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DEBT AND DEVELOPMENT: HOW TO

PROVIDE EFFICIENT, EFFECTIVE ASSISTANCE

TO THE WORLD’S POOREST COUNTRIES

HEARING

BEFORE THE

SUBCOMMITTEE ON 

DOMESTIC AND INTERNATIONAL 

MONETARY POLICY, TRADE AND TECHNOLOGY

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

June 8, 2005

Printed for the use of the Committee on Financial Services

Serial No. 109–35

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

BARNEY FRANK, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin, 

BERNARD SANDERS, Vermont

Robert U. Foster, III, Staff Director 

(III)

SUBCOMMITTEE ON DOMESTIC AND INTERNATIONAL MONETARY POLICY, TRADE AND

TECHNOLOGY

DEBORAH PRYCE, Ohio, Chair

JUDY BIGGERT, Illinois, Vice Chair 

JAMES A. LEACH, Iowa 

MICHAEL N. CASTLE, Delaware 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

MARK R. KENNEDY, Minnesota 

KATHERINE HARRIS, Florida 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

MICHAEL G. OXLEY, Ohio 

CAROLYN B. MALONEY, New York 

BERNARD SANDERS, Vermont 

MELVIN L. WATT, North Carolina 

MAXINE WATERS, California 

BARBARA LEE, California 

PAUL E. KANJORSKI, Pennsylvania 

BRAD SHERMAN, California 

LUIS V. GUTIERREZ, Illinois 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin 

JOSEPH CROWLEY, New York 

BARNEY FRANK, Massachusetts 

(V)

C O N T E N T S 

Page 

Hearing held on: 

June 8, 2005 ...................................................................................................... 1

Appendix: 

June 8, 2005 ...................................................................................................... 29

WITNESSES 

WEDNESDAY, JUNE 08, 2005

Birdsall, Nancy, President, Center for Global Development ................................ 7

Kapoor, Sony, Senior Policy Advisor, Jubilee USA Network ............................... 9

McNamar, Tim , Member, Bretton Woods Committee ......................................... 12

APPENDIX 

Prepared statements: 

Pryce, Hon. Deborah ........................................................................................ 30

Biggert, Hon. Judy ........................................................................................... 32

Maloney, Hon. Carolyn B. ................................................................................ 34

Waters Hon. Maxine ......................................................................................... 39

Birdsall, Nancy ................................................................................................. 41

Kapoor, Sony ..................................................................................................... 54

McNamar, Tim .................................................................................................. 82

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Biggert, Hon. Judy: ..................................................................................................

Additional questions for the record for Dr.Nancy Birdsall ........................... 99

Frank, Hon. Barney: ................................................................................................

′′The Price Of Gold′′, New York Times, June 3, 2005 ..................................... 100

Moore, Hon. Gwen: ..................................................................................................

′′Crumbs for Africa′′, New York Times, June 8, 2005 .................................... 101

Birdsall, Nancy: .......................................................................................................

Written response to questions from Hon. Judy Biggert ................................ 102

Kapoor, Sony: ...........................................................................................................

Written response to question from Hon. Barney Frank ................................ 103

Written response to question from Hon. Carolyn B. Maloney ...................... 104

′′Debt Relief and Financing The MDGs,′′ Communique on the 11th Meeting of HIPC Finance Ministers, March 16, 2005 ........................................ 108

McNamar, Tim: ........................................................................................................

Bretton Woods Committee Recommedations to New World Bank Management, June 1, 2005 ....................................................................................... 112

′′Wolfwitz and Oil: Facts and Opportunity,′′ position paper ......................... 119

(1)

DEBT AND DEVELOPMENT: HOW TO 

PROVIDE EFFICIENT, EFFECTIVE ASSISTANCE 

TO THE WORLD’S POOREST COUNTRIES 

Wednesday, June 8, 2005

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON DOMESTIC AND INTERNATIONAL

MONETARY POLICY, TRADE, AND TECHNOLOGY

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to call, at 2:25 p.m., in Room 

2128, Rayburn House Office Building, Hon. Judy Biggert [vice 

chair of the subcommittee] presiding. 

Present: Representatives Biggert, Kennedy, Neugebauer, Price, 

Maloney, Waters, Sherman, Wasserman Schultz, Moore, and 

Frank. 

Mrs. BIGGERT . [Presiding.] The Subcommittee on Domestic and 

International Monetary Policy will come to order. 

Without objection, all members’ opening statements will be made 

part of the record. 

Good afternoon. It is my pleasure to welcome you today to today’s 

hearing on ′′Debt and Development: How to Provide Efficient, Effective Assistance to the World’s Poorest Countries.′′

We are here today to receive testimony from three witnesses regarding current thinking on how our international financial institutions can provide more effective relief to impoverished nations. 

I will begin with my opening statement. 

You may have noticed that I am not Chairman Deborah Pryce. 

I am Vice Chairman Judy Biggert. Chairman Pryce will have an 

opening statement for the record. She very much regrets that she 

has to miss this hearing today. She asked me to share with you her 

commitment to finding innovative ways to eliminate debt for countries that are showing reform. 

Today is not the first time that this committee has focused on 

debt and development issues. I am sure that it will not be the last. 

The issues are broad-ranging and global and elicit the interests of 

many persons and parties, including in my congressional district 

just outside of Chicago. 

In April of last year, I chaired a hearing of the subcommittee to 

receive a report issued by the General Accounting Office concerning 

the projected cost of the enhanced highly indebted poor country, 

HIPC, program. This report produced staggering, yet somewhat 

questionable numbers. It became clear from that report and from 

the testimony we received at the hearing that simply providing bilVerDate 0ct 09 2002 17:18 Feb 21, 2006 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 G:\DOCS\109.35 RODNEY
2

lions of dollars in aid and debt relief to developing countries is not 

enough. Money alone is not the answer. It clearly has not worked 

in the past. 

We must find ways to provide more effective and efficient assistance to developing countries, and we must find ways to support developing countries’ efforts to one day graduate from dependency on 

development assistance. 

The Bush administration is taking quite a bold step in this area. 

It has called on the international community to provide up to 100 

percent of debt relief for highly indebted poor countries and to provide more performance-based grants to them. In return, those 

countries would be asked to increase transparency in their decision-making, promote private sector development, and take other 

key steps toward self-sufficiency. 

We meet this afternoon amidst a spirited global discussion about 

new strategies to help aid the poorest countries of the world. Our 

colleagues on the Joint Economic Committee have just released a 

new study on this topic and President Bush continues his discussions today with U.K. Prime Minister Tony Blair on this and other 

issues. The Group of Eight summit in July includes as a major 

item on the agenda debt and development issues. 

As we move forward, it is clear that there is no one-size-fits-all 

solution to alleviating the debt burden of all poor countries in the 

world. Each poverty-stricken country is faced with unique economic 

and social challenges. Under the current system, countries must 

continue to undergo rigorous processes to qualify for debt forgiveness or no-or low-interest loans, technical assistance and other 

forms of aid. 

Many believe this process should be improved. It is unfortunate 

when a country cannot qualify for aid due to its Government’s unwillingness to set policies that will help to provide them with greater economic and social certainty. It is even more unfortunate for 

their citizens who are poor, uneducated, or dying of disease or malnutrition. 

Regardless of which approach is ultimately taken, we must continue to work with our international partners to encourage HIPC 

countries to implement anticorruption measures, legal systems, 

and other important reforms. If the U.S. and her international 

partners provide debt relief to countries that are without sound 

Governments, infrastructure or legal systems, it is the equivalent 

of putting water in a sieve. It will not carry and it leaks through. 

At the same time, we do not want to withhold funding if a country is on the road to reform. We need to find ways to strike this 

delicate balance. I understand that making these kinds of reforms 

is not easy, but these reforms are not luxuries. Encouraging impoverished countries to form democratic societies and free-market 

economies can have material human benefits as they alleviate the 

exposure to disease and poverty that too often accompany corruption and mismanagement. These reforms also can undermine the 

opportunity for terrorism-based ideologies to take hold in poor 

countries where it can be so easy to find a scapegoat. 

I look forward to hearing from our witnesses on new proposals 

to finance debt relief and update the delivery of development assistance. We will hear from a range of views on the way to fund 

3

debt relief. We will also hear a range of views on how funds can 

be mobilized to promote economic development. I look forward to 

hearing from our witnesses about their proposals to facilitate responsible and sustainable debt relief and development in impoverished countries. 

With that, I will recognize the ranking member of the whole committee, my friend and colleague, Mr. Frank from Massachusetts, 

for an opening statement. 

[The prepared statement of Hon. Judy Biggert can be found on 

page 32 in the appendix.] 

Mr. FRANK . Thank you, Madam Chair. 

I am very proud of the work that this committee is doing and has 

been doing on an issue that is as important for humanity as any 

I can think of. We talk a lot about faith, about religious values, 

about humanitarian values that come from secular purposes. They 

all come together here. 

Members of this committee, the gentleman from Iowa, Mr. Leach, 

the gentleman from Alabama, Mr. Bachus, the gentlewoman from 

California, Ms. Waters, and myself took the lead with a lot of other 

members supporting us a few years ago when the House in a rare 

moment of independence wrote debt relief beyond what was being 

contemplated by the Administration at the time. 

