The last few months have brought forth an unprecedented number of proposals from governments and politicians regarding international debt. While the issue has long been given lip service by the IMF and World Bank and by the Finance Ministries and Treasury Departments of the G-7 countries, there is now, suddenly, a race by the various governments to prove their seriousness and compassion.

This moment has been made possible by the hard campaigning of the international Jubilee 2000 movement, as well as the analysis and organizing done by dozens of groups - like the 50 Years Is Enough Network and its members - in advance of and parallel to Jubilee 2000. The world's political leaders are now paying attention. We will have to keep the pressure on the G-7 leaders and hold many pairs of feet to the fire.

Chancellor Gerhard Schroeder of Germany, the official host of this year's June G-7 Summit in Köln (Cologne), has indicated that debt will be a major topic on the agenda. The German, French, U.S, U.K., Canadian, and, as we went to press, Japanese governments have all put forth interesting proposals, leaving Italy as the only G-7 country without a proposal on debt relief. In addition, there are a number of bills in Congress which would also institute serious changes in U.S. policy on debt. This article provides an analytical summary of each of the Congressional measures, the Clinton Administration's rather vague proposal, and the other G-7 governmental proposals.

U.S. Initiatives

The HOPE for Africa Act - Proposed by Rep. Jesse Jackson Jr. Last year a bill known as the Africa Growth & Opportunity Act (AGOA) was passed by the U.S. House of Representatives but died in the Senate. Its supporters, including the Clinton Administration and many Republicans, announced that they intended to try again this year. The AGOA was, and is, basically a "free-trade" NAFTA-style bill designed to ease the path of transnational corporations into Africa, with few guarantees that ordinary Africans would benefit from the resulting trade. It also mandates that any country wishing to trade with the U.S. under its provisions adhere to IMF structural adjustment conditions.

For 1999, opponents of the AGOA decided that a trade bill for Africa was a good idea, and that they would draft one that actually benefits ordinary Africans rather than corporations and African elites. So the HOPE for Africa bill was born. (HOPE stands for Human Rights, Opportunity, Partnership, and Empowerment.) It includes several innovative trade provisions to guarantee that any imports would be made with at least 90% African labor and in facilities with 60% African ownership. It also includes labor rights and environmental protections absent from AGOA, as well as measures to keep drugs such as those used to fight HIV affordable for Africans. Its centerpiece, however, is debt cancellation. The decision to put debt at the center of this trade bill emerged from the recognition that until the continent's overwhelming debt servicing problems — Africa pays about 20% of its annual export income on debt service — are addressed, the prospects of creating equitable and productive trading relationships were slim. In terms of debt, the HOPE bill calls for the following: cancellation of the bilateral debts owed to the U.S. by sub-Saharan African countries; enforced, meaningful advocacy for cancellation of multilateral debt by the U.S. representatives to the World Bank and IMF; and the purchase of private debts of sub-Saharan African countries at market values (as of January 1, 1999) so that they can be canceled along with other bilateral debt. To elaborate on this last measure: Congress cannot, of course, mandate that private entities cancel debts owed them. It can, however, call for the government to purchase the private debts at market price (i.e. what banks can already sell the debt for on open markets, usually about 10% of its face value). Because the banks would not be getting any lost value restored, the transactions would not be bailouts but transfers from the private to the public sphere.

The HOPE for Africa bill's original sponsor is Rep. Jesse Jackson Jr. of Chicago. He has been joined by 68 Democratic co-sponsors as of this writing. The AGOA has 33 Democratic co-sponsors. It appears that the appeal of the HOPE bill has stalled the AGOA, and also catapulted debt to the center of discussion about Africa and about international trade. HOPE's debt provisions are probably the most progressive ever proposed in U.S. legislation with more than token support. It is uncertain at this time how Congress will move forward with the two competing Africa trade bills. For more details on the HOPE bill and its current status, check Rep. Jackson's web site, <www. jessejacksonjr.org>, and search with the keyword 'Africa'.

