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[House Report 110-575]
[From the U.S. Government Publishing Office]

110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     110-575

======================================================================

 
 JUBILEE ACT FOR RESPONSIBLE LENDING AND EXPANDED DEBT CANCELLATION OF 
                                  2008

                                _______
                                

 April 10, 2008.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Frank of Massachusetts, from the Committee on Financial Services, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 2634]

      [Including cost estimate of the Congressional Budget Office]

      The Committee on Financial Services, to whom was referred 
the bill (H.R. 2634) to provide for greater responsibility in 
lending and expanded cancellation of debts owed to the United 
States and the international financial institutions by low-
income countries, and for other purposes, having considered the 
same, report favorably thereon with an amendment and recommend 
that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     1
Purpose and Summary..............................................     6
Background and Need for Legislation..............................     7
Hearings.........................................................    14
Committee Consideration..........................................    14
Committee Votes..................................................    14
Committee Oversight Findings.....................................    15
Performance Goals and Objectives.................................    15
New Budget Authority, Entitlement Authority, and Tax Expenditures    15
Committee Cost Estimate..........................................    15
Congressional Budget Office Estimate.............................    15
Federal Mandates Statement.......................................    16
Advisory Committee Statement.....................................    16
Constitutional Authority Statement...............................    16
Applicability to Legislative Branch..............................    17
Earmark Identification...........................................    17
Section-by-Section Analysis of the Legislation...................    17
Changes in Existing Law Made by the Bill, as Reported............    20
Additional Views.................................................    25

                               Amendment

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Jubilee Act for Responsible Lending 
and Expanded Debt Cancellation of 2008''.

SEC. 2. FINDINGS.