I think those of us who pushed for that have been vindicated by 

the good results that we have seen. I appreciate the spirit of cooperation that we have since had with regard to going forward on 

that. At the time, it was a situation where religious and secular believers in alleviating human suffering came together. It was the jubilee year that the Pope proclaimed. That was very helpful to us 

in getting votes. 

There were people who have particular concern for those in Africa, because as we look at this question of worldwide poverty and 

the crushing debt, Africa is not the only place, but it is the single 

greatest locus of this problem, so I am pleased that we have been 

moving along. 

I want to now also express my appreciation to the Bush administration. We have been told that we will soon be hearing about an 

agreement that is going to be announced between the President 

and Prime Minister Blair. And without trying to preempt it or get 

into the details, from what I have heard, this is a very big step forward in accepting the principle of 100 percent debt relief for the 

poorest countries, the highly indebted poor countries, and an issue 

that we had raised frequently here, one of the things that has 

made this agreement possible. Because in addition to the debt relief it will also mean that future aid will come in the form of grants 

and not loans. It does not make sense to give people debt relief and 

then the next day start indebting them again. You just start over 

that cycle. 

There has been a strong argument for grants. Some of us were 

concerned that the problem was that the future funding that was 

being given had been coming from debt repayments, not the best 

source of revenue in the world, but still something. I congratulate 

the Administration for apparently agreeing that we will make up 

any shortfall in the future that would come from the fact that we 

are making grants and not loans. That is, there will not be the reVerDate 0ct 09 2002 17:18 Feb 21, 2006 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 G:\DOCS\109.35 RODNEY
4

flow of loans. We are going to, as I understand it, commit ourselves 

to supply any shortfall there. 

So that was an important breakthrough in getting this agreement, the willingness of this Administration to agree that if necessary there will be more money coming. So I am very pleased to 

see this moving forward. There will be some accounting issues on 

how this is noted. We have already voted on some of the budget. 

Let me say, I think we start from a reality which is if I were 

really dependent on any of this money being really paid back, I 

think I would be in big trouble. So to the extent that we are engaging in some accounting gestures, moves to account for the fact that 

we are not getting the money back, nobody is really getting hurt. 

We are acknowledging the reality that it is not likely that this 

money would be paid back, nor is it desirable that it be paid back. 

Accounting for that in an appropriate way is fine. 

I have always felt, frankly, that we overvalued some of that debt. 

That is, I think if you tried to sell some of this debt on the market, 

it would not pay for your transaction costs, so recognizing that reality is reasonable. So I am very pleased with the administration’s 

forthcoming approach with regard to the World Bank debt. 

I will note that we are also apparently seeing some progress in 

conceptual terms on IMF debt. If you are a country that owes 

money, it really does not make any difference to you whether you 

owe it to the World Bank or the IMF if it is money that is not 

available to you. I am pleased to see that there is apparently an 

agreement in principle, in concept, to do a similar thing for the 

poor countries with the IMF. 

There is still a question of how to pay for it. I continue to believe 

that an orderly managed sale of gold that the IMF has, for which 

the IMF has no great need, is the best way to do this. In the IMF, 

unlike us, it is in the business of making gold coins. I wish we were 

not in the business either because I think it causes us more grief 

for less return than anything else this committee does, but we are 

stuck with it. But the IMF is not. So I think they could monetize 

some of their excess gold in an orderly way. 

In fact, I would ask, Madam Chair, to put into the record a New 

York Times editorial from June 3 calling for us to do that. 

Mrs. BIGGERT . Without objection. 

Mr. FRANK . We are not there yet. I hope we will get there, but 

I do not want to cavil. The fact is that we have a good agreement, 

I understand, on the World Bank debt being totally cancelled. Remember that we already cancelled the bilateral debt, so it is not 

a case of asking others to do what we will not do ourselves. We 

have now cancelled one of the two pots of, or are about to, multilateral debt. 

The other pot also ought to be cancelled. I think that could be 

done with managed gold sales. Once again, gold sales were a part 

of the last effort. They worked well. They can continue to work. So 

this is a day I think for people to express, I hope, appreciation for 

the progress that has been made. All those other issues are still on 

the table. 

Let me just close by saying I agree that money alone does not 

solve a problem, but what is also clear to me is that the absence 

of money exacerbates the problem. Forgiving the debt, I agree, is 

5

not sufficient to solve the problems of poverty in Africa, but it certainly is necessary. If we do not begin by doing that, along with 

other measures, we will not get anywhere. 

So I think today is a day on which I want to congratulate the 

Administration and urge that we take what I think is just the one 

last step of putting the IMF gold in. If they can come up with another way to do it, I will be willing to look at it, but I do think 

we now have a recognition that cancellation of the debt, and I ask 

a 30-second indulgence, let’s be very clear. 

The moral argument for canceling the debt, the debt would have 

to be repaid by very poor people who got very little benefit when 

it was incurred. There is no point in cracking down on debt collection when it comes from the people who were not the beneficiaries 

of the indebtedness. That is why we are not talking about an individual who borrowed money and forgiving that individual. We are 

talking about poor people who have been victimized, and debt cancellation is a way of recognizing that. 

Thank you, Madam Chair. 

Mrs. BIGGERT . The ranking member of the subcommittee, Mrs. 

Maloney, is recognized for an opening statement. 

Mr. MALONEY. In the recognition of time, I will put my opening 

statement in the record, but I thank you and the ranking member 

and certainly welcome all of our guests. 

I just want to mention that I was original sponsor of the Jubilee 

Act which would achieve debt relief for 50 nations. I hope to continue working towards that with all of you. The list of countries 

needing relief is not limited to the poorest countries. When we introduced the legislation to forgive the Iraqi debt, it was certainly 

an example of what the ranking member mentioned about the poor 

people who did not benefit from it would have to pay back the odious debt from an oppressive regime that put them in debt to buy 

palaces—I think there are 60 palaces they built—and to buy arms. 

So I certainly hope that we can apply the same realization to 

achieve debt relief for South Africa, Haiti, and the Philippines. I 

truly believe the proposal that was put forward yesterday by the 

U.S., the U.K., and Canada is a very serious effort on all sides to 

achieve real debt relief for the most impoverished nations and give 

them a chance to move forward. I hope we have the political will 

and commitment to achieve the promise of this moment. 

I understand that Mr. Kapoor is going to outline the proposal, 

but in brief it adopts the U.S. policy of 100 percent debt forgiveness 

for the current HIPC countries, but incorporates the British principle that the concessional facility, the International Development 

Association, or IDA, be replenished. As I understand it, the U.S. 

has now made a significant commitment to replenish the IDA in 

the amount needed to cover the reduction in re-flows to the IDA 

that will result from debt relief. 

Secretary Snow indicated before the committee that Treasury 

would do so when we asked him in his last appearance, so I am 

delighted to learn that the Administration has made good on that 

promise. These developments are truly new and exciting, and I look 

forward to hearing the testimony and to seeing the results of the 

G-8 meeting in Scotland that is coming up in July. 

6

So I place the rest of my comments in the record and look forward to the comments. Thank you. 

[The prepared statement of Hon. Carolyn B. Maloney can be 

found on page 34 in the appendix.] 

Mrs. BIGGERT . Without objection, all members’ opening statements will be made part of the record. 

With that, we will move to our panel of expert witnesses. 

First of all, we have Dr. Nancy Birdsall, who is president of the 

Center for Global Development. She is the founding president, and 

prior to launching that center, she served for 3 years as senior associate and director of the Economic Reform Project at the Carnegie Endowment for International Peace, where her work focused 

on issues of globalization and equality, as well as on the reform of 

international financial institutions. Prior to that, she was executive 

vice president of the Inter-American Development Bank, and prior 

to that she was with the World Bank. So she brings a wealth of 

experience. 

I would yield to the ranking member of the committee for an introduction of Mr. Kapoor. 

Mr. MALONEY. I am really delighted to introduce Sony Kapoor, 

the senior policy adviser to Jubilee USA Network. I would like to 

thank him for coming all the way from London to offer his views 

and expertise to us today. We have worked with him, many of us 

on this committee, for a long time, both on my bill to forgive Iraqi 

debt and on the Jubilee Act with Representative Waters. I thank 

them for bringing Mr. Kapoor here today. 

Sony Kapoor works on issues relating to international finance, 

development, and governance, both with nongovernmental organizations and various Governments. As the senior policy adviser to 

Jubilee USA Network, Christian Aid U.K., and the International 

Tax Justice Network, which advocates regulation of tax havens, he 

has testified on several occasions before the British Parliament and 

other international groups. 

For the past 2 years, Mr. Kapoor has played a leading role in the 

international policy and advocacy effort around multilateral debt 

cancellation and other development issues. He has written extensively on debt and development financing. He is a member of the 

New Rules for Global Finance Coalition and has also written extensively on financial stability and taxation. He has a background in 

the financial services industry, having worked both as a banker 

and a derivatives trader. 

He has a master’s degree in international finance from the London School of Economics and an MBA in finance. He also holds an 

engineering degree from the Indian Institute of Technology. 

We welcome you and thank you and Jubilee for all the work that 

you have done to help poor nations and to relieve debt around the 

world. We thank you. 

Mrs. BIGGERT . Thank you. 

