The bill builds on previous successful efforts in recent years to provide debt relief for the world’s poorest countries as an essential component in the overall effort to help alleviate the severe poverty that exists in many parts of the world. Debt relief programs have had a proven record of success. For example, Uganda used its $57.9 million in savings from debt relief in 2006 to invest in energy infrastructure, primary education, malaria control, health care, and water infrastructure.
Following is an overview of some of the key provisions of the bill:
The bill builds on the successful international debt relief activities that began in 1996 – with 30 poor countries having receiving debt relief in the last 12 years. This bill builds on the immensely successful debt relief efforts that began more than a decade ago to provide debt relief for the world’s poorest countries as an essential ingredient in the overall effort to reduce global poverty. These efforts require the country receiving the debt relief to use the savings for poverty reduction efforts. These efforts were first launched in 1996, when the World Bank and IMF launched the first “Highly Indebted Poor Countries Initiative (HIPC).” There have been follow-on efforts since then. Since 1996, more than 30 poor countries have received some form of debt relief, totaling approximately $80 billion.
The bill calls for a new agreement that would allow up to 24 additional poor countries to qualify for debt relief. The bill instructs the Treasury Department to commence multilateral negotiations for an agreement within the international financial institutions (such as the World Bank and the International Monetary Fund) and the Paris Club of bilateral creditors to allow up to 24 additional poor countries to qualify for debt relief.
The bill sets a series of criteria that a country would have to meet in order to qualify for debt relief. To be eligible for debt relief under the bill, these low-income nations would have to meet conditions outlined in the bill, including:
- Fostering transparent and participatory policies to achieve poverty reduction through economic growth;
- Ensuring sound budget procedures, good governance, and effective anti-corruption measures; and
- Producing and disclosing to the public an annual report disclosing how the savings from debt cancellation will be used.
The bill also lists activities that would disqualify a country from debt relief. Under the bill, countries would be excluded from receiving the debt cancellation 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.
The bill also includes steps for ensuring countries benefiting from debt cancellation don’t return to square one. This legislation calls for measures to help ensure that nations that benefit from debt cancellation do not acquire new debt and thus return to square one, including prioritizing grants over lending in future development assistance and adoption of a legal framework to prevent some creditors from profiting from debt relief by providing high-cost loans to countries that are newly debt-free.
The bill only provides authorization for the Treasury Department to commence negotiations for new debt relief; and therefore has no costs. This legislation only provides authorization for the Treasury Department to commence efforts to negotiate a multilateral agreement on debt cancellation, but it does not authorize the implementation of any agreement. Since Congress would have to approve any future agreement that might be reached to cancel bilateral and multilateral debts, CBO estimates that enacting H.R. 2634, by itself, would have no budgetary impact.
