to
eligible low-income countries without any conditions except
those that are explicitly outlined in the bill. These
conditions include a requirement that governments of each
country ensures that the financial benefits of debt relief are
applied to programs to combat poverty; adopts an integrated
development strategy to support poverty reduction through
economic growth, that includes monitorable poverty reduction
goals; makes policy decisions through transparent and
participatory processes; adopts sound budget procedures, good
governance and effective anticorruption measures; and produces
and disclose to the public an annual report disclosing how the
savings from debt cancellation were used.
The Committee notes that while it supports the adoption by
countries of an integrated development strategy to support
poverty reduction, it also believes countries should have the
necessary flexibility to independently change its strategy in
light of changing economic circumstances, or in response to
adjustments made to national development plans by
democratically elected parliaments.
ESTABLISHING A FRAMEWORK FOR TRANSPARENT, RESPONSIBLE LENDING
One of the greatest challenges facing nations that have
received debt cancellation under existing initiatives is the
range of new lenders which threaten to send nations back into
unsustainable debt. To ensure that countries that benefit from
debt relief do not fall back into unsustainable debt, the
Jubilee Act calls on the Secretary of the Treasury to: provide
that the external financing needs of low-income countries are
primarily met through grants rather than new lending; develop
and promote policies to ensure that all creditors work together
to preserve the gains of debt relief; promote the adoption of a
legal framework, binding on all creditors, and overseen by an
independent body with significant input from affected
communities to guarantee that no future creditor can take
advantage of debt relief through the terms of their new lending
(known as free-riding) and to ensure that free-riders would pay
their share of future debt relief made necessary in part by
their irresponsible lending.
The Jubilee Act also calls for greater transparency in
lending. The legislation calls on the Department of Treasury to
commence immediate efforts to encourage Paris Club creditors,
the International Monetary Fund and the World Bank to promote
greater transparency regarding their activities and follow a
policy of maximum disclosure and support continued efforts to
allow greater participation and input by affected communities
and institutions in affected areas.
FINANCING OF DEBT CANCELLATION AND COST TO THE UNITED STATES
This legislation only provides authorization for the
Secretary of the Treasury to commence immediate efforts to
negotiate a multilateral agreement on debt cancellation, but it
does not authorize the implementation of any agreement. Since
the Committee explicitly withholds authorization for any future
agreement that might be reached, there should be no budgetary
impact associated with this Act. The following section provides
estimates on what future costs might be, contingent on the
timing and scope and nature of any future agreement.
Bilateral Debt: The budgetary cost to forgive the U.S.
bilateral debts of the 24 countries that could potentially
qualify for debt cancellation under the Jubilee Act is
estimated at approximately $700 million to $1 billion, spread
over 9 years (2009-2017), or an average annual appropriation of
$106 million.
International Monetary Fund Debt: The 24 countries
potentially covered under the Act owe a total of roughly $2
billion to the IMF. There is growing support for selling a
portion of the IMF's gold holding to pay for some IMF debt
forgiveness, as well as to bolster the World Bank's soft-loan
arm. This approach provides purely additional funds and does
not require any additional contributions.
The IMF's gold reserves are the third largest in the world
after the United States and Germany. The IMF currently holds
103.4 million ounces of gold that are valued on its balance
sheet at about $9 billion. At the current market prices of
about $913/ounce, the IMF's gold holdings amount to roughly $94
billion. In 1999, it revalued 12.9 million ounces of the gold
in off-market transactions as a way to fund the HIPC debt
cancellation.
An internal IMF staff report presented to the board in 2005
shows that selling a small portion of the fund's gold to pay
for debt relief need not cause disruption to the market if the
sale is well managed. By adhering to the terms of the 1999
Central Bank Gold Agreement, which governs future sales of gold
by central banks, the IMF could raise the required resources
without causing market volatility or hurting gold-producing
countries. The report also stresses the need to make clear that
a sale would not be the first stage in an ongoing disposal of
the IMF's gold--and that it would retain large holdings for
prudential reasons.