Our next witness is R. Tim McNamar, who is a senior adviser 

to PricewaterhouseCoopers on advanced information technology for 

accounting. He also served in the Reagan administration as deputy 

secretary of the treasury. Since then, he has founded two Internet 

startups and served in senior management positions in a number 

of leading U.S. financial institutions. 

7

Welcome. 

With that, we will start with Dr. Birdsall. 

Without objection, all of your written statements will be made 

part of the record. You will be each recognized for a 5-minute summary of your testimony. After that, each Member of Congress will 

have 5 minutes to ask questions of you all. 

With that, Dr. Birdsall, you are recognized for 5 minutes. 

STATEMENT OF DR. NANCY BIRDSALL, PRESIDENT, CENTER 

FOR GLOBAL DEVELOPMENT 

Mr. BIRDSALL. Thank you very much, Vice Chairman Biggert, 

Ranking Member of the full committee Frank, Ranking Member 

Maloney, and other members of the subcommittee. I am very 

pleased to have this opportunity to speak with you today. 

What I would like to do is talk about some broad issues of development policy into which the debt issues that many of you have 

raised come. I would like to emphasize a few points, and I will try 

to do that as I proceed. 

As the vice chairman’s introductory statement indicated, this is 

a big year on development, and it is a huge opportunity for the 

U.S. to reassert its leadership on development issues, both with 

Blair’s visit, of course the G-8 summit, the appointment of Paul 

Wolfowitz to the World Bank, the U.N. Millennium Summit in September, and the Hong Kong ministerial meeting as part of the 

Doha Development Round in December. 

So this is the moment for the U.S. There are some short-term 

issues that are arising obviously, some are reflected already in the 

statements, right now in Washington. In addition, there is an opportunity for this committee to work with Treasury and in particular with management at the World Bank to really set the tone 

for the next 4 or 5 years at least on what should be the direction 

of U.S. policy with respect to development. 

I would like to raise five specific issues in the short time I have. 

The first has to do with aid effectiveness and aid accountability. On 

this score, what would be great to see is a commitment from the 

U.S., already indicated in the remarks of Mr. Frank, for increased 

levels of U.S. aid money to go through multilateral channels. That 

would make U.S. aid much more predictable, which is important 

for recipient countries who are trying to make investments, for example, in education that do not make sense if they cannot foresee 

some continuing flows in the future to finance teacher salaries and 

books and so on. The same would go for health. 

In particular, more emphasis on pooling of Millennium Challenge 

Account funds with other donor funds to relieve the burden on developing countries who are trying to manage many, many sources 

of resources. And I would say a big push from this committee 

through the Treasury that at the World Bank and among other donors there be a new emphasis on creating an approach to having 

independent evaluation of the impact of development programs in 

order to justify and make more credible increases in the future in 

the budgeting for those programs. 

The second issue I would raise very quickly is debt relief, which 

has been mentioned. It is very exciting to see the prospect of a compromise between the Europeans and the U.S. I would like to make 

8

two quick points. One is that we estimate very crudely that that 

compromise in terms of what additional funds would be required 

to replenish IDA, to make up for the lost re-flows, is very small. 

Well, nothing is really small, but $200 million a year, which is a 

tiny proportion of our current foreign aid spending. 

With respect to gold, I would like to indicate that at the Center 

for Global Development, including in my own work, we have indicated the logic of the orderly gold sales, which were mentioned already. I think that there is still room for a breakthrough there because of the strong support for debt relief in the Congress. 

I would also mention very quickly, it is not raised in my written 

testimony, that we hope in the future when and if Nigeria, as it 

continues to demonstrate through its Government, its efforts on reforms, that there be an openness to joining in some debt relief for 

that country. It could be the anchor for security in all of West Africa. 

A third issue to raise is something we call ′′making markets′′ for 

vaccines. The U.S. could take leadership at the G-8 summit in setting up, or at least agreeing that there should be set up and perhaps firmed up a year from now, what can be called an advanced 

market for the guaranteed purchase of malaria and AIDS vaccines. 

This would create incentives for private R&D on the part of our 

pharmaceutical firms to finally address this critical problem. It is 

a way to spend money on aid effectively without worrying about absorption capacity in particular countries and potentially to save 

millions of lives, including of course in Africa. 

The fourth issue is trade and market access. I have a colleague 

at the Center who has estimated that 500 million people could be 

lifted out of poverty were there liberalization of trade regimes 

around the world. In particular, the developing countries could benefit by up to $100 billion a year just from liberalization in the rich 

countries. 

What we would like to see is the Congress engage in strengthening the African Growth and Opportunity Act, including by extending its duration, and we would like to see the leadership of the 

U.S. in the WTO base system on a program to help countries that 

are losing their preferences, seeing erosion of their trade preferences, cope with that problem through some kind of transitional 

assistance. 

Finally, on the issue of U.S. leadership at the World Bank, where 

I am sure my colleague Mr. McNamar will have more to say, I 

would like to make two critical points where it is important for the 

Congress to provide encouragement, again through Treasury, to 

Mr. Wolfowitz. One is that he take the lead at the World Bank in 

creating some sort of a consortium of donors and possibly of developing country governments to address the problem of our lack of 

serious evaluation of the impact of programs. We are proposing 

that some sort of a club be set up that the members would pay 

modest dues, and that they would then sponsor selective impact 

evaluations. This could be done through contracts to third parties 

to ensure they were independent. 

And second, that Mr. Wolfowitz take early steps to begin a process of creating a setting at the World Bank where the developing 

countries can be much better represented. A particular example 

9

that would be appropriate in the short run, given the emphasis 

that Tony Blair and our European colleagues have been putting on 

Africa, would be that the U.S. agree to a proposal that for the time 

being two chairs be added at the World Bank to represent with two 

additional members the 48 African countries. That would be a modest step. It could be set up as an interim step. 

I would like to say a final word with respect to the G-8, that the 

compromise on debt that looks like it is coming is very exciting. We 

think, however, that at the same time the U.S. should be the leader on the vaccine initiative. Such an initiative would be fully consistent with America’s values, based on creating incentives for the 

private market to act, and consistent with America’s strengths. It 

would be a tremendous innovation. I think in a decade we would 

look back on it as a major contribution that we had made to saving 

lives all throughout the poorest countries of the world. 

Thank you very much, Madam Vice Chair. 

[The prepared statement of Dr. Nancy Birdsall can be found on 

page 41 in the appendix.] 

Mrs. BIGGERT . Thank you very much. 

Now, Mr. Kapoor, you are recognized for 5 minutes. 

STATEMENT OF SONY KAPOOR, SENIOR POLICY ADVISER, 

JUBILEE USA NETWORK 

Mr. KAPOOR. Members of the committee, thank you so much for 

the opportunity to appear before the committee and testify about 

debt and development issues. I will try and be brief. 

The situation for many developing countries is very grave. Each 

year, more than 6 million children die from malnutrition before 

their 5th birthday. We cannot keep ignoring this. The HIV-AIDS 

pandemic kills more than 2 million people every year and adds to 

the leagues of millions of orphans in Africa, creating long-term social and economic problems. 

It is both in the interests of the United States as a compassionate Nation, as well as in the interests of the U.S. having strong 

economic partners to take the issues of development more seriously 

and act immediately. 

Debt cancellation and development can bring resources and hope 

where there is none and also foster economic growth. Former Secretary of State Colin Powell has argued that development is a core 

national security issue and that the U.S. cannot win the war on 

terror unless we confront the social and political roots of poverty. 

So this highlights the importance, as previous speakers have done, 

of this particular issue. 

My opinions have been formed on the basis of two strong experiences in my life. One is having grown up in India and being surrounded by poverty. The second is having worked in the financial 

services industry. To summarize two completely dichotomous fields 

of experience, what I try and do in my work is to try and bring together solutions that are acceptable to all sides, developing countries to the private sector, as well as to Governments in the rich 

countries. That is what I will try and highlight. 

This is, as Nancy said, a very unique opportunity where there is 

an unprecedented attention on the issues of development. The U.S. 

is in a unique position to assume its natural leadership role, espeVerDate 0ct 09 2002 17:18 Feb 21, 2006 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 G:\DOCS\109.35 RODNEY
10

cially by advancing the bold agenda on debt cancellation and some 

of the other issues that Nancy highlighted. 

There are three main issues in financing development today. One 

is how to enable developing countries to maximize domestic resources. The second is what mechanisms and sources of external 

funds exist that can be used to support these domestic resources. 

And the third is how can these domestic resources best be kept in 

the country, something I call ′′plugging the leaks.′′ Overseas development aid, foreign direct investment and portfolio flows all fall in the first category. I have addressed them in 

my revised written testimony. Plugging the leaks is also something 

I have addressed in my written testimony. I shall try and concentrate on debt. I have also in my written testimony addressed 

the issue of trade liberalization, the issue of restructuring the 

international financial institutions and other systemic issues. 

Fifty-thousand children die every day because of preventable poverty, and that is from hunger and lack of clean water and diseases 

which would be prevented if the money to treat them existed. This 

has been proven to be effective in the past. Many children have 

been vaccinated; many more have gotten access to clean water and 

past debt relief initiators have made a real tangible difference in 

these countries. 

