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Building on International Debt Relief Initiatives S. HRG. 110–659 BUILDING ON INTERNATIONAL DEBT RELIEF INITIATIVES HEARING BEFORE THE COMMITTEE ON FOREIGN RELATIONS UNITED STATES SENATE ONE HUNDRED TENTH CONGRESS SECOND SESSION APRIL 24, 2008 Printed for the use of the Committee on Foreign Relations ( Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html U.S. GOVERNMENT PRINTING OFFICE 45–985 PDF WASHINGTON : 2008 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate 11-MAY-2000 15:47 Dec 17, 2008 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 DEBTRELIEF sforel1 PsN: sforel1 COMMITTEE ON FOREIGN RELATIONS JOSEPH R. BIDEN, JR., Delaware, Chairman CHRISTOPHER J. DODD, Connecticut RICHARD G. LUGAR, Indiana JOHN F. KERRY, Massachusetts CHUCK HAGEL, Nebraska RUSSELL D. FEINGOLD, Wisconsin NORM COLEMAN, Minnesota BARBARA BOXER, California BOB CORKER, Tennessee BILL NELSON, Florida GEORGE V. VOINOVICH, Ohio BARACK OBAMA, Illinois LISA MURKOWSKI, Alaska ROBERT MENENDEZ, New Jersey JIM DEMINT, South Carolina BENJAMIN L. CARDIN, Maryland JOHNNY ISAKSON, Georgia ROBERT P. CASEY, JR., Pennsylvania DAVID VITTER, Louisiana JIM WEBB, Virginia JOHN BARRASSO, Wyoming ANTONY J. BLINKEN, Staff Director KENNETH A. MYERS, JR., Republican Staff Director (II) VerDate 11-MAY-2000 15:47 Dec 17, 2008 Jkt 000000 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 DEBTRELIEF sforel1 PsN: sforel1 CONTENTS Page Birdsall, Dr. Nancy, president, Center for Global Development, Washington, DC .......................................................................................................................... 19 Prepared statement .......................................................................................... 21 Response to question submitted for the record from Senator Richard Lugar .............................................................................................................. 60 Casey, Hon. Robert P., Jr., U.S. Senator from Pennsylvania, opening state- ment ...................................................................................................................... 1 Flood, Gerald F., counselor, Office of International Justice and Peace, U.S. Conference of Catholic Bishops, Washington, DC ............................................. 25 Prepared statement .......................................................................................... 27 Response to question submitted for the record by Senator Richard Lugar . 61 Henry, Dr. Peter B., Konosuke Matsushita Professor of International Econom- ics and Gunn Faculty Scholar, Graduate School of Business, Stanford Uni- versity, Stanford, CA ........................................................................................... 34 Prepared statement .......................................................................................... 36 Responses to questions submitted for the record by Senator Richard Lugar .............................................................................................................. 64 Lowery, Hon. Clay, Assistant Secretary for International Affairs, Department of the Treasury, Washington, DC ....................................................................... 4 Prepared statement .......................................................................................... 6 Responses to questions submitted for the record by Senator Richard Lugar .............................................................................................................. 64 ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD Lugar, Hon. Richard G., U.S. Senator from Indiana, prepared statement ......... 51 McCormick, David H., Under Secretary for International Affairs, Department of the Treasury, letter to Representatives Barney Frank and Spencer Bachus ................................................................................................................... 58 Sitali, Muyatwa, coordinator, Debt, Aid and Trade Programme, Jesuit Centre for Theological Reflection, Lusaka, Zambia, prepared statement .................... 