Provisions for Countries Hit by Hurricane Mitch Soon after Hurricane Mitch hit Central America at the end of October, activists in both the North and the South, and government officials in the affected countries, began calling for debt cancellation for the two worst-hit countries, Honduras and Nicaragua. They are also among those with the worst debt problems in Latin America. A moratorium on both bilateral and multilateral debt payments for the two countries lasting until February 2001 was agreed on. But the creditors did not agree to forego interest payments on the bilateral debt during that time, meaning that the interest will be capitalized and the countries will owe even more when they emerge from the moratorium. The Paris Club pledged to consider granting Nicaragua forgiveness of 80% of its bilateral debt and Honduras 67% of its bilateral debt. However, that will not be approved until the moratorium ends, and would likely apply only to debt contracted before the 'cut-off date' - the time when the countries first won rescheduling from the Paris Club (1988 for Nicaragua; 1990 for Honduras).

Activists then called for President Clinton to include such measures in an emergency relief bill. He proposed such a bill in February, but its debt relief components were very modest. They would cover the accounting costs of the moratorium and the post-moratorium Paris Club pledges, and provide a $25 million contribution to the trust fund set up by the World Bank to pay off the multilateral debts owed by the two countries during the moratorium (since there is no official way to halt or cancel multilateral payments without defaulting). The total amount budgeted for debt relief in the emergency bill is $41 million.

During the debate on the bill in the House Appropriations Committee, Rep. Nancy Pelosi proposed the addition of $25.5 million, which is all that would be required to fully cancel all bilateral debt owed the U.S. by Honduras and Nicaragua. That amount would cancel over $250 million worth of debt owed by the two nations, and, more important than the amount of debt canceled, would set an important example for responding to the hurricane by the world's leading economy. That idea was rejected by the committee, but Rep. Jesse Jackson Jr. did mention it again in a speech when the full House voted to approve the bill. The House and Senate must now reconcile their two bills and get President Clinton's approval. Each of the bills contains 'offsets' - cuts in other programs to pay for the relief - which in some cases affect poverty programs in the U.S. Clinton has threatened to veto any relief legislation containing objectionable offsets.

The Debt Relief for Poverty Reduction Act - Proposed by Rep. Jim Leach Rep. Leach, the Republican Chair of the House Banking Committee, has introduced a bill which would cancel the bilateral debt owed the U.S. by the 41 countries defined by the World Bank and IMF as -heavily indebted poor countries- (HIPCs). It also would attempt to reform the World Bank/IMF HIPC Initiative, the plan those institutions came up with in 1996 to respond to calls for debt relief.

The bilateral debt relief accorded by the bill would be a very positive step. As in the case of Nicaragua and Honduras, the breaking of the precedent by which the U.S. always resists full debt cancellation, would perhaps be more important than the amounts of debt canceled. The multilateral debt section of the bill, however, is problematic. The HIPC Initiative is a deeply flawed program. It demands that debtor countries wait for several years before seeing any relief, then provides paltry benefits. During the waiting period, it requires that governments commit themselves to several years of IMF/World Bank structural adjustment programs (SAPs) - the very schemes which have already exacerbated poverty and increased debt burdens throughout Africa, Latin America, and much of Asia by mandating layoffs, hikes in interest rates, currency devaluations, and cuts in health and education spending. Africa's external debt has increased nearly 400% since the onset of structural adjustment programs in 1980. Uganda, the first graduate of the HIPC program (in April 1998) has already found that its debt has again become officially 'unsustainable', and Mozambique has found that HIPC will reduce its annual debt payments only from $110 million annually to $100 million - on the condition, demanded by the IMF, that it quintuple user fees for patients at health clinics. In light of such experiences and the very structure of HIPC, 50 Years Is Enough believes the HIPC Initiative is more accurately viewed as a tool for keeping countries tethered to IMF/World Bank austerity programs than as a debt relief program.

The Leach bill would reform HIPC by offering a one-year grant to the HIPC Trust Fund and promising two more years of contributions if it the program is changed as outlined in the bill. The suggested changes include loosening the requirements for countries to participate and offering deeper debt relief - specifically by lowering the target for 'sustainable' debt payments from 20-25% of annual export income to 15%. (As IMF officials have admitted, the 20-25% targets were chosen quite arbitrarily.) It would also reduce from six to three the number of years that countries would have to implement structural adjustment or similar programs before gaining HIPC's benefits. Any time spent under SAPs, however, is time in which countries are starving their people in return for a promise that relief will come in a few more years. Loosening the eligibility requirements and deepening relief are of course welcome, but the levels chosen by the bill should be much more ambitious. We are also concerned that the reforms would still allow the IMF and World Bank to determine when a country has completed three years of satisfactory performance - and the IMF declares countries 'off-track' in 75% of its programs. The three years could thus easily grow to four, five, or more.