In 2003, Senegal and Malawi each spent about one-third of their 

Government revenue on debt service. These are just some of the African countries which spend more on debt than on health expenditure. This happens when life expectancy in countries such as Zambia, Mozambique, and Malawi is just about 37 years, which is less 

than half of what it is in the civilized world. 

It is pointless and debilitating that the churning of resources, 

money going in as new aid, comes out almost immediately as debt 

servicing. This is part of the reason why there is a reluctance on 

the part of rich countries to put more money in because this money 

is seen to be coming out immediately as debt service. This is a 

problem which we need to address very seriously and immediately. 

Debt cancellation is a very effective and efficient way of transferring resources to developing countries, not just for this reason, but 

also because of several reasons such as it provides direct budgetary 

support, reduced administrative costs. It is durable and predictable. It engenders a deeper sense of country ownership, which is 

extremely important for the development of long-term democratic 

institutions. 

A high level of debt discourages private investment, which is 

very critical to the idea of U.S. foreign policy. Debt cancellation is 

also anti-inflationary and helps keep domestic interest rates low. 

There has been some skepticism expressed about how and why the 

money of debt cancellation that is released by debt cancellation be 

utilized. Past experience has been good on this front. Countries 

that received the very limited debt relief that was available under 

the Heavily Indebted Poor Country Program have doubled poverty 

reduction expenditures from 1999 to 2004 and saw no net increase 

in military spending. 

After Mozambique was granted debt relief, it was able to offer all 

children free vaccinations. In Uganda, debt relief led directly to 2.2 

million more people getting access to clean water. These are just 

11

some of many, many real examples and tangible impacts on the 

lives of millions of people. 

The issue of multilateral debt is particularly important, as it constitutes a growing and more pernicious part of debt. The reason it 

is more pernicious is because multilateral debt is almost always 

serviced because multilateral institutions are considered to be preferred creditors. Bilateral debt, a large proportion of it, was in arrears which was not being repaid. Hence, despite the fact that it 

existed on books, it was not actually diverting resources away from 

countries. 

This has been, in part, the failure of the HIPC initiative, where 

a large proportion of the debt that has been cancelled has actually 

been debt that was worthless in any case, which has just been a 

paper transaction and, hence, has not resulted in new resources 

flowing to these countries. Multilateral debt, for every dollar cancelled, results in a dollar of additional resource to the country that 

it is cancelled for. That is why it is so important. 

Various discussions over the past months have now been narrowed down to two major groups. One is the so-called U.S.-U.K. 

compromise, and the second is the new particularly dangerous proposal which has come out from Japan, France, and Germany, 

which is still in an informal format. The reason I call it dangerous 

is that despite this momentum which has been built up over 5 

years, with the number of countries with the need for 100 percent 

cancellation, this new joint initiative which is still in its infancy actually will deliver debt cancellation only to about five countries. 

It is very, very limited in its scope. It is extremely limited in the 

way it does it. And it treats countries on a case-by-case basis and 

deals with the debt sustainability framework, which actually the 

United States to its credit was pushing for grants, not loans, for 

all poor countries and has not been accepted by the Bank and 

Fund. 

The U.S. and the U.K. proposal is extremely encouraging. It 

looks to cancel 100 percent of IDA and African Development Fund 

debt stock, which is the critical point because the U.K.’s original 

proposal was only looking at debt service through 2015. So this expands that. We really commend that. 

The country list, unfortunately, still stays narrow. The country 

list from the beginning of the proposals being discussed last year 

has been steadily narrowed, and it is now likely that the actual list 

of countries within the HIPC initiative that will receive that cancellation is going to be somewhere between 18 and 33, which is not 

enough. The HIPC group of countries, they are extremely needy. 

They really need these resources, which will save lives. 

However, they have already got more than their share of debt 

cancellation. They have attracted more than a fair share of overseas development aid, and other countries which were arbitrarily 

left off the initial heavily indebted poor country scheme will be at 

a further loss. This is not a fair proposition. These countries need 

debt cancellation as much as the HIPC countries do. We strongly 

request the members of the committee to agree with us on this 

issue and try and influence the U.S. Treasury to expend the country list. 

12

In discussion, it is also reported that the Administration is calling for an inclusion of IMF debt, which is a very positive development because in the past few months, we had been extremely 

scared that the International Monetary Fund debt was left off the 

agenda. That is an unacceptable situation because IMF debt accounts for a significant proportion, up to 25 to 30 percent of the 

debt service that these poor countries will pay over the next 10 

years leading up to the international development goals, the Millennium Development Goals in 2015. So it is extremely important 

that IMF debt be addressed. 

The second reason is that IMF debt actually is less concessional 

and is more expensive than IDA debt. So for these two reasons and 

others, the IMF portion of the debt needs to be considered. 

The current idea seems to be that the United States favors the 

use of sources of funds within the IMF, including the PRGF, the 

Poverty Reduction and Growth Facility, and the corpus, the principal from the gold transaction back in 1999, to cancel this debt. 

The U.K. Government favors the gold sales idea. We are hoping 

that a compromise can be struck. 

Mrs. BIGGERT . Mr. Kapoor, if you could sum up and we will get 

to the questions. 

Mr. KAPOOR. Thirty seconds? 

Mrs. BIGGERT . Yes. 

Mr. KAPOOR. Excellent. 

There have been several misunderstandings of what we have proposed about dealing with the issue of IMF gold. I am very happy 

to answer those questions and clear those misunderstandings. I am 

also happy to answer all questions about other things that I have 

not addressed. 

In summary, there are four more issues in tackling the problem 

of development. What we need to do is we need to free up more 

policy space for countries. This could help them have domestically 

owned and flexible policies which are conducive to the local circumstances. We cannot push for a one-size-fits-all approach because countries are extremely different in their local circumstances, 

educational infrastructure, raw commodities, and basic country development. 

We are also very aware of the issue of the debate about increased 

aid without increasing aid effectiveness. I think that is something 

that Nancy will speak more about. 

And last of all, we reiterate the importance of stopping the leakage of billions of dollars from these countries in the form of dirty 

money flows, capital flight, and debt servicing. 

Thank you very much. 

[The prepared statement of Sony Kapoor can be found on page 

54 in the appendix.] 

Mrs. BIGGERT . Thank you. 

Mr. McNamar, you are recognized for 5 minutes. 

STATEMENT OF TIM MCNAMAR, MEMBER, BRETTON WOODS 

COMMITTEE 

Mr. MCNAMAR. Thank you, Madam Chairwoman and Ranking 

Member Maloney. I am privileged to testify—and I do regard it as 

a privilege, make no mistake—before your committee today. 

13

I was actually thinking, having been gone 25 years, how proud 

my father, who is long deceased, would be of me. My family has 

not done this before. We are not very good at this, but we love our 

country. I am here as a great unequivocal supporter of the World 

Bank. I am going to say some critical things, make no mistake, and 

I would hope you would take that as, if you will, tough love, because I believe in the World Bank. 

I am privileged to have testified with Barney Frank and Jim 

Leach before. I do not think they excoriated me, but I cannot remember. Maybe the scars have healed over. I am not sure. But you 

have a very complex and difficult task before you. I would like to 

tell you I have the answers. I do not. I know a few of the questions 

and maybe a couple of the answers, but that is about it. This is 

hard stuff, but it is stuff that, if I may say so, America has to step 

up to because there is no one else. It is our responsibility to the 

world, make no mistake. We have to do this. 

Democrats and Republicans can disagree on how to do it. We 

cannot disagree on our responsibility. There is no second choice. 

There is no other choice. Just as we fought the Cold War, we have 

to work on this. 

Let me make a couple of points at the outset. I am here speaking 

for myself and as a representative of the Bretton Woods Committee, which as I am sure many or all of you know, is a bipartisan 

group that supports the Bretton Woods institutions. It is composed 

only of Americans only because we can come here in Congress and 

testify without registering as a foreign agent as you would have to. 

But we believe in this. 

And I have been here for a couple of years now and wrote a book 

on Enron. I learned about something called XBRL, which I will tell 

you in a minute, which is extensible business reporting language, 

which is the kind of thing that will put you to sleep except it is 

revolutionary. 

How many people in this room understood when Netscape came 

out it was revolutionary? This is revolutionary. I did not invent it. 

My firm does not own it. Actually, we lose money on it. Okay? Just 

to be very clear. But the world will be better because of it and it 

is imperative that the developing world and the multilateral development banks push it. I am going to say something in a minute. 

It turns out that the Inter-American Development Bank is at the 

forefront of recognizing this. They deserve credit. My view, correct 

or incorrect, is that the World Bank needs to catch up. 

But I do want to talk about technology because that is in the 

title of the committee and that is what you are concerned about. 

I am going to say something a little provocative. I will say a whole 

bunch of things. I do not believe that the international finance facility proposed by Gordon Brown is quite correct. I do not think it 

is good enough. But I recommend the British and I commend Gordon for having tried. 

Does it look too much like what I saw in 1985? Yes. The fact of 

the matter is that he is trying and he put something out there and 

I commend him for doing that. We need to keep getting these 

things coming as opposed to saying, oh no, the U.S. is opposed to 

it. That is not the answer. The U.S. is not necessarily opposed. 

14

I want to talk about change technology and development. I remember as a child getting under the desk to protect myself from 

an atomic bomb attack. It did not come in Oklahoma because they 

did not have aerial refueling. The Germans did not have the bomb. 