  The Congress finds the following:
          (1) Many low-income countries have been struggling under the 
        burden of international debts for many years.
          (2) Since 1996, when the Heavily Indebted Poor Countries 
        Initiative (HIPC) was created, more than 30 nations have seen 
        some form of debt relief totaling approximately 
        $80,000,000,000.
          (3) Congress has demonstrated its support for bilateral and 
        multilateral debt relief through the enactment of comprehensive 
        debt relief initiatives for heavily indebted low-income 
        countries in--
                  (A) title V of H.R. 3425 of the 106th Congress, as 
                enacted into law by section 1000(a)(5) of the Act 
                entitled ``An Act making consolidated appropriations 
                for the fiscal year ending September 30, 2000, and for 
                other purposes'', approved November 29, 1999 (Public 
                Law 106-113; 113 Stat. 1501-311) and the amendments 
                made by such title;
                  (B) title II of H.R. 5526 of the 106th Congress, as 
                enacted into law by section 101(a) of the Act entitled 
                ``An Act making appropriations for foreign operations, 
                export financing, and related programs for the fiscal 
                year ending September 30, 2001, and for other 
                purposes'', approved November 6, 2000 (Public Law 106-
                429; 114 Stat. 1900A-5); and
                  (C) title V of the United States Leadership Against 
                HIV/AIDS, Tuberculosis, and Malaria Act of 2003 (Public 
                Law 108-25; 117 Stat. 747) and the amendment made by 
                such title.
          (4) In 2005, the United States and other G-8 nations reached 
        an agreement to provide cancellation of 100 percent of the 
        debts owed by eligible poor nations to Paris Club members, the 
        IMF, the World Bank, and the African Development Bank. The 
        Inter-American Development Bank reached an agreement in early 
        2007 to provide similar treatment.
          (5) The 2005 agreement led to the creation of the 
        Multilateral Debt Relief Initiative (MDRI). As of April 2007, 
        22 nations have seen the majority of their debts to the IMF, 
        World Bank, and African Development Bank cancelled under the 
        terms of the MDRI. In March 2007, the Inter-American 
        Development Bank announced it would provide full debt 
        cancellation to 5 Latin American countries on MDRI terms.
          (6) Resources released by debt relief efforts to date are 
        reaching the poor. Cameroon is using the $29,800,000 of savings 
        it will gain from the MDRI in 2006 for national poverty 
        reduction priorities, including infrastructure, social sector 
        and governance reforms. Uganda is using its $57,900,000 savings 
        in 2006 on improving energy infrastructure to try to ease acute 
        electricity shortages, as well as primary education, malaria 
        control, healthcare and water infrastructure (specifically 
        targeting the poor and under-served villages). Zambia is using 
        its savings of $23,800,000 under the MDRI in 2006 to increase 
        spending on agricultural projects, such as smallholder 
        irrigation and livestock disease control, as well as to 
        eliminate fees for healthcare in rural areas.
          (7) While debt cancellation has a record of success, there 
        remains an unfinished agenda on international debt. There are a 
        number of challenges to both the effective reduction of poverty 
        and inequality and the achievement of broader debt 
        cancellation.
          (8) 2007 is an important year to address the unfinished 
        agenda on international debt as the global Jubilee debt 
        campaign has declared 2007 a ``Sabbath year'', 7 years after 
        the historic Jubilee 2000 campaign.
          (9) A critical issue which needs to be addressed on debt is 
        the way that non-concessional lenders stand to gain financially 
        from lending to poor countries that have benefited from debt 
        relief without having paid for past debt relief or facing the 
        prospect of paying for the future relief of unsustainable and 
        irresponsible new lending. In these cases, the gains of debt 
        relief for poor debtor countries are at risk of being eroded. 
        This takes the form of new lending to countries that have 
        received debt cancellation from countries including China.
          (10) It is also essential that all lenders and borrowers 
        accept co-responsibility and learn from past mistakes--as 
        evidenced by the debt crisis itself--by making more productive 
        investment choices and engaging in more responsible lending and 
        borrowing in the future. In October 2006, Norway became the 
        first creditor to accept co-responsibility for past lending 
        mistakes and cancelled the debt of 5 nations on the grounds 
        that the loans reflected poor development policy.
          (11) A growing number of governments and intergovernmental 
        bodies, including the United Kingdom, the European Commission, 
        and Norway, are raising concerns about the harmful impacts of 
        economic policy conditionality. Many impoverished countries 
        that have received debt cancellation under the HIPC and MDRI 
        initiatives have done so at a high social cost, because they 
        have had to implement economic policy conditions such as 
        privatization of public utilities and other basic services, 
        adhere to budget ceilings imposed by the IMF, and comply with 
        other harmful requirements. Some of these policies have had the 
        effect of limiting fiscal space for productive investment and 
        threatening growth and human development. Several countries 
        currently eligible for debt cancellation under the HIPC or MDRI 
        programs are facing extended delays in receiving cancellation 
        because they are struggling to comply with such requirements 
        from the IMF and World Bank.
          (12) There is also an urgent need to look beyond the 
        constraints of current debt relief initiatives to address the 
        need for expanded debt cancellation. The current initiatives 
        allow countries to qualify for relief based on economic 
        criteria rather than human needs. A January 2007 report by the 
        United Nations Human Rights Council found that eligibility for 
        debt cancellation should be expanded to cover all low-income 
        countries.
          (13) The government of the United Kingdom has proposed that 
        qualification for the MDRI be extended to the 67 nations which 
        qualify for assistance exclusively from the International 
        Development Association. To be eligible for cancellation, 
        countries must meet requirements pertaining to public financial 
        management, anti-corruption measures, and budget transparency.
          (14) Since debt cancellation is an essential component of the 
        United States development assistance strategy and the United 
        States has been able to lead the debt cancellation efforts of 
        the international community by example, the United States 
        should continue to work to improve and expand initiatives in 
        this area.
          (15) The United States has been a leader in supporting debt 
        relief efforts to date and should continue to work to improve 
        and expand initiatives in this area.

SEC. 3. CANCELLATION OF DEBT OWED BY ELIGIBLE LOW-INCOME COUNTRIES.

  Title XVI of the International Financial Institutions Act (22 U.S.C. 
262p-262p-8) is amended by adding at the end the following:

``SEC. 1626. CANCELLATION OF DEBT OWED BY ELIGIBLE LOW-INCOME 
                    COUNTRIES.

