Last-minute budget wrangling in Congress has put on hold a plan that the United States and the other industrial powers laboriously negotiated to wipe away up to $27 billion in debt owed by the world's poorest countries.
As legislators haggle over final actions of the 1999 session, they have yet to grant permission for the International Monetary Fund to revalue gold and restate certain reserve accounts, crucial steps for that agency's part of the program. They have also left unfunded U.S. portions of programs to help the World Bank and other international agencies forgive debt.
Debt relief is "a fascinating issue, where the heart says go, go and the mind says wait a bit," House Majority Leader Richard K. Armey (R-Tex.) said yesterday. "The instruments [used to grant the relief] are very difficult sometimes to understand, and to draw the language properly is difficult." He said efforts toward a solution continued but they were "bogging down."
Giving a fresh start to desperately poor countries, many of them in Africa, became the rallying cry of an international campaign called Jubilee 2000, which links religious organizations, aid groups, politicians and others. In June, leaders of the seven major industrialized countries agreed at a summit in Cologne, Germany, to move forward with the program.
Key to putting it into practice is that the different types of creditors must write off debts simultaneously, or no one does. If the World Bank wiped away debt, but the IMF did not, for instance, money that countries saved on their World Bank loans would simply flow to the IMF. That would defeat the plan's core purpose, which is that the countries will use the saved money to fund vital health and education programs. About 35 countries, including Mozambique, Bolivia and Ivory Coast, are in line to take part.
Most everyone in Congress sings the praises of debt relief. But so far, the only concrete action in Congress was the passage of a House bill to give $110 million in fiscal year 2000 to forgive debts owed to U.S. government lenders such as the Export-Import Bank.
"The initiative can't go forward, the world will be left waiting for us, if the Congress is unable to authorize the use of IMF reserves and gold," a senior Treasury official said.
Seth Amgott, spokesman for the Oxfam aid group, which has pushed for the program, said: "I don't think there's going to be any rush of people wanting to make up a shortfall that's caused by U.S. inaction. . . . The financing for Cologne could fall over like a house of cards at that point."
The most difficult wrangling has concerned the IMF, an agency that generates suspicion in many quarters of Congress. On the right, it's seen as handing out billions of dollars of bailout loans with no accountability; on the left, it's faulted for forcing recipient countries to enact painful economic measures to qualify for the money.
Much of the IMF's share of the program would be funded by revaluing up to 14 million ounces of its gold stock in private transactions. To take such a step, IMF rules first require that 85 percent of its ownership shares be voted "yes"; the United States holds about 17 percent of the IMF's shares, giving it an effective veto.
U.S. Treasury Secretary Lawrence H. Summers and other Treasury officials have been negotiating with Republican lawmakers to approve a "yes" vote--no commitment of tax dollars would be required. But to date they have yet to reach an agreement that would allow the plan to go forward. Congress is also holding up approval for White House-supported changes in an IMF reserve account that would also help the IMF pay for the program.
At a Capitol Hill news conference yesterday, Armey said that controversy over the "Mexico City policy," which would ban aid to groups that lobby foreign governments to change abortion laws, is a "potential showstopper" that could affect everything else that is still in play in Congress, including the debt-relief plan.
Some sources involved in the budget negotiations said they have seen signs that Republicans are trying to hold debt relief as well as United Nations funding hostage to get the Clinton administration to back down and approve the "Mexico City antiabortion restrictions." But Armey said debt relief and the abortion controversy are not directly related.