The world has changed since then. I kissed my parents good-night 

from Ann Arbor during the Cuban missile crisis because I was not 

going to wake up the next morning and they were not either. The 

world has changed. 

I do not think we grasp that enough. Ideas, trends, thoughts 

about the World Bank and IDA have shifted with time, perhaps not 

enough. I think the United States’s support for the World Bank in 

fact has been quite good. I would offer you a thought. Probably you 

have read this. It is called a Guide to the World Bank, published 

by the World Bank. I actually read the whole thing last week in 

preparation for this testimony. I was embarrassed. 

How many of you have read this book? I hope everybody is going 

to raise their hand. If you do not, I commend it to you. 

Mr. FRANK . We have no idea what that book is. 

Mr. MCNAMAR. I am sorry. Thank you. This is ′′The World is 

Flat: A Brief History of the 20th Century′′ by Thomas Friedman of 

the New York Times, the number-one bestseller for the last 8 

weeks or 10 weeks. 

Mr. FRANK . We have been in session for the last 8 weeks. 

[Laughter.] 

Mr. MCNAMAR. One of these books is out of date. Unfortunately, 

the committee has the responsibility to figure that out. I do not, 

but you do. And you have to figure out what are the things you 

would like to urge the U.S. Treasury to urge the World Bank or 

the Inter-American Development Bank or the IMF to do. And I 

urge you to read both books. 

You will be appalled at the one, and you will be frightened by 

the other. I did not say ′′enlightened.′′ I said ′′frightened.′′ And do 

you know what? You have to figure out what you are going to do 

and what your second choice is, because my view is you do not 

have a second choice. The United States does not have a second 

choice. You have to support the World Bank and IDA unequivocally. 

Does that mean they cannot change? Absolutely not. They need 

a lot of changes. I look at how the African Development Bank suffers. I look at the Millennium Challenge Corporation’s effort. That 

is an experiment, no bones about it. But you know what? It may 

be directionally correct or the right answer. I do not know. You, unfortunately, have the responsibility that I do not have to decide 

that. 

I will give you an example. I had lunch yesterday at the InterAmerican Development Bank. We have been chatting with them 

about this EBRL thing, which is basically the XML with some improvements. This is the web-based language that businesses use. 

Okay? And they have figured it out, grasped, grabbed on to, and 

believe that if their countries in Latin America that do not do this, 

there is something called a development gap, that is, the left-behind. 

They are going to take a role, and I do not know exactly what 

it will be, but they are going to take a role to trying to make this 

15

happen because if they do not, their countries are not going to 

progress like they should, have the per capita income increase, the 

improvements in living standards and healthcare and all the other 

good things that go with that. That is development. 

Your responsibility, which I am so glad I do not have, is to make 

sure that our multilateral development banks do that. It turns out 

that there is one in the world, the Inter-American Development 

Bank, that is ahead of the curve. I commend them. This is forward 

thinking. This is getting the fact that this book is history. It is not 

even good history. And this book is the future. And they want to 

improve their peoples’ lives, their constituents, their countries’ 

lives. 

We have a new paradigm for development. We have two choices. 

We can say, oh, that is not true, and reject it because the World 

Bank is doing in 2005 what it did in 1955. Or they can do something different. Do I think that technology and call centers in 

Kenya are going to solve all the world’s problems? No. That is foolish. Do I think it is a component of development that if I dare say 

so, this is probably arrogant, but a lot of people call me arrogant 

so we will take that. 

Mrs. BIGGERT . Could you sum up your testimony? 

Mr. MCNAMAR. Yes. I am arrogant and the committee has not 

heard it before, and that ought to be a concern. 

[The prepared statement of Tim McNamar can be found on page 

82 in the appendix.] 

Mrs. BIGGERT . Thank you. 

We will now turn to the questions. 

Mr. MCNAMAR. Madam Chairman? 

Mrs. BIGGERT . Yes? 

Mr. MCNAMAR. May I ask that my oral testimony be submitted, 

only because there are a couple of attachments that I think the 

committee might find useful? 

Mrs. BIGGERT . Your written testimony? 

Mr. MCNAMAR. Oral. 

Mrs. BIGGERT . Oral. It will be in the record, without objection. 

Mr. MCNAMAR. Thank you. 

Mrs. BIGGERT . I will now yield myself 5 minutes for questions. 

Dr. Birdsall and Mr. Kapoor, is it your testimony that you support 100 percent debt relief for HIPC countries? 

Mr. BIRDSALL. Yes. My testimony is that we support 100 percent 

debt relief for HIPC countries who have met certain standards of 

eligibility. 

Mrs. BIGGERT . Okay. 

And Mr. Kapoor? 

Mr. KAPOOR. It is my testimony that we support 100 percent 

debt cancellation not just for HIPC countries, but for all impoverished countries that need resources and are having to repay debt 

at the cost of human lives. 

Mrs. BIGGERT . Okay. Then is it your testimony that you support 

ending the cycle of lend-and-forgive so that poor countries are not 

receiving loans to service existing and increasing debt? 

Mr. KAPOOR. Absolutely not. We are strongly in favor of getting 

out of the lend-and-forgive cycle. We have been extremely strongly 

supportive of the U.S. initiative to give grants only and not loans 

16

to especially the poorest countries. We believe that 100 percent 

debt cancellation is a way of wiping the slate clean. One-hundred 

percent debt cancellation wiping the slate clean and a combination 

shift to grants not loans is the only way we can get out of the lendand-forgive cycle. That is what we support. 

Mrs. BIGGERT . Okay. 

Dr. Birdsall? 

Mr. BIRDSALL. Yes. And I would like exactly the same. It does 

not make sense really to make loans to countries where in the future we expect to have to make more loans so that they can repay 

the initial loans. But in particular, what I would recommend is 

that the Congress work with Treasury to encourage the World 

Bank to establish a kind of second window inside IDA with some 

clarity on which countries are eligible for grants. 

Certainly, all those that get 100 percent debt relief should have 

grants going forward, but what would be simple and straightforward is to establish an income per capita level below which 

countries should get grants until they move beyond that income per 

capita level. This would be absolutely no different from the existing 

distinction between poor countries who are eligible for IDA and the 

middle-income countries that are eligible for the IBRD window at 

the World Bank. 

Mrs. BIGGERT . So then is it your testimony that IBRD reserves 

could be mobilized to support the debt relief? 

Mr. BIRDSALL. I am not prepared to suggest that, but I think 

that the debt relief should be supported by contributions, new contributions to the IDA for those poor countries and to the African 

Development Bank, and by sale of limited managed sale of IMF 

gold. 

The problem with attacking, in a sense, the reserves of the IBRD 

is not about the financing. In the medium term, that might make 

sense. My concern about that and our concern at the Center for 

Global Development is that the middle-income countries would end 

up financing in part indirectly those costs. That is not such a bad 

thing in principle. It might be very sensible to have some of those 

countries be indirect donors. 

However, it should come under an umbrella in which they have 

more representation, more voice in making those decisions. It will 

create more complications for overall understanding and bringing 

in China, India, Brazil, Mexico, bringing them to the table if they 

feel that the G-8, the United States and its G-8 partners, and a set 

of other rich countries decide in their wisdom that the way to finance more debt relief for the poorest countries is in effect to impose a somewhat higher price on the middle-income countries because if those reserves are used indirectly it will increase their cost 

of borrowing from the World Bank. 

Mrs. BIGGERT . How about you, Mr. Kapoor? Would you support 

using those reserves to support that relief? 

Mr. KAPOOR. May I issue a point of clarification? Which is that 

I think the debate about the source of money is misrepresented. It 

goes into nuances which are not necessarily true. The reason behind that is that eventually when the IMF and the World Bank are 

wound up, as someday they will be, they are continuing institutions, but one hopes and one thinks that the world will not need 

17

them at some point of time. The money that they have in reserves 

and otherwise will then go back to the creditor countries in the proportion of their shares now. 

So the distinction between new resources from creditors, as well 

as existing resources from IFIs, currently is there, but it is not exactly black and white. It is shades of gray. Having said that, I 

think that it is entirely possible to in part finance IDA from IBRD 

reserves. I think Nancy does have a point. It might lead to a small 

increase in the cost of loans to middle-income countries. 

I have in my written paper clarified that that increase would be 

very small and insignificant, so that is entirely possible. However, 

in terms of the hierarchy of funds, and again for the reasons that 

Nancy highlighted about middle-income countries not having a fair 

representation, it is perhaps not the most appropriate port of call 

of reserves to use. So there are other avenues that should be 

tapped. 

However, if there is residual demand for more funds and it comes 

at the cost of some poor countries not getting that cancellation, 

then we yes very strongly favor the use of at least some of those 

reserves. In the past, IBRD has already cumulatively transferred 

$7 billion through annual income transfers to IDA, so it does have 

a precedent. Thank you. 

Mrs. BIGGERT . Okay. So then it would appear that you support 

the basics that President Bush has been talking about for funding 

the World Bank debt relief? 

Mr. KAPOOR. I would like to make a distinction here between 

what President Bush was saying before and what has been said 

yesterday. We strongly endorse what has been said yesterday, 

which is the additional new money which will come from the country donors to account for any loss in the lending capacity and the 

grant-giving capacity of IDA. What has been said before was slightly different, which was that the money that is used for cancellation 

would actually not be reimbursed by the United States. 