The World Gold Council, a body representing gold-mining
companies, also voiced conditional support for the sale of some
IMF gold to help pay for the Fund's share of debt relief,
saying it would prefer any sales to be conducted under the
auspices of the Central Bank Gold Agreement to avoid disruption
to the market.
The Administration has indicated support for a proposal to
sell a small portion of the IMF's gold holdings in order to
help fund IMF operations. The Committee believes some
additional gold sales would be appropriate to help finance debt
relief for additional poor countries that are not already
eligible for the debt cancellation approved under the current
initiatives.
The Fund needs near universal support (an 85 percent
majority of voting power) from the IMF Executive Board to
engage in the sale or use of its gold reserves. The IMF is
required under U.S. law to gain support from the U.S. Congress
before selling any IMF gold.
World Bank Debt: The 24 countries potentially covered under
the Act owe a total of roughly $24 billion to the World Bank.
While the cost to cancel the multilateral debts that eligible
countries owe to the World Bank by eligible countries is much
greater, the cost to the United States would be less because
the World Bank has the financial capacity to responsibly
mobilize a share of its large reserves and/or transfer funds
from the annual net income of the IBRD or IFC to cover the
costs of cancellation without any impact on the World Bank's
ability to lend or its credit rating. In fact, the World Bank
Board of Directors recently considered a Capital Adequacy
Report which recognized that the Bank's current equity to loans
ratio is significantly higher than what is necessary to cover
risk and generate sufficient income. The report also identifies
a $10 billion ``capital buffer'' that could be mobilized to
fund debt cancellation.
African Development Bank and Asian Development Bank Debt:
The 24 countries potentially covered under the Act owe a total
of roughly $11.1 billion to the African Development Bank and
Asian Development Bank. While some costs could be borne by the
institutions themselves, the remaining burden would be shared
among other donor governments.
DEBT AUDITS
The Jubilee Act also addresses the problem of odious and
unjust debts (debts accrued by undemocratic regimes or that did
not benefit the population) by requiring the Comptroller
General of the U.S. to undertake audits of debt portfolios of
previous regimes in countries where there is accepted evidence
of odious, onerous or illegal loans, such as the Democratic
Republic of Congo and South Africa. Such audits should consider
debts owed to the World Bank, IMF, and other multilaterals, as
well as export credit debts owed to governments, and commercial
creditors, and assess whether or not past investments produced
the intended results. Furthermore, such audits would
investigate the process by which the loans were contracted, how
the funds were utilized and their product, and determine
whether U.S. and/or international laws were violated in the
contraction of these loans. This is imperative in order to
learn from past errors and ensure more responsible and
productive lending and borrowing moving forward. The audits
should be planned and executed in a transparent and
consultative manner, engaging Congressional bodies and civil
society groups in the countries in question.
Hearings
The Committee on Financial Services held a legislative
hearing entitled ``H.R. 2634, the Jubilee Act for Responsible
Lending and Expanded Debt Cancellation Act of 2008'' on
November 8, 2007. The following witnesses testified:
Mr. Neil Watkins, National Coordinator,
Jubilee USA Network
Ms. Emira Woods, Co-Director, Foreign Policy
in Focus, Institute for Policy Studies
Mr. Gerald F. Flood, Counselor, Office of
International Justice and Peace, U.S. Conference of
Catholic Bishops
Mr. Aldo Caliari, Director, Rethinking
Bretton Woods Project, Center of Concern
Committee Consideration
The Committee on Financial Services met in open session on
April 3, 2008, and ordered H.R. 2634, the ``Jubilee Act for
Responsible Lending and Expanded Debt Cancellation Act of
2008,'' as amended, favorably reported by a voice vote.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. No
record votes were taken in conjunction with the consideration
of this legislation. A motion by Mr. Frank (MA) to report the
bill, as amended, to the House with a favorable recommendation
was agreed to by a voice vote.
