Congress Nears Debt Relief Deal

Urged on by an Irish rock star, a televangelist and other odd ideological bedfellows, Congress is nearing approval of a major package to help write off debt for some of the world’s poorest countries.

The $435-million Clinton administration proposal--nearly double what the House approved last summer and more than five times what the Senate had previously agreed to--is meant to fulfill the U.S. end of a much larger multilateral initiative supported by other wealthy nations.

Advocates such as Bono, lead singer of the rock group U2, and the Rev. Pat Robertson, founder of the Christian Coalition, have argued that debt relief is a moral obligation for a nation enjoying unparalleled prosperity at the turn of the millennium.

House Majority Leader Dick Armey (R-Texas) said Wednesday that he expects a debt-relief deal to be announced within days. His comment followed what he described as “congenial” talks between Democrats and Republicans--a sharp contrast to the heated negotiations over several other remaining issues in the fiscal 2001 budget.

Most of those involved in the debt-relief debate agree that something must be done to help the world’s poorest countries emerge from a staggering debt load that they are likely never to repay in full. In 1996, the International Monetary Fund and the World Bank launched an initiative to help erase nearly $200 billion in debt owed by 41 countries, mostly in Africa. Last year, leaders of the major industrial powers meeting at Cologne, Germany, promised to accelerate the debt relief.

But critics charge that the proposed action, which presidential candidates Al Gore and George W. Bush both support, may benefit corrupt regimes while not achieving its avowed aim of helping people in Africa and Latin America out of poverty.

Those voicing doubts over the proposal include Sen. Phil Gramm (R-Texas), who in a speech Wednesday complained that the leader of Uganda had bought a $47-million Gulfstream jet as his country was getting an installment of debt relief. And he noted that Chad, another African nation in line for relief, has been criticized by the State Department for allowing security forces to torture, rape and kill without license.

Gramm, who is holding up a crucial provision of legislation to help the IMF forgive debt by revaluing its gold reserves, said that he is demanding strict conditions for accountability.

“The sad story is that, if we forgive this debt and we do not demand real reform, nothing will change,” Gramm said in his Senate speech. “This great opportunity to do something good for the poor people in the world will be lost.”

Advocates said that, while many international loans were squandered in decades past by inept or corrupt leaders, the hundreds of millions of people who live under these regimes should not be penalized as those countries begin to reform their economic and democratic institutions. IMF officials said that countries seeking to qualify for debt relief must draw up detailed plans for how the new funds will be used to reduce poverty.

Clinton administration officials have lobbied hard for the plan in the last two years and have secured support from key Republicans, such as Rep. James A. Leach (R-Iowa), chairman of the House Banking Committee, and John R. Kasich (R-Ohio), head of the House Budget Committee. Now the administration is seeking to close the deal.

“Every day that we fail to fund our commitments to this effort has real human costs,” Treasury Secretary Lawrence H. Summers told Congress last month.

Summers cited Bolivia and Honduras as two countries that would gain from a congressional commitment. Bolivia, he said, has a solid record of economic reform and is a key South American ally in the campaign against the illegal drug trade. But a delay in receiving $850 million in debt relief means that Bolivia would spend $35 annually per person on debt payments, Summers said, more than its spending on health or education.

Likewise, Honduras pays $4 to international creditors for every dollar it spends on health care. It recently qualified for $556 million in debt relief. Yet, Summers said, the Central American country “will not be able to put all of those resources to bear on attacking poverty until Congress acts.”

Debt relief is not a new issue for Congress. The United States agreed in the early 1990s to help write off significant debts owed by Poland and Egypt when those countries played important strategic roles in Eastern Europe and the Middle East.

This year’s initiative has drawn heavy support from the congressional black and Latino caucuses, which closely monitor U.S. policy toward Africa and Latin America.

In July, Rep. Maxine Waters (D-Los Angeles), a prominent liberal in the black caucus, teamed with Rep. Spencer Bachus (R-Ala.), a Southern conservative, to force an unexpected House vote to raise the U.S. debt-relief commitment to $225 million in the next year. The Senate had voted for only $75 million.

Raising that sum still further to $435 million would represent a major victory for the pro-debt relief coalition.

“We have a chance to do something substantial here,” Waters said recently. “It’s big. It’s a very, very big deal.”