51 (III) VerDate 11-MAY-2000 15:47 Dec 17, 2008 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 DEBTRELIEF sforel1 PsN: sforel1 VerDate 11-MAY-2000 15:47 Dec 17, 2008 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 DEBTRELIEF sforel1 PsN: sforel1 BUILDING ON INTERNATIONAL DEBT RELIEF INITIATIVES THURSDAY, APRIL 24, 2008 U.S. SENATE, COMMITTEE ON FOREIGN RELATIONS, Washington, DC. The committee met, pursuant to notice, at 1:59 p.m., in room SD–419, Dirksen Senate Office Building, Hon. Robert P. Casey, Jr., presiding. Present: Senator Casey. OPENING STATEMENT OF HON. ROBERT P. CASEY, JR., U.S. SENATOR FROM PENNSYLVANIA Senator CASEY. The hearing of the Committee on Foreign Rela- tions will now come to order. We are starting as close to exactly on time as possible. There is a vote at 2:15. So I do not know what that will do to our pro- ceedings here, but I wanted to get started so we could move for- ward. Today the committee meets to assess the utility provided by international debt relief initiatives in alleviating poverty and pro- moting development in the world’s poorest nations. A primary pur- pose of this hearing is to assess the lessons learned from recent debt relief initiatives, including the heavily indebted poor countries known as HIPC and multilateral debt relief initiative known as MDRI. Both of those initiatives have been undertaken in the past dozen years. These two broad debt relief initiatives, when combined and com- pleted, are expected to reduce the debt stock of those 32 nations that are eligible under these initiatives by a total of $96 billion. In 2007 alone, these nations included in the MDRI initiative benefited from $1.3 billion of annual reductions in debt service payments or approximately 1 percent of their overall gross domestic product. The Bush administration should be congratulated for having pro- vided strong leadership in initiating the MDRI effort and pro- moting a greater awareness of the real benefits afforded by com- prehensive debt relief. I recognize the numbers that I just provided are abstract, but it is essential to recognize the real savings for impoverished nations that can now use scarce resources for the benefit of their people. The Government of Zambia, for example, benefited from the for- giveness of almost $24 million in outstanding debt in 2006 under the MDRI initiative. Using proceeds from that debt relief, the Zam- bian Government ended user fees for rural health clinics, ensuring (1) VerDate 11-MAY-2000 15:47 Dec 17, 2008 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 DEBTRELIEF sforel1 PsN: sforel1 2 that medical care and prescription drugs were free and available for all. Another example. Just listen to the former President of Tanzania who wrote in 2004, ‘‘In 2001, Tanzania was granted significant debt relief. We have already witnessed tremendous successes. The primary school population has increased by 66 percent, the greater part of an extra 2 million children, and the shortfall in the enroll- ment of girls has been eliminated. We have built 45,000 class- rooms, 1,925 new primary schools, and over 7,500 homes for teach- ers in partnership with their communities.’’ So that is another example of the success of these initiatives. The purpose of this retrospective look is to establish whether ad- ditional international debt relief today makes sense for nations not already included in the HIPC and MDRI initiatives. Last week, the House of Representatives passed on a bipartisan basis H.R. 2634, the Jubilee Act for Responsible Lending and Expanded Debt Relief. Last October, I introduced S. 2166, the Senate version of this leg- islation, which differs in some respects from its House counterpart but retains the overall goal of expanding debt cancellation to an additional 24 nations. These new nations, which range from Geor- gia to Moldova in the former Soviet Union to Kenya and Lesotho in Africa, qualify on the basis of their low per capita income levels and their subsequent eligibility to receive special assistance from the World Bank. I am proud to be joined by 25 other Senators who have agreed to cosponsor the legislation, including a majority of Senators who sit on the Foreign Relations Committee. In recent years, the world has witnessed a coming together of a diverse coalition of groups on behalf of the cause of forgiving the debts of those nations at the lowest rungs of the world’s economic ladder. A grassroots religious coalition has organized itself under the Jubilee Network to provide for greater debt relief and has been joined by academics, entertainers, and world leaders. Jeffrey Sachs of Columbia University and a former adviser to the U.N. Secretary General has declared, ‘‘No civilized nation should try to collect the debts of people who are dying of hunger and dis- ease and poverty.’’ The late Pope John Paul II, whose successor, Pope Benedict, vis- ited the United States last week, made international debt relief a key priority for his papacy, calling on the international community to ‘‘reduce substantially, if not cancel outright, the international debt which seriously threatens the future of many nations.’’ So said the Pope. Finally, we have seen the United Kingdom, under the leadership of Prime Minister Gordon Brown, maintain a sustained focus on expanding the benefits of debt relief for all worthy recipients. I recognize
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