During the consideration of the bill, the following
amendment was considered:
An amendment by Mr. Frank (MA), No. 1, a manager's
amendment making various technical and substantive changes, was
agreed to by a voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee has held hearings and
made findings that are reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
H.R. 2634 authorizes the Secretary of the Treasury to
commence immediate efforts to negotiate with the Paris Club and
the international financial institutions to establish an
agreement that provides full cancellation of the debts of
eligible low-income countries, including those owed to the
United States. The Secretary shall work to require the
government of each eligible low-income country to allocate the
savings from debt cancellation towards poverty-reducing
expenditures, and engage a broad cross-section of civil society
groups in determining how the funds should be allocated.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 9, 2008.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2634, the Jubilee
Act for Responsible Lending and Expanded Debt Cancellation of
2008.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Michelle S.
Patterson.
Sincerely,
Robert A. Sunshine
(For Peter R. Orszag).
Enclosure.
H.R. 2634--Jubilee Act for Responsible Lending and Expanded Debt
Cancellation of 2008
H.R. 2634 would require the Secretary of the Treasury to
begin negotiations to cancel debt owed by eligible low-income
countries to the United States and to certain global
organizations, such as the International Monetary Fund and the
World Bank. Agreements to cancel debt could not be finalized
without authorization from the Congress. The bill also would
require the Secretary to promote within the international
community transparent lending processes and responsible
financing policies for the benefit of debtor nations.
Because the Congress must approve any agreements to cancel
bilateral or multilateral debts, CBO estimates that enacting
H.R. 2634, by itself, would have no budgetary impact.
H.R. 2634 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of state, local, or tribal
governments.
The CBO staff contact for this estimate is Michelle S.
Patterson. This estimate was approved by Peter H. Fontaine,
Assistant Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
general welfare of the United States) and clause 3 (relating to
the power to regulate interstate commerce).
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
H.R. 2634 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Section-by-Section Analysis of the Legislation
Sec 1. Short title
Title of the bill: the ``Jubilee Act for Responsible
Lending and Expanded Debt Cancellation of 2008''
Sec. 2. Findings
The Findings of the bill: (1) outline the record of success
under the Heavily Indebted Poor Countries Initiative and the
Multilateral Debt Relief Initiative, as well as the unfinished
agenda on international debt, including effective
implementation of existing commitments and the need for a
broader debt cancellation program; (2) review the strong
Congressional leadership in supporting previous bilateral and
multilateral debt relief efforts; (3) express concern about the
harmful impacts of some of the economic policies imposed on
poor countries as a condition for receiving debt relief; (4)
discuss appropriate conditionality; and (5) raise the critical
issue of new non-concessional loans to countries that have
benefited from debt relief.
Sec. 3. Cancellation of debt owed by eligible low-income countries
This section requires the Secretary of the Treasury to
commence immediate efforts, within the Paris Club and
international financial institutions, to negotiate an agreement
to provide full cancellation of the debts of eligible low-
income countries, including those owed to the United States.
The Act requires the Secretary of the Treasury to ensure,
to the extent possible, that the international financial
institutions finance debt cancellation from the ongoing
operations, procedures, and accounts of each institution, and
ensure that any waiting period for the enhanced debt
cancellation is not excessive.
The Secretary of the Treasury shall work to ensure that the
provision of debt cancellation to eligible low-income countries
is not followed by a reduction of any other development
assistance to the countries by international financial
institutions and bilateral creditors.
The Secretary shall also work to require the government of
each eligible low-income country to allocate the savings from
debt cancellation towards poverty-reducing expenditures, and
engage a broad cross-section of civil society groups in the
allocation determination process.
The Act requires an annual public report disclosing how the
savings from debt cancellation were used.
The Act authorizes the Secretary of the Treasury to
commence immediate efforts to negotiate an agreement, but it
does not explicitly authorize the implementation of any
agreement. Once a multilateral agreement is reached, Congress
will have to authorize it.
