FY2001 Appropriations Request: $435 million in funding for debt relief for the world's poorest countries in the FY2001 Foreign Operations Appropriations bill.

Last year, the G-7 developed an plan to relief $90 billion in debt for 33 poor countries, while promoting transparency, better fiscal management, poverty reduction, and economic growth in these countries. This $90 billion in debt cancellation would cost creditors $27 billion primarily due to heavy discounting of the loans and the advantage of purchasing the debt today as opposed to having it accrue interest over the length of the loan. The direct cost to the United States is less than four percent - $920 million over four years for both bilateral and multilateral debt relief. This plan is consistent with legislation introduced by Congressmen Leach and LaFalce, and Senators Mack and Sarbanes, which received strong bipartisan support.

At the end of last year, Congress and the Administration reached an agreement to authorize cancellation of 100% of the bilateral debts owed directly to the U.S. from these countries (worth $320 million) and funded the first year installment ($110 million). Last month, the Senate Foreign Relations Committee unanimously passed the Helms-Biden-Hagel-Sarbanes agreement authorizing $600 million in multilateral debt relief. The House Banking Committee authorized this amount last year.

In order to fulfill the United States portion of this international debt relief agreement and leverage billions of dollars from other nations, Congress must appropriate the remaining $810 million. The Administration has requested $435 million for the 2001 budget. This includes $210 million in multilateral debt relief funding not included in the FY2000 budget, and $225 in both bilateral and multilateral relief for FY2001.

There is wide bipartisan agreement that these decades-old debts will never be repaid and ought to be relieved. Much of the debate has centered on the conditions that poor countries must meet in order to get relief. Under last year's budget agreement, countries must perform satisfactorily under an economic reform program, promote civil society participation, implement anticorruption measures and transparent policy making, adopt strategies for poverty reduction, and strengthen private sector growth, trade, and investment. Consistent with current U.S. law, the program excludes from eligibility countries that systematically violate human rights, support terrorism, or have excessive military spending.

The Senate Banking Committee has requested a review of the debt-related provisions of the Foreign Relations bill, with a particular eye to IMF reform. Senator Gramm has said explicitly that his concerns revolve around IMF reform. While IMF reform is important and Congress should carefully consider these issues, the highly complex and long-reaching nature of IMF reform will necessarily take time. Debt relief should move forward now to help these struggling countries without tying that relief to a very complex and lengthy debate over IMF reform. The rest of the world is waiting for funding from the U.S. before they write off their debts. The U.S. may lose an historic opportunity to leverage billions of dollars from other countries - 96% of the cost is covered by other creditors - because we fail to act now.

Summary

Program Cost
Debt cancelled under the Cologne G-7 agreement	$90 billion
Total cost of this agreement to international creditors	$27 billion
Direct cost to US (less than 4% of total) over 4 years	$920 million
$920 million = $320 bilateral + $600 multilateral
Authorization
Congress authorized 100% bilateral cancellation ($320 million) in last year's budget deal.
Senate Foreign Relations and House Banking Committees have authorized the full request for a U.S. contribution for multilateral relief ($600 million).
Appropriations
Administration's request for 2000: $110 bilateral + $210 multilateral =	$320 million
for 2001: $75 bilateral + $150 multilateral =	$225 million
for 02-03:	$375 million
Total	$920 million
For FY2000, Congress appropriated $110 million for bilateral cancellation (the full request), and no multilateral contribution.
For FY2001, the Administration request is $435 million	=$210 million '00 multilateral
	$75 million '01 bilateral
	$150 million '01 multilateral

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