In the spirit of the book of Leviticus, Christians will have to raise their voice on behalf of all the poor of the world, proposing the Jubilee as an appropriate time to give thought, among other things, to reducing substantially, if not canceling outright, the international debt which seriously threatens the future of many nations.
-Pope John Paul II, Tertio Millennio Adveniente, 1994

ISSUE:
Heavy debt burdens continue to draw precious government resources away from critical investments in health care, education, water and other sectors necessary to improve lives in the poorest countries. Debt burdens also impede the ability of governments to respond to crises such as HIV/AIDS, natural disasters and civil strife.

BACKGROUND:
Many poor countries have begun to see their debts reduced through the Heavily Indebted Poor Country (HIPC) initiative that was adopted in 1996 and expanded in 1999 in response to successful advocacy by the global Jubilee 2000 movement, in which the Catholic Church played a major role. However, as implementation of the HIPC program progressed, it became increasingly apparent that the amount of debt relief provided was insufficient for the kind of "fresh start" that countries needed in order to address deep-seated poverty. To address the situation, the USCCB developed a proposal for deeper debt relief that was passed into law with bipartisan support in 2003. Unfortunately, the Administration treated the law as "advisory" rather than mandatory and did not implement it.

Eventually the Administration changed its position. In 2004 both US and United Kingdom officials announced that they favored providing up to 100% debt cancellation of debt owed to the World Bank's International Development Association (IDA) and other international financial institutions that held most of the remaining HIPC-country debt. Prior to the World Bank/IMF annual meetings in September 2004, Bishop Ricard wrote to Treasury Secretary Snow urging a resolution of the problem of poor country debt "in a way that offers new hope to some of the world's poorest and most forgotten people." He also urged that the losses of the international financial institutions from the debt cancellation not be offset by reductions in new assistance to poor countries. He stressed that, for us, debt cancellation is not about adjusting accounts, but about combating poverty. Unfortunately, the US and the UK were unable to achieve a consensus among the major creditor countries at the 2004 annual meetings.

A major step forward was the agreement early in 2005 by the major donors to IDA that 100% of new IDA assistance to about 42 poor countries (including a substantial number of non-HIPC countries) should be in the form of grants rather than loans. Another 5 poor countries would receive close to 50% in grants. This agreement is an important complement to debt cancellation, as the two measures together should help assure that poor countries do not fall back into heavy international indebtedness in the future. The new agreement also highlights the need for inclusion of all "grant-eligible" non-HIPC countries in any new debt cancellation proposal, as the underlying analysis showed that these countries have debt burdens at least as heavy as the HIPCs.

Bishop Ricard sent new letters to senior US officials in early 2005 encouraging an agreement that would include all poor countries with heavy debt burdens as well as provide new resources to finance the debt cancellation. A major breakthrough occurred in July at the Scotland Summit of leaders of the major industrialized countries plus Russia (the G8). They announced a proposal to cancel 100% of the debt owed by about 18 HIPC countries (eventually as many as 38 HIPC's) to IDA, the African Development Fund (AfDF), and the International Monetary Fund (IMF). The G8 called for the U.S. and other major donor countries to reimburse the IDA and AfDB for their losses from the debt cancellation. (The IMF will finance its costs mainly from internal resources.)

Bishop Ricard issued a statement following the G8 meeting welcoming the new commitments on debt cancellation while urging leaders to expand the countries eligible for debt relief and to include debt owed to the Inter-American Development Bank (IDB). IJP participated in an ecumenical delegation immediately prior to the G8 Summit that was led by the Archbishop of Canterbury. The group met with British Finance Minister Brown and held a seminar at Lambeth Palace to discuss a joint message that was delivered to the G8 leaders.

The G8 proposal was accepted by all member countries of the World Bank and IMF at their recent Annual Meetings, and final approval by the Boards of these institutions and the AfDF is expected shortly. To assure that the US can meet the financial commitment that forms part of the agreement, it is essential that the House /Senate conference that will decide the FY06 appropriations for foreign operations provides $950 million for IDA. The House-approved bill includes $950 million, but the Senate-approved bill includes only $900 million.

A major goal of the USCCB has been to promote fairness in country eligibility so that all of the poorest countries that have heavy debt burdens are included in the new debt cancellation. The G8 proposal is limited to HIPC countries. Another goal is to include debt owed to the IDB, the largest creditor of Latin American HIPC countries. USCCB has worked closely with Congressional offices in drafting a bill that supports the debt cancellation in the G8 proposal but also authorizes cancellation of IDB debt and urges the U.S. Treasury to work to expand the group of eligible countries. The "Multilateral Debt Relief Act of 2005" was introduced by Sen. Mike DeWine (R-OH) and by Rep. Chris Smith (R-NJ). Bishop Ricard wrote to Congress in July urging support for the bill. USCCB staff testified before the Africa Sub-committee of the House International Relations Committee on the benefits of, and issues raised by, the G8 proposal.

USCCB/CRS POSITION:
USCCB/CRS commend the Administration for its leadership in bringing about a new debt cancellation agreement. USCCB/CRS will:

• Advocate with the Congress for appropriation of $950 million for IDA for FY 2006;
• Continue to support passage of the "Multilateral Debt Relief Act of 2005;" and
• Encourage the Administration to implement the bill's provisions by working for debt cancellation to all poor countries with heavy debt burdens, i.e. at least for all those entitled to grant financing from IDA.

For more information contact: Gerry Flood, 202-541-3167; gflood@usccb.org; and Fr. Andrew Small, 202-541-3153; asmall@usccb.org

Email us at sdwpmail@usccb.org
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