Establishment of framework for creditor transparency
The Secretary of the Treasury shall commence immediate
efforts to continue to promote greater transparency regarding
the activities of the international financial institutions,
including credit, grant, guarantee, and technical assistance
operations, following a policy of maximum disclosure; and
support continued efforts to allow informed participation and
input by affected communities, including translation of
information on proposed projects, provision of information
(including draft documents) through outreach and dialogue with
community organizations and institutions in affected areas.
Establishment of framework for responsible lending
The Secretary of the Treasury shall commence immediate
efforts to seek the international adoption of a binding legal
framework on new lending that (A) guarantees that no creditor
can take or expect to take financial advantage of acquired or
newly awarded debt relief through the terms and rates of their
new lending to beneficiary countries; (B) is binding on all
creditors, whether multilateral, bilateral or private; (C)
foresees, as a sanction for creditors who violate it, an
equitable share in the burden of the losses from any future
debt relief needed by the sovereign debtor to whom lending was
irresponsibly provided; (D) provides for decisions on
irresponsible lending to be made by an entity independent from
the creditors; and (E) enables fair opportunities for the
people of the affected country to be heard.
The Secretary of the Treasury shall support the development
of responsible financing standards where creditors and aid/loan
recipients alike adhere to standards to assure transparency and
accountability to citizens, human rights, and the avoidance of
new odious debt, while encouraging the development of renewable
energy and helping countries to transition away from dependence
on oil.
The Secretary of the Treasury shall also commence immediate
efforts to provide that the external financing needs of low-
income countries are met primarily through grant financing
rather than new lending.
GAO audit of debt portfolios of countries with questionable
loans
The Comptroller General of the United States shall
undertake an audit of the debt portfolios of previous
governments in countries such as the Democratic Republic of
Congo and South Africa, where there is significant evidence
that odious, onerous, or illegal loans were made tothe
government. The Comptroller General of the United States shall prepare
and submit to the relevant congressional committees a report that
contains the results of these audits within 2 years after the date of
the enactment of this section.
Availability on Treasury Department Website of remarks of
U.S. executive directors at meetings of
international financial institutions' boards of
directors
The Secretary of the Treasury shall make available on the
website of the Department of the Treasury the full record of
the remarks of the United States Executive Director at meetings
of the boards of directors of each international financial
institution about cancellation or reduction of debts owed to
the institution involved, with redaction by the Secretary of
the Treasury of material deemed too sensitive for public
distribution, but showing the topic, amount of material
redacted, and reason for the redaction.
Report from the Comptroller General
Within 1 year after the date of the enactment of this
section, the Comptroller General of the United States shall
prepare and submit to Congress a report on the availability of
the ongoing operations, procedures, and accounts of the IMF,
the World Bank, and the other international financial
institutions for canceling the debt of eligible low-income
countries.
Annual reports from the President
Not later than December 31 of each year, the President
shall submit to the relevant congressional committees a public
report on the progress made in accomplishing the purposes of
this section, including a list of the countries that have
received debt cancellation, a list of the countries whose
request for debt cancellation has been denied and why, and a
list of the countries whose requests for debt cancellation are
under consideration.
Eligible low-income country defined
The term ``eligible low-income country'' is defined as a
country that (1) is eligible for financing only from the
International Development Association and has not already
qualified for debt relief under HIPC and MDRI; (2) has
transparent and effective budget execution and public financial
management systems which ensure that the savings from debt
relief are spent on reducing poverty; (3) does not have an
excessive level of military expenditures; (4) has not
repeatedly provided support for acts of international
terrorism, as determined by the Secretary of State and defined
under U.S. law; (5) is cooperating on international narcotics
control matters; and (6) is not engaging in a consistent
pattern of gross violations of internationally recognized human
rights, including through its military or other security
forces.