So between these two options, we strongly reinforce what has 

been said yesterday, but the previous idea, we are not very comfortable with. 

Mrs. BIGGERT . All right. So to be clear, then, that would be that 

they would not receive the same amount of money after the debt 

relief that they receive now. 

Mr. KAPOOR. Yes, that was the previous proposal, but that has 

been addressed in the suggestion that was put forward yesterday. 

There was never a clear, explicit suggestion of the transfer of 

money from IBRD to IDA in any of the U.S. proposals that I have 

seen. So it was discussed, but never formally. 

Mrs. BIGGERT . Okay. Thank you. My time has exceeded. 

Mrs. Maloney is recognized for 5 minutes. 

Mr. MALONEY. I thank all of the members for their testimony. In 

fact, I did read The World is Flat, literally last week, and it does 

present a wake-up call. I would be interested in your comments on 

how we should change our policies to address the new changes in 

the world. 

I would like to begin by asking Mr. Kapoor, Jubilee was very active in introducing the Jubilee Act in 2004. Can you compare the 

18

mechanism that that act uses to pay for debt cancellation with 

other proposals? In what ways is it different? 

In your testimony, you also expressed your grief really that in 

many cases aid money, all new aid money, is used just for debt 

service. I would like to know, and if you do not have that, if you 

could give it in writing to the committee, how many countries are 

in that category, and if there are a lot of countries that are not already in the HIPC area. 

I would also like you to address another one of your statements. 

You said there was tremendous ambiguity. It seemed like an arbitrary decision on how countries were selected for HIPC and that 

many needy ones were left off. So I would like to ask you what criteria should we use to respond, if you agree with the recommendation that Nancy put forward on per capita income. 

And just all of the comments, anybody who would like to respond 

to the provocative questions of Mr. McNamar on how we change 

our new policies in the international community, given that the 

world has become flat. 

Okay. Thank you all for your testimony. 

Mr. Kapoor? 

Mr. KAPOOR. Thank you very much for the questions. Please remind me if I forget to address any of those. I am a little jet-lagged. 

The last question first in terms of the criteria that was used for 

HIPC. It is clearly known that the criteria used was politically 

based. It was also based on the limited resource envelope that the 

countries which were at the negotiating table thought they had 

available, and, hence, large countries, especially the example of Nigeria comes to mind, was left off simply because it was considered 

to be too big a case. There were not enough resources available. 

The criteria used was arbitrary. There had been a lot of analysis 

on that. A late report from UNDP highlights clearly why the criteria was arbitrary. It had to do with debt servicing to exports ratios. If you look at most of the numbers that the Fund and the 

Bank use in defining such criteria, they are always very round 

numbers which highlights the lack of rigor behind them. So most 

of these numbers are like 150 percent or 200 percent or 100 percent. Amazingly, they always add up to multiples of 50 percent. So 

that is something about that. 

The second question, I believe, was around the leakage of resources of aid money coming out as debt servicing. There are several countries, especially many of the poorer middle-income countries, the example of the Philippines come to mind, wherein the 

debt servicing paid is far in excess of the new aid flows that go in. 

As to the specific numbers, I am happy to submit the answer as 

a written testimony. 

Mr. MALONEY. But what criteria would you suggest we use if the 

other was arbitrary? What criteria would you suggest we use? 

Mr. KAPOOR. We have done some work in collaboration with a 

number of other civil society organizations. We have developed 

what we call the human development approach to debt sustainability. The idea behind that is as long as any country has resources that fall short of trying to meet the Millennium Development Goals, goals that many OECD countries, all OECD countries 

including the United States have signed up to, as long as the reVerDate 0ct 09 2002 17:18 Feb 21, 2006 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 G:\DOCS\109.35 RODNEY
19

sources available fall short of sustaining the basic needs of its citizens such as health and education, no debt should be serviced. 

That is the criteria we would like to use. 

Based on that criteria, the number of countries which qualify, 

and this relates with Nancy’s criteria of having a purely low per 

capita income basis. In fact, if you look at the country list that 

comes out from both these criteria, there is a very large degree of 

overlap. We very strongly feel that creditor rights are important, 

but they should not come at the cost of human lives, and that is 

the basic criteria we want the Bank and the Fund to go forward 

with. 

Mr. MALONEY. Do you see a possibility, and I know the aid going 

into many of these countries in South America and all over the 

place, Africa and Asia, it is not just Government money. It is from 

private investments also. Would you have the same criteria with 

the private investments, too, that their debt service not be carried 

if the human suffering is too great? 

Mr. KAPOOR. There have been interesting suggestions around the 

treatment of sovereign debt. One came up from the Fund. There 

has been another suggestion called the Fair and Transparent Arbitration Process put forward by the Civil Society. The idea is that 

enough resources should be provided by the international community, including the United States, to help meet these basic needs 

so that the need to borrow at exorbitant rates does not arise and 

the problem of the debt forgiveness cycle again is not repeated. 

So as long as there are enough resources available in these countries to meet the basic human needs of their citizens, they should 

not be borrowing, especially at exorbitant rates in the international 

markets. However, there are cases where in a number of cases it 

is either desperation which has forced them to borrow or there are 

a number of cases, as you also pointed out, of odious debt where 

odious regimes, including that of Iraq and before that the Democratic Republic of Congo and Nigeria, have borrowed for nefarious 

purposes. 

There should be, we very strongly feel, some sort of lending 

guidelines in place the first of January, 2006 going forward which 

ensures that private as well as public lending to odious regimes 

used to suppress populations and used for nefarious purposes and 

military expenditures should not be enforceable in the court of law. 

So regimes or lending to such regimes should be declared odious ab 

initio so that the problem does not arise and citizens do not have 

to pay for money that they never benefited from. 

Mr. MALONEY. My time is up. Thank you for your leadership on 

helping so many countries. Thank you. 

Mrs. BIGGERT . The gentleman from Massachusetts, the ranking 

member, is recognized. 

Mr. FRANK . Thank you, Madam Chair. 

Let me ask first about the IMF and gold your reservations, Ms. 

Birdsall, about the potential effect of reserves being used. I have 

to say, I am obviously not in the business of lending money to the 

Bank and the IMF, but my own sense is that the security of that 

investment has more to do with the inherent advantages and the 

international backing than the actual amount of reserves. I think 

20

that there is a very clear commitment on the part of the donor 

countries not to let them go bust. 

Leaving that aside, does trying to get some of the monetary value 

out of the IMF gold, would that have any similar problems? 

Mr. BIRDSALL. No, it actually does not because—it is sort of a 

complicated financial system. 

Mr. FRANK . We are the Financial Services Committee. We are 

supposed to pretend we can understand all of it, so it is okay. 

[Laughter.] 

Mr. BIRDSALL. Right. My apologies. You are the ones who would 

understand. The IMF books its gold at an old price that reflects the 

price that it paid or the market value when it acquired the gold. 

So it is booked at about $45 billion, but it is actually worth closer 

to 10 times that amount. So when it sells the gold, it is actually 

releasing resources and generating cash, which is much greater 

than the current book value. 

So it could sell gold and actually enhance its ability in the future. 

Mr. FRANK . So you are in favor of using the gold to pay for IMF 

debt relief? 

Mr. BIRDSALL. Absolutely. I think that that holds the IMF accountable for what turned out to be expensive loans to countries. 

Mr. FRANK . I agree. I gather we are getting to the point of 

agreeing on IMF debt relief, because there is certainly no logical 

reason to not also do that, and there has been the question of how 

you pay for it. 

Mr. BIRDSALL. I think if I could say that I think there is a legitimate concern on the part of gold-producing countries and gold-producing States about sales from an official institution not creating 

price volatility. 

Mr. FRANK . I understand. But I think those people know how 

to put a cartel to work. The principles of a cartel could be employed 

to not have any impact on the price. They know how to do that. 

Mr. BIRDSALL. Yes, well, whatever. I am not sure whether I want 

to agree with any use of those words. But I think the point is that 

the price of gold is currently quite high, that there is an arrangement that has been proposed by the technical staff at the IMF 

under which IMF gold could be sold under the rubric of a current 

agreement among central banks. 

Mr. FRANK . I understand the World Gold Council has indicated 

that it could be done right in a way that they could support. 

Mr. BIRDSALL. I think here what we need is some leadership 

from the administration and from both parties in Congress to make 

a kind of deal that would ensure that this could move forward. 

Mr. FRANK . Okay. I appreciate that. 

Mr. Kapoor, you look like you want to address that. 

Mr. KAPOOR. First may I just correct something that Nancy said, 

which is the amount of gold which would be the amount of money 

that would be raised would be $45 billion. Its current value is closer to about $8 billion. I think you said $45 billion and 10 times 45. 

So we do not have $450 billion in gold. I wish we did, but we do 

not. 

I would just like to add to your first question that the IMF acknowledges that the sale of gold would actually result in a small 

21

increase in the Fund’s liquidity and that it need not erode the 

Fund. 

Mr. FRANK . All right. That was obvious. So none of the reservations, whatever they were about the use of reserves, are there. 

Mr. KAPOOR. Right. 

