By Emad Mekay
WASHINGTON, Jun 7 2004 (IPS)

U.S. legislators are examining a new bill that would completely cancel the debts that poor countries owe to the International Monetary Fund (IMF).

The Jubilee Act would require the U.S. Treasury to work with multilateral lenders to achieve 100 percent cancellation of the debts of 50 nations, mostly in Africa, Latin America and Asia.

The Washington-based IMF would be asked to finance the debts from its own resources without imposing additional conditions on the debtor nations.

In the past, the Fund has typically compelled borrowing countries to agree to certain conditions before receiving their loans. They include: balancing their fiscal budgets, devaluing their currencies, implementing anti-inflation monetary measures – such as high interest rates – and imposing tighter lending policies.

"We believe this is actually ground-breaking legislation because it would be the first time that the U.S. would call on the IMF to cancel 100-percent of debt for more than just the usual suspect countries, for a total of 50 countries, and from their own resources," said Marie Clarke, national coordinator of Jubilee USA Network, one of the anti-debt groups behind the bill.

"The cancellation of debts owed to the IMF would remove a major impediment to poverty eradication and economic growth in Asia, Africa and Latin America, and enable the nations to invest their own resources in health care, education and poverty reduction," she added.

The Jubilee Act, whose full name is The Justice and Understanding By IMF Loan Elimination and Equity Act, must be approved by House of Representatives committees before it can proceed to the public hearings required before it becomes law.

"The Jubilee movement opened our eyes to the fact that countries such as Zambia, Tanzania and Nicaragua spent more on debt service payments than they spent on health and education combined," said Representative Maxine Waters, one of the five politicians who sponsored the act.

Clarke says passing the bill would send a signal to other western governments. "Certainly if the U.S. works to make a strong call at the institutions, we think that the European nations would get behind the U.S. and also call for complete cancellation by the IMF."

"We cannot presume to know that for sure at this point. But the expectation is that the U.S., with such a strong powerful voice in the IMF, would really set the tone for debt cancellation."

The United States is the biggest shareholder in both the IMF and its sister institution the World Bank.

Jubilee says its activists will spend coming months encouraging other members of Congress to back the bill, so that it could be considered this fall, in time for the annual meetings of the IMF and the World Bank.

Anti-debt groups argue that poor nations face some of the greatest health and education crises of our time, and that without full debt cancellation, diseases like HIV/AIDS, combined with a lack of social services, will continue to kill many people in those countries.

The introduction of the Jubilee Act coincides with the summit of the group of eight (G8) most industrialised nations in the U.S. state of Georgia this week. Leaders from the United States, Britain, Canada, France, Germany, Italy, Japan and Russia are likely to address the issue of the debt burden on impoverished nations, although activists and other observers predict it will take a back seat to concerns about global security.

British Prime Minister Tony Blair and Chancellor of the Exchequer Gordon Brown have proposed extending the debt relief scheme of the World Bank and IMF, known as the Heavily Indebted Poor Countries’ Initiative (HIPC), to nations that have not yet benefited from the programme.

HIPC was set up in 1997 to help reduce the debt burden on the world’s most underdeveloped nations.

"Jubilee USA calls on the G8 to adopt the call for 100 percent cancellation by the IMF of the 50 eligible countries as a part of their strategy to resolve the debt crisis," said Clarke in a phone interview from Georgia, where she joined hundreds of protesters and activists.

While some bilateral lenders have cancelled the entire debts of impoverished and under-developed nations, the IMF and World Bank have refused to provide complete debt relief. The IMF has traditionally responded by pleading poverty.

As a result, many poor countries are still struggling under huge debt burdens, and other poor nations, such as Nigeria, the Philippines and South Africa, have received no debt relief at all.

But reports by British accounting firms, and last autumn by UK-based Jubilee Research, have shown that the Bank and IMF have enough resources to cancel 100 percent of the debts of the HIPC nations without that move having an impact on their credit rating or ability to lend. It is also believed that the institutions could expand full debt forgiveness to many countries outside the HIPC initiative without a strong negative impact.

Jubilee’s call for complete debt cancellation is backed by clergy, church goers and other activists, who told members of Congress that the debt payments take food from the mouths of the poor and cause, directly or indirectly, 19,000 children to die every day in the world’s poorest countries.

Groups such as Catholic Relief Services, the Episcopal Church, the Africa Faith and Justice Network and the American Friends Service Committee have also worked to inject a moral dimension into the political and economic debates surrounding the debt issue.

"Many poor countries are being forced to pay debts that resulted from loans to corrupt and brutal dictators, which used the money to enrich themselves or repress their populations," said Waters in a statement.

For example, most of Nigeria’s debt was incurred under the dictatorship of Sani Abacha; the bulk of the Philippines’ arrears were incurred by Ferdinand Marcos, and South Africa’s debt was chalked up during decades of white minority rule under the brutal system of apartheid.

"The people of these countries did not receive any benefits from these loans, and it is unjust and immoral to expect them to pay back the debts," said Waters.

"President George W Bush often reminds us of the importance that religion plays in his life," she added. "I urge him today to provide the leadership necessary to persuade the IMF and the World Bank to do the right thing and forgive the debts of the poor. I urge President Bush to bring the Biblical principles of justice and charity into the boardrooms of these powerful institutions."

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