Sec. 4. Limitation on conditionality of debt relief for eligible low-
income countries
The Secretary of the Treasury shall commence immediate
efforts within the Paris Club of bilateral creditors and within
the international financial institutions to ensure that the
provision of debt cancellation to eligible low-income
governments is not conditioned on any agreement by such a
government to implement policies except those explicitly
outlined in the bill, such as those that foster transparent and
participatory policies to achieve poverty reduction through
economic growth; ensure sound budget procedures, good
governance and effective anticorruption measures; and produce
and disclose to the public an annual report disclosing how the
savings from debt cancellation were used.
Annual reports to the Congress
Not later than December 31 of each year, the President
shall submit to the relevant congressional committees a public
report on the progress made in accomplishing the purposes of
this section.
Sec. 5. Sense of the Congress
This section expresses the sense of the Congress that to
further the goals of debt reduction for low-income countries,
in addition to the efforts described in this Act, the United
States should pay off outstanding arrearages of $595.8 million
to the multilateral development banks and debt reduction
efforts.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
INTERNATIONAL FINANCIAL INSTITUTIONS ACT
* * * * * * *
TITLE XVI--HUMAN WELFARE
* * * * * * *
SEC. 1626. CANCELLATION OF DEBT OWED BY ELIGIBLE LOW-INCOME COUNTRIES.
(a) In General.--The Secretary of the Treasury shall commence
immediate efforts, within the Paris Club of Official Creditors,
the International Monetary Fund (IMF), the International Bank
for Reconstruction and Development (World Bank), and the other
international financial institutions (as defined in section
1701(c)(2)), to negotiate an agreement to accomplish the
following:
(1) Cancellation by each international financial
institution of all debts owed to the institution by
eligible low-income countries, and, to the extent
possible, financing the debt cancellation from the
ongoing operations, procedures, and accounts of the
institution.
(2) Cancellation by the United States of all debts
owed to it by eligible low-income countries.
(3) Ensuring that any waiting period for the enhanced
debt cancellation is not excessive.
(4) Ensuring that the provision of debt cancellation
to eligible low-income countries is not followed by a
reduction in the provision of any other development
assistance to the countries by international financial
institutions and bilateral creditors.
(5) Encouraging the government of each eligible low-
income country to allocate at least 20 percent of its
national budget towards poverty-alleviation programs
such as the provision of basic health care services,
education services, and clean water services to all
individuals in the country.
This subsection shall not be interpreted to authorize the
Secretary of the Treasury to enter into an agreement to
accomplish any of the foregoing without express congressional
authorization to do so.
(b) Establishment of Framework for Creditor Transparency.--
The Secretary of the Treasury shall commence immediate efforts,
within the Paris Club of Official Creditors, the International
Monetary Fund, the World Bank, and the other international
financial institutions (as so defined), to ensure that each of
the institutions--
(1) continues to make efforts to promote greater
transparency regarding the activities of the
institution, including credit, grant, guarantee, and
technical assistance operations, following a policy of
maximum disclosure; and
(2) supports continued efforts to allow informed
participation and input by affected communities,
including translation of information on proposed
projects, provision of information (including draft
documents) through information technology application,
oral briefings, and outreach to and dialogue with
community organizations and institutions in affected
areas.
(c) Establishment of Framework for Responsible Lending.--The
Secretary of the Treasury shall commence immediate efforts to--
(1) develop and promote policies to ensure all
creditors, with no distinction, will contribute to
preserving the gains of debt relief for low-income
debtor countries;
(2) provide that the external financing needs of low-
income countries are met primarily through grant
financing rather than new lending;
(3) seek the international adoption of a binding
legal framework on new lending that--
(A) guarantees that no creditor can take or
expect to take financial advantage of acquired
or newly awarded debt relief through the terms
and rates of such lending to beneficiary
countries;
(B) is binding on all creditors, whether
multilateral, bilateral or private;
(C) foresees, as a sanction for creditors who
violate it, an equitable share in the burden of
the losses from any future debt relief needed
by the sovereign debtor to whom lending was
irresponsibly provided;
(D) provides for decisions on irresponsible
lending to be made by an entity independent
from the creditors; and
(E) enables fair opportunities for the people
of the affected country to be heard; and
(4) support the development of responsible financing
standards where creditors and aid/loan recipients alike
adhere to standards to assure transparency and
accountability to citizens, human rights, and the
avoidance of new odious debt, while encouraging the
development of renewable energy and helping countries
to transition away from dependence on oil.
