Clinton Offers to Expand Plan to Forgive Poor Nations’ Debts

President Clinton Wednesday offered to forgive all the official debts to the United States of as many as 36 of the world’s poorest nations, provided that they use the windfall to finance “basic human needs.”

The plan, which in theory could enable the Treasury Department to erase $5.7 billion in debt, builds on a previous U.S. commitment to write off a substantial portion of these countries’ red ink.

Wednesday’s offer only slightly increases the dollar amount of debt forgiveness that Clinton had previously pledged. But agreeing to completely clear the books of such debt was seen by advocates as symbolically important.

Much of the debt is considered uncollectable, and some anti-poverty activists said the plan’s greatest value was in goading other affluent countries to follow the U.S. lead.

Clinton’s offer reflected a growing awareness among the world’s financial leaders that the gulf between rich and poor countries had become a major problem at a time of widespread affluence in the advanced world.

“I don’t believe we can possibly agree to the idea that these nations that are so terribly poor should always be that way,” Clinton told financial officials at the annual meetings of the International Monetary Fund and the World Bank. “I don’t think we can in good conscience say we support the idea that they should choose between making interest payments on their debt and investing in their children’s education.”

Clinton called debt relief “a gift to the new millennium.” His offer followed a campaign to lift the debt burdens of the world’s poorest countries that that has been supported by Pope John Paul II, rock musician Bono and a growing cadre of activists on several continents.

In June, leaders of the world’s seven wealthiest nations, meeting in Cologne, Germany, pledged to slash the debt burdens of the neediest countries by $70 billion or more. Details of the complex international plan are still being worked out. The plan could start to lighten the debt loads of many impoverished nations next year.

“Today I am directing my administration to make it possible to forgive 100% of the debt these countries owe the United States when--and this is quite important--when needed to help them finance basic human needs and when the money will be used to do so,” Clinton told the international financial leaders, prompting a standing ovation.

Later, Treasury Secretary Lawrence H. Summers explained that 36 poor countries, including Madagascar, Uganda, Mozambique, Honduras and Nicaragua, are potential candidates for complete debt relief. The list, he said, would be determined by “discussions on a case-by-case basis.”

Clinton’s announcement represented an increased commitment beyond that which the administration made in Cologne to write off about $5.2 billion in debt. In the new plan, that overall figure rises to about $5.7 billion.

The administration agreed to write off 100% of many loans--the previous agreement was 90%--and added certain loans not included in the original grab-bag of loans and guarantees.

But it is also true that government officials gave up on ever seeing much of that money long ago. Treasury accountants figured that on many loans, less than 25 cents on each dollar would be repaid.

The White House has requested $970 million from Congress to go toward the bilateral U.S. debt relief and contribute to debt write-offs by international lenders such as the World Bank.

More than $3 billion of the debt was granted at conventional interest rates by such agencies as the Export-Import Bank, the Commodity Credit Corp. and others, according to Treasury officials. A smaller amount was awarded through special aid programs, in which recipients were given exceptionally low interest rates and lengthy repayment periods.

Briefing reporters Wednesday, Summers estimated that the White House initiative would lead to the writing off of “hundreds of millions” of more debt than previously planned but added that it “has a symbolic significance . . . that goes beyond its economic significance.”

Clinton’s announcement was greeted with approval by some in the contingent of debt-relief advocates that has convened at the IMF and World Bank meetings, despite skepticism toward rich, official lenders, embodied by the IMF.

“This is going to put pressure on other countries, particularly Japan and France, to follow suit,” said Carole Collins, national coordinator for the anti-poverty group Jubilee 2000 USA, alluding to the Group of 7 wealthiest nations, among whom there is resistance to comprehensive debt relief.

Before Clinton spoke, the campaign for debt relief reached Capitol Hill, where 21 members of Congress signed a letter to the president calling on him to cancel the debts of the poorest nations.

“It is absurd and inhuman that many of the poorest countries on this earth are forced to spend more of their budgets on debt payments than they spend on health care, education or the other basic needs of their people,” said Rep. Bernard Sanders (I-Vt.), a leader of the group.

Other countries that could qualify are Benin, Bolivia, Burkina Faso, Burundi, Cameroon, the Central African Republic, Chad, the Republic of Congo, Ivory Coast, the Democratic Republic of the Congo, Ethiopia, Ghana, Guinea, Guinea-Bissau, Guyana, Laos, Liberia, Malawi, Mali, Mauritania, Myanmar (Burma), Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, and Zambia.