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Monday, October 25, 2021
WASHINGTON, Jun 26 2008 (IPS) - Anti-debt campaigners say legislation passed by a U.S. Congressional committee this week that would expand debt cancellations to an additional 25 poor nations 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 Tuesday.
The act, known both as the Jubilee Act and the Casey Bill for Democratic Senator Bob Casey of Pennsylvania, paves the way for the 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 (IMF) 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 that international financial institutions have typically imposed conditions that were slanted towards multinational companies and local elites. These included user fees for water, sanitation, primary education and health care, including treatment for HIV/AIDS, tuberculosis and malaria.
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 in the red through new loans. Instead, it says that future external financing needs should be met mainly through grants. It also warns of so-called 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 (GAO), 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 “live-saving” and “historic” by anti-debt campaigners who have long argued that debt penalised 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 towards poverty-alleviation programmes 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 towards benefits for the wealthy elites or unnecessary military expenditures in these nations,” said a statement from Senator Casey’s office.
Countries that are classified as terrorism sponsors or are engaged in weapons of mass destruction proliferation, or 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 impacts on poor families across the globe.
After extensive campaigning by debt activists, the United States and other Group of Eight (G8) industrialised 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 (IDB) reached an agreement in early 2007 to provide similar treatment.
The initiatives created the so-called Multilateral Debt Relief Initiative (MDRI) which has so far benefited only 27 countries. The new bill says 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 dollars gained from debt forgiveness, while Uganda channeled 57.9 million dollars 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.
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