(d) GAO Audit of Debt Portfolios of Countries With
Questionable Loans.--
(1) In general.--The Comptroller General of the
United States shall undertake an audit of the debt
portfolios of previous governments in countries such as
the Democratic Republic of Congo and South Africa,
where there is significant evidence that odious,
onerous, or illegal loans were made to the government.
Each such audit shall--
(A) consider debt owed to the World Bank, the
IMF, and the other international financial
institutions (as so defined), export credit
debts owed to governments, and debts owed to
commercial creditors, and assess whether or not
past investments produced the intended results;
(B) investigate the process by which the
loans were contracted, how the funds were used,
and determine whether United States or
international laws were violated in the
contraction of these loans, and whether any of
the loans were odious or onerous; and
(C) be planned and executed in a transparent
and consultative manner, engaging congressional
bodies and civil society groups in the
countries.
(2) Report.--Within 2 years after the date of the
enactment of this section, the Comptroller General of
the United States shall prepare and submit to the
Committees on Financial Services and on Foreign Affairs
of the House of Representatives and the Committees on
Banking, Housing, and Urban Affairs and on Foreign
Relations of the Senate a report that contains the
results of the audits undertaken under paragraph (1).
(e) Availability on Treasury Department Website of Remarks of
United States Executive Directors at Meetings of International
Financial Institutions' Boards of Directors.--The Secretary of
the Treasury shall make available on the website of the
Department of the Treasury the full record of the remarks of
the United States Executive Director at meetings of the boards
of directors of the International Monetary Fund, the World
Bank, and the other international financial institutions (as so
defined), about cancellation or reduction of debts owed to the
institution involved, with redaction by the Secretary of the
Treasury of material deemed too sensitive for public
distribution, but showing the topic, amount of material
redacted, and reason for the redaction.
(f) Report From the Comptroller General.--Within 1 year after
the date of the enactment of this section, the Comptroller
General of the United States shall prepare and submit to the
Committees on Financial Services and on Foreign Affairs of the
House of Representatives and the Committees on Banking,
Housing, and Urban Affairs and on Foreign Relations of the
Senate a report on the availability of the ongoing operations,
procedures, and accounts of the IMF, the World Bank, and the
other international financial institutions (as so defined) for
canceling the debt of eligible low-income countries.
(g) Annual Reports From the President.--Not later than
December 31 of each year, the President shall submit to the
Committees on Financial Services and on Foreign Affairs of the
House of Representatives and the Committees on Foreign
Relations and on Banking, Housing, and Urban Affairs of the
Senate a report, which shall be made available to the public,
on the activities undertaken under this section, and other
progress made in accomplishing the purposes of this section,
for the prior fiscal year. The report shall include a list of
the countries that have received debt cancellation, a list of
the countries whose request for debt cancellation has been
denied and the reasons therefor, and a list of the countries
whose requests for debt cancellation are under consideration.
(h) Eligible Low-Income Country Defined.--In this section,
the term ``eligible low-income country'' means a country--
(1) that is eligible for financing from the
International Development Association but not the World
Bank, and does not qualify for debt relief under the
Enhanced HIPC Initiative (as defined in section
1625(e)(3)) and under the Multilateral Debt Relief
Initiative;
(2) that has transparent and effective budget
execution and public financial management systems which
ensure that the savings from debt relief are spent on
reducing poverty;
(3) the government of which does not have an
excessive level of military expenditures;
(4) the government of which has not repeatedly
provided support for acts of international terrorism,
as determined by the Secretary of State under section
6(j)(1) of the Export Administration Act of 1979 (50
U.S.C. App. 2405(j)(1)), or section 620A(a) of the
Foreign Assistance Act of 1961 (22 U.S.C. 2371(a));
(5) the government of which is cooperating on
international narcotics control matters; and
(6) the government of which (including its military
or other security forces) does not engage in a
consistent pattern of gross violations of
internationally recognized human rights.