Mr. FRANK . My next question has to do with, and I do think we 

are making some progress, the Poverty Reduction and Growth 

Fund at the IMF, which to my mind is a lot better than the structural adjustment program which preceded it, and which I think we 

helped get rid of. That was one of the conditions that I think this 

committee helped put into the previous set of agreements. 

What should we do with the Poverty Reduction and Growth 

Fund? There have been a variety of proposals with regards to the 

IMF. Should the IMF stay in that business? Should it go to the 

World Bank? If the function goes to the World Bank, should resources go with it? I would be interested, all of you, in what recommendations you would make about that. 

Mr. BIRDSALL. Maybe I could start. This is not something in my 

current testimony. 

Mr. FRANK . I know. That is why I asked you. 

Mr. BIRDSALL. I do believe that the PRGB facility, all its assets 

and all its liabilities, should be transferred to the World Bank. 

Mr. FRANK . So you would transfer the function and the assets 

and liabilities. 

Mr. BIRDSALL. I would transfer not the functions that are the 

core functions of the IMF. 

Mr. FRANK . No, the PRGF. We are not talking about the core 

functions of the IMF. 

Mr. BIRDSALL. And when the IMF would then do a program in 

a very poor country, it would do all the normal arrangements, with 

one exception, so that that very poor country does not need to borrow from the relatively high-cost IMF. It would do an IMF program 

with a loan subsidized from the resources at the PRGF. This would 

have the tremendous advantage of making the World Bank clearly 

accountable for the long-run structural issues. The IMF, sticking to 

its core issues—

Mr. FRANK . And getting them to work together, which I would 

appreciate. 

Mr. BIRDSALL. —and getting them to work together. Exactly. And 

that would also subsume a little bit the distinction now which says 

macro first, micro second. 

Mr. FRANK . Let me ask Mr. Kapoor and Mr. McNamar to comment on this. My time is up. Go ahead. 

Mr. KAPOOR. I agree that the PRGF should be wound up and the 

resources, not the function, should be transferred to the Bank. One 

possible suggestion for the use of that money could be setting up 

a compensatory finance facility for commodity price crashes. 

Mr. FRANK . A what facility? 

Mr. KAPOOR. A compensatory commodity facility to compensate 

for sharp falls in commodity prices, which is one of the serious 

problems. 

Mr. FRANK . Administered at the Bank? 

22

Mr. KAPOOR. At the Bank, administered at the Bank, or it could 

go into the general IDA pool. So the current functions of the PRGF 

need to stop. 

The second point, I would just like to go back to the previous 

question, if I have a second. 

Mr. FRANK . Not for very long because we only have 5 minutes. 

Mr. Kapoor, I know you are jet-lagged, but 5 minutes is still 5 minutes. 

Mr. KAPOOR. Okay. 

Mr. FRANK . Mr. McNamar? 

Mr. MCNAMAR. I looked at this question of gold sales and revaluing gold sales. I am trying to figure out how the world would be 

better off after we do the right thing, whatever that is. I do not 

know. 

Mr. FRANK . Okay. 

Mr. MCNAMAR. Gold is great for jewelry. 

Mr. FRANK . Mr. Kapoor and Mr. McNamar, again. 

Mr. BIRDSALL. Could I intervene here? 

Mr. FRANK . Then Mr. Kapoor, let me go back to you again on 

gold for 30 seconds. 

Mr. KAPOOR. This is the President of Ghana, one of the largest 

exporters of gold in terms of relative proportion of exports, making 

a statement yesterday. ′′As an exporter of gold, Ghana is confident 

that the properly managed sale of gold will not negatively impact 

the gold price. Instead, it will enable countries such as ours to redouble efforts to pursue pro-growth, pro-jobs development to the 

benefit of our people.′′ And today we have statements from the 

President of Tanzania, another major gold-producing HIPC country. 

Mr. FRANK . I want you to submit those for the record. 

Mr. MCNAMAR. May I ask how that helps poverty in Africa? 

Mr. KAPOOR. It puts resources there. 

Mr. FRANK . Mr. McNamar, you do not talk to each other. I do 

not mean to be rude, but we have only a limited amount of time. 

Afterwards, you have all day to talk to each other. But the answer 

to your question is that we are talking about it specifically to finance debt reduction at the IMF. That is how it would be helpful, 

debt cancellation. 

Dr. Birdsall, your last statement? 

Mr. BIRDSALL. This Administration and this Congress want debt 

relief. This is one way to help finance that debt relief. The cost is 

basically that some of the richest countries’ central bankers will 

sleep slightly less well at night because there will be slightly less 

gold not being used that they could use in the event of a global financial crisis. 

Mr. FRANK . Thank you. 

Thank you, Madam Chair. 

Mrs. BIGGERT . Thank you. 

The gentlewoman from Florida is recognized for 5 minutes. 

Ms. WASSERMAN SCHULTZ. Thank you. 

My question is to Mr. Kapoor. I would really like you to share 

your thoughts about the effects of the overwhelming debt of these 

nations on their political stability. 

23

Given the Administration’s interest in burgeoning democratic 

governments, and you touched on it a little bit in your testimony, 

but what that would mean in terms of global security, given our 

concern with terrorism, how that potentially could breed the next 

generation of terrorists without us dealing with it. 

Mr. KAPOOR. For starters, the current situation as it works is 

that even countries which are getting significant aid flows are servicing a lot of the debt. So what happens is that the accountability 

that these countries’ governments have is to the external donor 

agencies, not the people, because the tax revenues that are raised 

from the people go to service debt, and instead they get compensated by new aid flows. So the accountability, instead of being 

to the people, likes more with external aid groups. 

So canceling debt would first and foremost encourage accountability to local parliaments and the local population, the way it 

happened in the United States where the Federal Government is 

responsible on about how it spends the taxes that it raises from the 

population. It is responsible to the Congress. It is answerable to 

the Congress. It is scrutinized by the Congress. It is scrutinized by 

the people. So that is one thing in terms of long-term institutional 

change. It would encourage a more active participation, a more active stake from the people. 

The second is that the poverty and the desperation and the fact 

that we now live in a world where images of great prosperity are 

being beamed across the continents. When I was visiting some 

slums in India, people who had absolutely no access to any of the 

things that we take for granted, they still saw the same images of 

extreme prosperity and, in fact, opulence that we see on our television screens. The more inequality there is, the more injustice that 

is felt in the countries, the more incentive there is for people to be 

angry. And when one is angry, irrational things happen, as we 

have seen. 

The next point there is that in the cases of countries, for example 

such as South Africa and the Philippines and Indonesia and Nigeria, where past lending has been odious and questionable primarily 

because of Cold War dynamics, wherein for example the regime in 

the Democratic Republic of Congo was given the largest loan ever 

given to an African country by the Fund on the insistence of OECD 

countries just the year after the Fund’s representatives said that 

there is no hope of any money ever being repaid, and the money, 

which was about $1 billion, went straight into the account of 

Mobutu, who was the dictator. It never reached the people of 

Congo. 

The more these injustices add up, again, the more anger there 

is. And one way of redressing this would be to wipe the slate clean 

and come up with a practice wherein no more lending goes to support dictators. No more lending goes to prop up regimes which are 

oppressing their own people, and any money that goes in, goes towards development effort. 

Ms. WASSERMAN SCHULTZ. Shouldn’t there be a little bit more accountability in terms of following the money once it is lent? With 

the money that has gone to dictators and non-democratic governments that have mostly benefited leaders of nations instead of the 

24

people of those nations, what reforms do you think Mr. Wolfowitz 

should make when it comes to future lending decisions? 

Mr. KAPOOR. I have made a suggestion earlier, which is the 

adoption or discussion of future lending practices, because currently even as we speak, civil society organizations have been campaigning for addressing the issue of historical odious or illegitimate 

dictators. But even in those 5 years that this campaign has gone 

on, new lending has happened to regimes which are run by dictators which are being supported for other political objectives, similar to what happened in the Cold War except the political objectives are different. 

So what one needs to do under the leadership of Mr. Wolfowitz 

is, given his credentials as a champion of freedom and democracy, 

to then have clear guidelines in place that the Bank and the Fund 

will not lend to regimes which are not acceptable, which violate 

human rights, to get this approved and to get broad approval on 

this issue from international creditors, so that we will not experience these problems in the future as we did in the past, so that 

people will not be suppressed with the money that we give to Governments ostensibly for development purposes. So that is one way 

forward. 

As to the question of historical debt, there are loads of skeletons 

in the cupboard of all these OECD countries. As to whether a realistic political compromise can be reached is questionable, which is 

why an easy solution which circumvents all this problem of digging 

the dirt out would be to cancel debt and then move on with a cleaner regime. 

Mrs. BIGGERT . The gentlelady yields back. 

The gentlelady from Wisconsin, Ms. Moore, is recognized for 5 

minutes. 

Mr. MOORE. Thank you, Madam Chairperson. 

A really distinguished panel, thank you for coming. 

I guess my first question is I would like to address it to Ms. 

Birdsall. It is really related to comments that you have made in 

your written testimony that may be a little bit off the beaten track 

and also sort of dovetails with the question that Mr. Frank talked 

about earlier. 