Most importantly, maintaining the link between structural adjustment and debt relief contradicts the goal of the legislation and undermines campaigns against structural adjustment throughout the global South. 50 Years rejects the basic framework of HIPC, which is one where the 'preferred creditors' - the international financial institutions - serve as judge and jury in determining the fate of countries petitioning for debt relief. Any reform of the multilateral debt system should insist on a process of neutral arbitration.

Rep. Sanders's Global Sustainable Development Resolution The lone Independent in the House of Representatives, Bernie Sanders of Vermont, together with some progressive Democrats, is putting forth a hefty resolution on the global economy. It asks that Congress recognize the damage done by recent trends in globalization and declare itself for the democratization of the global economy.

The chances of its actual passage by the House are probably not good, but the resolution is useful in many other ways. Progressives opposed to the collection of economic policies and trends loosely referred to as globalization have long been called on to propose a coherent alternative. This 20-page document offers a diagnosis of the problem and the most essential steps to beginning to restore power over the global economy to the people who constitute it.

Suggestions for addressing the debt crisis occupy a sizable portion of the recommendations. It calls for the U.S. to work with the multilateral institutions, other governments, and commercial banks to 'write off the debts of the most impoverished countries by the end of the year 2000.' Like the HOPE for Africa Act, the Resolution calls in plain language for the U.S. to cancel the bilateral debts owed it by impoverished countries, and insists - more explicitly than HOPE - that 'debt cancellation shall not depend on adherence to structural adjustment or similar programs.' Also like HOPE, it would require that impoverished countries pay not more than 5% of annual export earnings toward servicing foreign debt. It also calls for the U.S. to influence the multilateral institutions to cancel debt, and for those institutions to use $1 billion of their own resources to finance debt relief.

Rep. Sanders's Resolution goes beyond HOPE in calling for the establishment of an impartial body to determine when countries should be declared insolvent, or bankrupt, so that they do not simply plunge into ever-higher debt tallies as they borrow to pay back earlier loans. The procedures used by the panel would be comparable to those used for U.S. municipalities in bankruptcy.

This Resolution contains many other excellent recommendations concerning the global economy, including a large section on reform of the IMF and World Bank. It is probably the closest thing we have to a pragmatic, visionary description of the progressive position on the global economy in the U.S. Sanders will be sponsoring a launching event for his Resolution in June, designed to increase its visibility around the country; the 50 Years Is Enough Network is a co-sponsor.

President Clinton's Speech of March 16: The U.S. Administration's Proposal On March 16, President Clinton made a speech to a gathering of finance and foreign ministers from Africa in Washington. In it he outlined, in remarkably vague fashion, his submission in the G-7 race of debt relief proposals in advance of the Cologne Summit. Our analysis is by necessity tentative, since the actual details of the plan were not released. The calculations indicated by press releases - that an additional $70 billion in debt relief would be achieved - indicate that someone has done some work on the details, so we hope to see it soon.

The only concrete promise of deeper debt relief in Clinton's proposal is a pledge of complete forgiveness of bilateral debt contracted on a concessional basis, which is to say loans made at interest rates below the prevailing market rate. For non-concessional bilateral debt, Clinton would go beyond the Paris Club's current 80% plateau, up to 90%. The rest of the proposal is firmly anchored in the terms of the HIPC Initiative as it now exists, and thus wed completely to neo-liberal structural adjustment. Most of the vaguer pledges are predicated on being offered to 'exceptional performers' or at least to countries successfully implementing 'economic reforms' - code words for structural adjustment - and would also require that other rich countries co-operate with U.S. plans. For example, a press release from the Treasury Department indicates that Clinton's plan would have the multilateral institutions make grants to countries during the HIPC Initiative's waiting period so that some net relief would arrive before the formal granting of benefits.

