The Issue

Throughout the developing world, more than one billion people are struggling under a burden of unpayable national debt. Often contracted by dictatorial regimes long ousted from power, interest on these debts not only divert a large proportion of revenues away from education, health care, and other programs of human development. They also have given First World nations control over the economic policies of the debtor nations (see Fifty Years is Enough: the World Bank and the International Monetary Fund).

Here's how so many poor nations in Africa, Asia, and Latin America were led into debt slavery: In the early 1970s, Western banks were glutted with revenues from oil-producing countries when oil prices rose. Both the banks and rich governments encouraged developing nations to borrow heavily. Some of these loans were wasted on schemes that didn't work, or huge and inappropriate "white elephant" projects often designed by aid agencies largely for the benefit of Western contractors. Some of the loans were simply pocketed by corrupt officials and sent to foreign banks. Others were used for military buildups.

When a global recession hit in the late 1970s, demand for exports dropped, so prices for Third World exports like agricultural products and minerals plummeted. Nations couldn't pay their loans, and they couldn't renegotiate with the commercial banks because interest rates were at an all-time high. At this point, the World Bank and the IMF stepped in to save the commercial banks from having to write off the loans. They lent money at lower interest so that the debtor nations could continue to pay interest to commercial banks. Of course, that meant a growing debt load.

Indeed, by this time most of the debtor nations have paid far more in interest than they ever received in loans, but they are even deeper in debt. For example, in 1986 the World Bank predicted that by 1995 sub-Saharan African governments would owe $29 billion. It turned out to be seven times that much. After more than 8,000 debt renegotiations, since 1980, sub-Saharan Africa's total debt has tripled from the original amount. Meanwhile, Western commercial banks keep raking in their interest.

Current Activity

The millennial year 2000 is the target date to bring about major debt relief for the world's poorest countries. It began with a call by Nobel Peace Prize Laureate Desmond Tutu of South Africa and Pope John Paul II, and drew its inspiration from an ordinance in the Hebrew Scriptures that calls for debt forgiveness and manumission of debt slaves every 50 years.

Jubilee 2000 is not attempting to impact that portion of foreign debt owed to commercial lenders. Rather, it focuses on debt owed to the World Bank, the IMF, and First World governments either directly or as investors in the World Bank. It aims for greater relief than offered by the Highly Indebted Poor County (HIPC) Initiative of the World Bank and the IMF. It would expand the number of eligible nations from 41 to 45; forgive more of the debt than just the amount those institutions deem beyond repayment; reduce the maximum waiting period for debt relief from 6 to 3 years; and require more democratic processes for deciding about use of funds freed up by debt forgiveness and about future loans.

Last year, President Clinton and leaders of other industrial countries agreed to write off approximately $90 billion in debt for about 33 impoverished countries. This $90 billion in debt cancellation would cost creditors $27 billion primarily due to heavy discounting of the face value of the loans.

Unfortunately, Congress has yet to fully fund the Administration's commitment of $920 million over four years toward this global debt reduction plan. Funding, particularly the amount needed for multilateral debt reduction, is critical to the success of the plan, as other wealthy nations are waiting for the U.S. to take the lead before unlocking billions of dollars in contributions. The delay is already being felt by debtor countries. Bolivia, for example, has been declared eligible for new debt relief under the plan, but must wait because the necessary funding is not available.

Thus far, Congress has authorized cancellation of 100% of United States bilateral debt owed by heavily-indebted poor countries, and it appropriated $110 million for this purpose for FY2000. On July 13, during debate on the foreign aid spending bill (HR 4811), the House 216-211 an amendment offered by Maxine Waters (D-CA) that brought the funding for debt relief in fiscal 2001 from $69.4 million to $225 million. The Senate Appropriations Committee has approved appropriation of only $75 million for bilateral debt reduction for FY2001.

No funds have been appropriated so far for multilateral debt reduction. However, the House Banking Committee (last year) and the Senate Foreign Relations Committee (this year) authorized appropriation of the amounts needed for multilateral debt reduction. The Senate Banking Committee has also taken the matter under consideration, and the committee chairman (Sen. Gramm, R-TX) wants to make authorization of multilateral debt reduction conditional on changes in the operation of the International Monetary Fund. The appropriation needed for multilateral debt reduction in FY 2001 is $360 million.

The total appropriation needed for FY2001 is $435 million ($75 million bilateral, $360 multilateral). Another $375 million will be needed for multilateral and bilateral debt reduction in FY2002 and 2003. These amounts, added to the $110 million appropriated last year, will complete the U.S.'s $920 million contribution to the global plan. The Administration has requested an advance appropriation of $375 million covering the needs for FY2002 and FY2003, but we suggest focusing at this time on the $435 million needed for FY2001.

Campaigns

Local: Bread for the World's regional coordinator is Jim Shields, 713.780.9403 (work), 713.664.6631 (home), wnwx33A@prodigy.com. The Roman Catholic Diocese of Galveston/Houston is also active in the campaign. Contact: Rev. Troy Gately, 713.659.5461.

National: The Jubilee 2000 campaign is largely, though not exclusively, church-based. For a complete list of participants and current news, see the Jubilee 2000/USA web site, www.j2000usa.org. To keep abreast of the efforts to pass H.R. 1095, contact Bread for the World at 301.608.2400; web site is www.bread.org. Also active is the U.S. Catholic Conference Dept. of Social Development and World Peace, 202.541.3180; web site is www.nccbuscc.org/sdwp.