We are talking about debt relief here, and there seems to be a 

consensus, I think you agree, that debt cancellation is just not 

enough to really relinquish this unsustainable debt that some of 

these countries have. And so aid, really we are looking at what 

Tony Blair has been doing with trying to get the European Union 

together to come up with this millennial program. It is embarrassing how little the United States has contributed to that. I refer, 

Madam Chair, and would like to enter into the record an article 

from today’s New York Times, Crumbs for Africa. 

Mrs. BIGGERT . Without objection. 

Mr. MOORE. It really talks about how only one-quarter of 1 percent of money in foreign assistance goes to Africa from the United 

States. So even if we were to provide debt relief and again we 

would not be this lend-borrow-lend-borrow cycle, places like Africa 

would be in a tremendous amount of trouble. 

So I guess my question to you first of all would be really to affirm that that is the case and to really describe what other sorts 

25

of programs besides debt relief that you would want to encourage 

us to look at. I thought I heard you say that canceling debt service 

was also an important element of debt relief. Did I hear you correctly? 

Mr. BIRDSALL. The proposals that I support include a write-down 

at 100 percent of the debt owed by the poorest countries to the 

multilateral creditors. Most of those countries have already had 

their bilateral debt largely forgiven. So once all of that existing 

debt is written down, they would not really have the same problem 

of debt service going forward. That would mean that as long as the 

current level of aid flows continued, they would be much better off. 

So first, yes, write off the debt of these poorest countries. 

Second, it is absolutely the case that the U.S. gives less for foreign aid overall than virtually all of our allies, with the possible exception of Japan. You take a dime out of your pocket and add three 

pennies every day, and that is how much we spend through our 

public budget on foreign aid, and another nickel through private 

giving. The Bush administration has justifiably emphasized the importance of using existing resources as well as possible. 

At the same time, there is certainly room if we are to be the 

leader of the free world to move forward and find ways to provide 

additional resources, always attending to the reality that those resources need to be used as effectively as possible. That is why I emphasized the importance of evaluation, the importance of signaling 

to places like the World Bank and the Inter-American Development 

Bank what a positive thing it could be for us to learn from what 

is working and to create the evidence base that would justify larger 

increases in the future. 

Mr. MOORE. Well, given that, Ms. Birdsall, here we are on the 

horns of a dilemma. If in fact we would agree with the Bush administration’s assertions that we ought to do more effective work 

with our current resources, if we forgive debt and presumably the 

funds that would be returning into a revolving loan fund, and I am 

sorry I do not know which one of the funds operates like a revolving loan fund, so that those other countries like China, for example, who are now doing better and are repaying their loans, if we 

forgive debt and we do not have these funds revolve back in and 

be available for reinvestment, then how are we justifying not upping our contributions and grants when we know for a fact that 

there will not be efficient and effective ways, that the current resources will shrink with debt relief? We have all agreed that debt 

relief is important, but then that is a smaller pot to do good. 

Mr. BIRDSALL. Yes, we are hoping that the outcome of the ongoing discussions between Prime Minister Blair and President Bush 

will be an agreement that the U.S., among the other advanced 

economies, will make up the difference going forward by increasing 

U.S. contributions to the IDA funds at the World Bank. It would 

apply also to the soft money window at the African Development 

Bank. 

This would have the additional advantage, as I emphasized in 

my written testimony, of moving more of the U.S. foreign aid 

money through multilateral channels. I believe that is important 

because we are no longer living with a donor system that can be 

unilateral. Leadership from the U.S. has to be done in a multilatVerDate 0ct 09 2002 17:18 Feb 21, 2006 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 G:\DOCS\109.35 RODNEY
26

eral context because the U.S. now, although it is still a very important donor, is a much smaller part of the picture certainly than it 

was when we invented the Marshall Plan. 

Mr. MOORE. Thank you. My time has expired. 

Mrs. BIGGERT . Thank you. 

The gentleman from California, Mr. Sherman? 

Mr.SHERMAN. Thank you. 

I would like to use my 5 minutes mostly to make comments. The 

first is that debt relief is money for the countries to which it is 

granted. Countries could stop making debt payments. They do not 

because by getting debt relief, they are in a position to borrow 

more. 

Now, I believe we should do more in foreign aid. I believe we 

should give more, and debt relief is one way to do it. But we should 

provide debt relief only to those countries that we would give cash 

to. It is just like our domestic policy. You see people advocating tax 

credits for programs they would not advocate writing a Government check. There are two ways to provide U.S. Treasury funds or 

dispensation to a particular cause, and we ought to do so when the 

cause warrants it. 

The second point I would make is that the folks before us have 

testified and are experts in many things, but you are not experts 

at what it takes to get the average American to take money out of 

their pocket, money away from their own family, money that 

means they cannot send their kids to a higher-priced college, and 

give it for foreign aid. I have some expertise in that, and I have 

advocated higher foreign aid throughout my career. 

The one piece of advice I would give you is please do not disparage America in order to encourage generosity. And do not say that 

all we do for the world is contained in the foreign aid budget, while 

ignoring the hundreds of billions of dollars we spend to provide stability for the world, which I might add is more important than anything aid does. If you look around the world as to where people are 

dying, it is places where there is instability, places where there is 

conflict. 

You can doubt very much the effectiveness and intelligence of our 

foreign policy and military efforts designed to provide stability and 

promote democracy around the world, but you cannot doubt that 

money spent promoting democracy, defending democracy, and promoting order does as much as money spent on any other aspect of 

foreign aid. To count what Japan does and compare it to the 

United States while ignoring the vast bulk of our military budget 

is not to defend the United States, but is to defend a world order 

and is an unfair disparagement to those very taxpayers I represent. 

Finally, we have heard testimony about multinationalism in our 

aid. Imagine going to my district and saying you want to increase 

foreign aid, and oh by the way, $1 billion is going from the World 

Bank to the people who run and mis-run the Government in Iran, 

the very people trying to develop a nuclear weapon, smuggle it into 

the United States, and threaten to blow up or actually blow up an 

American city, and that is what your foreign aid dollars are being 

used for. 

I will tell you now, if you want us to continue to participate in 

multilateral organizations, you must remove the malignancy from 

27

those organizations. A little inefficiency? Hey, we are used to that. 

But when you take money from my district to spend to help keep 

in power the people who are trying to literally destroy my district 

or some other town, whichever town they happen to choose, then 

you can only hope for the ignorance of the American people and 

that ignorance of the fact that their foreign dollars are going to Teheran through these multilateral organizations. 

I look forward to an Administration which after 5 years will have 

the guts to do something about the World Bank disbursements to 

the Government in Iran. I have talked to the President many 

times. He has a worldwide image of aggressiveness which he has 

gained only through his dealings with one particular country. 

When it comes to dealing with the World Bank, it is rather frustrating. 

So I thank you for your time. I do not know if I have any time 

to allow a response from our witnesses, and I do not know if any 

of them are itching to make such a response. 

Mrs. BIGGERT . Thank you. The gentleman yields back. 

I do appreciate the gentleman’s comments. 

I would like to just ask Dr. Birdsall, what country provides the 

largest amount of money right now for development? 

Mr. BIRDSALL. In absolute terms, I believe the U.S. still contributes the largest single amount. If you compare the U.S. to all of 

our European allies, we are about 50 percent of what they together 

provide. 

Mrs. BIGGERT . And what country comes in second to the U.S. 

in terms of development assistance in dollar terms? 

Mr. BIRDSALL. I am afraid I am not sure. It is probably Japan. 

Right. So Japan and the U.S. are the smallest relative to the size 

of their economies in their giving on public aid and the largest in 

absolute terms. 

Mrs. BIGGERT . So you are just going from percentage, rather 

than dollars. 

Mr. BIRDSALL. Well, I am answering your question in terms of 

absolute amount of dollars. So the U.S. currently provides I think 

an estimated $15 billion or $16 billion a year. 

Mrs. BIGGERT . Nineteen billion? 

Mr. BIRDSALL. It depends on the definition, how much is included 

for our efforts in Iraq, for example, and Japan would be behind 

that. 

Mrs. BIGGERT . Eight or 9 billion. 

Mr. BIRDSALL. Thank you very much. 

Mrs. BIGGERT . Yes. Thank you. 

I would like just to say that I think that the American people are 

the most generous in the world, and we have always been willing 

to open our hearts and our pocketbooks for others. I think we have 

to keep that in mind. 

Mr. BIRDSALL. Absolutely. May I make a comment on Representative Sherman’s points? To endorse the general view that it is important to look not only at our aid budget, but at the many different ways we affect developing countries. At the Center, we have 

an index that ranks rich countries in terms of a set of policies, including trade, migration, environment and so on, and the U.S. is 

28

first generally on trade. It is the least-worst, you might say, among 

all the countries. 

Mrs. BIGGERT . Let me just note that some members may have 

additional questions for this panel which they may wish to submit 

in writing. Without objection, the hearing record will remain open 

for 30 days for members to submit written questions to these witnesses and to place their responses in the record. 

With that, I would like to thank the witnesses. You have been 

outstanding. We have had a spirited debate and thank you for coming from all the distances that you have come. We really appreciate 

it. 

With that, this hearing is adjourned. 

[Whereupon, at 4:00 p.m., the subcommittee was adjourned.] 

(29)

A P P E N D I X

June 8, 2005

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