SEC. 1627. LIMITATION ON CONDITIONALITY OF DEBT RELIEF FOR ELIGIBLE
LOW-INCOME COUNTRIES.
(a) In General.--The Secretary of the Treasury shall commence
immediate efforts within the Paris Club of Official Creditors,
the International Monetary Fund (IMF), the International Bank
for Reconstruction and Development (World Bank), and the other
international financial institutions (as defined in section
1701(c)(2)), to ensure that debt cancellation is provided to
eligible low-income countries (as defined in section 1626(h))
without any conditions except requiring the government of such
a country to--
(1) take steps so that the financial benefits of debt
relief are applied to programs to combat poverty (in
particular through concrete measures to improve
economic infrastructure, basic services in education,
nutrition, and health, particularly treatment and
prevention of the leading causes of mortality) and to
redress environmental degradation;
(2) make policy decisions through transparent and
participatory processes;
(3) adopt an integrated development strategy to
support poverty reduction through economic growth, that
includes monitorable poverty reduction goals;
(4) implement transparent policy making and budget
procedures, good governance, and effective
anticorruption measures;
(5) broaden public participation and popular
understanding of the principles and goals of poverty
reduction, particularly through economic growth, and
good governance;
(6) promote the participation of citizens and
nongovernmental organizations in the economic policy
choices of the government; and
(7) produce an annual report disclosing how the
savings from debt cancellation were used, and make the
report publicly available and easily accessible to all
interested parties, including civil society groups and
the media.
(b) Annual Reports to the Congress.--Not later than December
31 of each year, the President shall submit to the Committees
on Financial Services and on International Relations of the
House of Representatives and the Committees on Foreign
Relations and on Banking, Housing, and Urban Affairs of the
Senate a report, which shall be made available to the public,
on the activities undertaken under this section, and other
progress made in accomplishing the purposes of this section,
for the prior fiscal year.
* * * * * * *
ADDITIONAL VIEWS
H.R. 2634, the ``Jubilee Act for Responsible Lending and
Expanded Debt Cancellation of 2008,'' authorizes the Secretary
of the Treasury to negotiate with the Paris Club and
international financial institutions a debt relief agreement
for certain low-income countries that have not received debt
relief under previous programs. Such an agreement is expected
to include bilateral and multilateral debt cancellation for
low-income countries that are eligible for International
Development Association assistance. Once negotiated,
implementation would require Congressional approval.
The Jubilee Act will build on the immensely successful debt
relief efforts begun more than a decade ago under the Heavily
Indebted Poor Countries (HIPC) initiative and continued in the
``Enhanced HIPC'' and the Multilateral Debt Relief Initiative
(MDRI). In countries where debt relief has been completed,
national debt has been reduced by two-thirds and spending on
reducing hunger and improving health, education, and social
services now is four times greater than the amount of previous
debt payments. The Jubilee Act would build on these successes.
By doing so, it would serve United States national interests by
helping to combat the poverty that breeds unrest and
instability and creates the conditions that allow dictators and
terrorists to thrive. Paying for the U.S. share of the expected
first round of debt relief under the Jubilee Act would cost no
more than 50 cents apiece for every man, woman, and child in
this country.
The bill reported by the Committee on Financial Services
makes a number of important improvements to the introduced
version: establishing conditions for receipt of the debt
reduction, breaking debt relief into a two-step process--
negotiation, followed by implementation--and deleting language
that would be either controversial or duplicative of other
legislation. It also contains a ``Sense of Congress'' section
expressing the view that while pressing forward on new debt-
relief programs, the U.S. should become current in its existing
debt relief obligations, which are currently $600 million in
arrears.
Spencer Bachus.
Judy Biggert.