A report on the plan in the Washington Post indicated that this proposal would accord relief to some 50 countries (as opposed to the 41 the World Bank classifies as HIPCs). Again, we shall see. Another item, which Clinton has now talked about on a couple occasions, and which Vice President Gore first hinted at publicly on January 29, involves selling off some of the IMF's gold stocks (estimated total worth: $30 billion to $40 billion) to finance debt relief. Past proposals for gold sales would have routed the money through the IMF - something which would of course be a serious error if meaningful debt relief is the goal (see article on page 8 for more details on this danger). We await clarification on how this sale would work, though it appears that the President is talking only of using the interest from investing the proceeds, and not the proceeds themselves, which of course could provide much greater benefits.

The 50 Years Is Enough Network put out a press release in response to the Clinton proposal which noted that the fact that Clinton is talking about addressing the debt problem at all is a real advance. His proposals were made, no doubt, in response to those from his European counterparts described below; it's important that the U.S. participate in the dialogue if the Cologne summit is to produce anything meaningful. Our press release, however, emphasized that the announcement, vague as it was, did not really herald any significant new attitudes. The Network Director, Njoki Njoroge Njehu, said, "While we are pleased to see that the President wants to address this crisis, we are very disappointed that he still wants to subject countries to failed economic policies that will mean more debt and will sabotage any move toward sustainable development." The continued insistence on conditioning debt relief on adherence to structural adjustment, she said, means "governments are in essence told they must starve their people before the creditors will take any action to save them."

Other G-7 Proposals

(For some of our analysis of the proposals coming out of Europe, we are indebted - so to speak - to our colleagues at the European Network on Debt and Development [EURODAD].)

The German Proposal The opening salvo in the G-7 flurry of debt proposals came on January 21 in a Financial Times article by German Chancellor Gerhard Schroeder. The big news in his proposal - apart from its very existence, which has proved the most important thing - was the recommendation that the Paris Club consider 100% cancellation of debts (both concessional and non-concessional) for the most indebted countries in "exceptional cases." Like the Leach Bill, the German proposal also called for reducing the period countries being considered for HIPC benefits would have to spend under structural adjustment from six years to three. Schroeder also announced that he would not oppose selling IMF gold, which was news because German opposition had for several years been the main obstacle when the idea was brought up. The German government has apparently responded to the subsequent proposals from its G-7 partners (the U.S., and, as detailed below, the U.K. and France). In an example of very circuitous reporting, a story by the French news agency AFP, datelined Tokyo - March 22, says that the business newspaper Nihon Keizai Shimbun reports from Washington that the German government has proposed to the G-7 'waiving all their official development aid [debt], worth some 20 billion dollars, to the world's poorest nations.' The story says that the U.S., U.K., and Canada have all indicated their support. The report says that a special meeting of G-7 finance ministers in May, since apparently pushed back to June 12, will attempt to merge the various debt relief proposals in advance of the Cologne Summit.

The British Proposal The proposal offered by the U.K., presented to G-7 finance ministers at a Bonn meeting on February 20, was summarized in an article in the February 22 Guardian by Chancellor of the Exchequer (Finance Minister) Gordon Brown and Development Minister Clare Short. In it, they proclaim that all 41 HIPCs should receive debt reduction by the end of 2000, which implies that US$50 billion will be written off in the next 22 months. They also recommend reducing the waiting period for relief under HIPC to three years. Like the U.S., the U.K. suggests financing the additional debt relief with sales of IMF gold. The most interesting aspect of this proposal is its timeline - accomplishing this debt relief by the end of 2000, which is not something that Clinton promises. If that timeline were to be adhered to for all HIPC countries, it would be a genuine advance. It would, it seems, mean foregoing the rigid conditionalities preceding relief for many countries, despite the plan's continuing reliance on the HIPC Initiative. Maybe the biggest distinction between the U.K. and the U.S., however, is the way the government officials talk. Can anyone imagine Robert Rubin appearing in front of a crowd of 3,500 debt campaigners to endorse the idea of radical debt relief? Gordon Brown did, on March 7 at St. Paul's Cathedral in London. He said that poor countries' debt "is the great moral issue of our day and this decade" and "the greatest single cause of poverty and injustice across the earth and potentially one of the greatest threats to peace." And: "I say to the churches and to all who support Jubilee 2000 - as I do - for your work, from the Human Chain that enveloped Birmingham last year, to the missionary work and sacrifice in the farthest corners of the globe every year, we thank you. […] Your vision is of a new climate of justice across the world, a new climate of justice that will liberate nations from unsustainable debt." Less than a week later, Prime Minister Tony Blair asked to meet with Jubilee 2000 campaigners who had staged an all-night vigil. The following summary of their visit to 10 Downing Street comes from the Jubilee 2000 U.K. web site (www.jubilee2000uk.org): "Blair met the 7-strong delegation in the lobby outside the Cabinet Room and congratulated everyone, calling Jubilee 2000 "a great campaign." Jubilee 2000 [U.K.] Director Ann Pettifor invited him to put on a lapel chain, the campaign's symbol - which he agreed to do. After photos, he confirmed that he was determined to see this issue tackled at the G8 in Cologne and agreed that the current form of the HIPC initiative is not good enough. He added that he would have to get his fellow leaders to act too. [...] the Prime Minister's willingness to meet demonstrates a growing commitment to action from the British Government - and its readiness to identify itself with the Jubilee 2000 Coalition.

The French Proposal Not to be left out in the competition, France has also put forth a proposal. Unlike those from Germany, the U.S., and the U.K., it does not offer reform of the HIPC Initiative. The idea, announced by Finance Minister Dominique Strauss-Kahn in Paris on March 17, at the annual meeting in Paris of the Inter-American Development Bank, is comparatively simple. The French would cancel all interest payments on the bilateral debt of impoverished countries for a period of 30 years. They also suggest making the terms offered by the Paris Club of creditor countries more flexible. The one great merit is the length of its commitment, although it is unclear if it would apply to “fresh” debt contracted after the inauguration of the program. It fails to treat multilateral debt, however, and as such cannot be considered as serious a proposal as the others.

The Canadian Proposal Prime Minister Jean Chretien announced his plan on Thursday, March 25, in Winnipeg. It is somewhat more progressive and more detailed than the other plans, though it is not without problems. The biggest problem is its explicit endorsement of structural adjustment, done with an enthusiasm not seen even in the U.S. proposal. The Canadians are the first to say that they will act on their pledges on bilateral debt relief regardless of whether other G-7 countries do so or not. Their bilateral debt relief pledges are also more far-reaching than those in the other proposals. They include 100% write-downs for all 41 HIPC countries, plus a few that the proposal names specifically as countries that should be considered HIPCs - Honduras, Bangladesh, Haiti, and Malawi, and, when political circumstances permit, Afghanistan. The Canadians also propose converting debts of countries in conflict or not yet meeting democratization criteria - Ethiopia, Liberia, Rwanda, the Democratic Republic of Congo (formerly Zaire), and Sudan are mentioned - into local currencies to support development projects. Most significantly, perhaps, Canadian officials, in conversation with some of our Canadian partners, have made clear that the proposal applies to both concessional and non-concessional debt and is not subject to 'cut-off dates' such as the Paris Club uses in excluding more recent debts from relief packages. Like most of the other proposals, Canada's suggests reforms of the HIPC Initiative. It would reduce the waiting period for relief from six to three years and reduce the debt-to-export ratio target from 200-250% to 150% (the level contemplated by the Leach Bill). The Canadian proposal calls for the sale of IMF gold to finance the new debt relief. The wording of this section of the plan - to "help finance the IMF's participation in the HIPC Initiative and its regular programs for the poorest countries' - leaves open the possibility that proceeds from gold sales would finance the IMF's Enhanced Structural Adjustment Facility (ESAF). Another part of the Canadian plan explicitly advocates increasing ESAF funding, and states "Canada will loan more than C$400 million to augment ESAF loan resources in order to assist the IMF in providing support to HIPCs." This is very unfortunate, as ESAF is used exclusively for support of structural adjustment programs, which have devastated economies around the world and contradict entirely the goals of debt relief. This provision also strongly suggests that the Canadian government does not envision de-linking HIPC debt relief from structural adjustment conditions at any point. (See accompanying article on gold sales and ESAF.) Conclusion The present moment is certainly the most hopeful one for the movement for meaningful debt cancellation in many years. Activism by a well-informed public and the advent of the Jubilee 2000 movement around the world has been the most important factor in bringing it about. Now, as we approach the G-7 Summit and the intervention of the world's most powerful heads of state, we must wade through high-level international politics, and be certain that the results are in line with the principles that have brought us this far: unconditional cancellation of the debts that are suffocating millions of people around the world. The next issue of Economic Justice News will contain an update on the developments coming out of Cologne, as well as in the U.S. Congress.