  ``(a) In General.--The Secretary of the Treasury shall commence 
immediate efforts, within the Paris Club of Official Creditors, the 
International Monetary Fund (IMF), the International Bank for 
Reconstruction and Development (World Bank), and the other 
international financial institutions (as defined in section 
1701(c)(2)), to negotiate an agreement to accomplish the following:
          ``(1) Cancellation by each international financial 
        institution of all debts owed to the institution by eligible 
        low-income countries, and, to the extent possible, financing 
        the debt cancellation from the ongoing operations, procedures, 
        and accounts of the institution.
          ``(2) Cancellation by the United States of all debts owed to 
        it by eligible low-income countries.
          ``(3) Ensuring that any waiting period for the enhanced debt 
        cancellation is not excessive.
          ``(4) Ensuring that the provision of debt cancellation to 
        eligible low-income countries is not followed by a reduction in 
        the provision of any other development assistance to the 
        countries by international financial institutions and bilateral 
        creditors.
          ``(5) Encouraging the government of each eligible low-income 
        country to allocate at least 20 percent of its national budget 
        towards poverty-alleviation programs such as the provision of 
        basic health care services, education services, and clean water 
        services to all individuals in the country.
This subsection shall not be interpreted to authorize the Secretary of 
the Treasury to enter into an agreement to accomplish any of the 
foregoing without express congressional authorization to do so.
  ``(b) Establishment of Framework for Creditor Transparency.--The 
Secretary of the Treasury shall commence immediate efforts, within the 
Paris Club of Official Creditors, the International Monetary Fund, the 
World Bank, and the other international financial institutions (as so 
defined), to ensure that each of the institutions--
          ``(1) continues to make efforts to promote greater 
        transparency regarding the activities of the institution, 
        including credit, grant, guarantee, and technical assistance 
        operations, following a policy of maximum disclosure; and
          ``(2) supports continued efforts to allow informed 
        participation and input by affected communities, including 
        translation of information on proposed projects, provision of 
        information (including draft documents) through information 
        technology application, oral briefings, and outreach to and 
        dialogue with community organizations and institutions in 
        affected areas.
  ``(c) Establishment of Framework for Responsible Lending.--The 
Secretary of the Treasury shall commence immediate efforts to--
          ``(1) develop and promote policies to ensure all creditors, 
        with no distinction, will contribute to preserving the gains of 
        debt relief for low-income debtor countries;
          ``(2) provide that the external financing needs of low-income 
        countries are met primarily through grant financing rather than 
        new lending;
          ``(3) seek the international adoption of a binding legal 
        framework on new lending that--
                  ``(A) guarantees that no creditor can take or expect 
                to take financial advantage of acquired or newly 
                awarded debt relief through the terms and rates of such 
                lending to beneficiary countries;
                  ``(B) is binding on all creditors, whether 
                multilateral, bilateral or private;
                  ``(C) foresees, as a sanction for creditors who 
                violate it, an equitable share in the burden of the 
                losses from any future debt relief needed by the 
                sovereign debtor to whom lending was irresponsibly 
                provided;
                  ``(D) provides for decisions on irresponsible lending 
                to be made by an entity independent from the creditors; 
                and
                  ``(E) enables fair opportunities for the people of 
                the affected country to be heard; and
          ``(4) support the development of responsible financing 
        standards where creditors and aid/loan recipients alike adhere 
        to standards to assure transparency and accountability to 
        citizens, human rights, and the avoidance of new odious debt, 
        while encouraging the development of renewable energy and 
        helping countries to transition away from dependence on oil.
  ``(d) GAO Audit of Debt Portfolios of Countries With Questionable 
Loans.--
          ``(1) In general.--The Comptroller General of the United 
        States shall undertake an audit of the debt portfolios of 
        previous governments in countries such as the Democratic 
        Republic of Congo and South Africa, where there is significant 
        evidence that odious, onerous, or illegal loans were made to 
        the government. Each such audit shall--
                  ``(A) consider debt owed to the World Bank, the IMF, 
                and the other international financial institutions (as 
                so defined), export credit debts owed to governments, 
                and debts owed to commercial creditors, and assess 
                whether or not past investments produced the intended 
                results;
                  ``(B) investigate the process by which the loans were 
                contracted, how the funds were used, and determine 
                whether United States or international laws were 
                violated in the contraction of these loans, and whether 
                any of the loans were odious or onerous; and
                  ``(C) be planned and executed in a transparent and 
                consultative manner, engaging congressional bodies and 
                civil society groups in the countries.
          ``(2) Report.--Within 2 years after the date of the enactment 
        of this section, the Comptroller General of the United States 
        shall prepare and submit to the Committees on Financial 
        Services and on Foreign Affairs of the House of Representatives 
        and the Committees on Banking, Housing, and Urban Affairs and 
        on Foreign Relations of the Senate a report that contains the 
        results of the audits undertaken under paragraph (1).
  ``(e) Availability on Treasury Department Website of Remarks of 
United States Executive Directors at Meetings of International 
Financial Institutions' Boards of Directors.--The Secretary of the 
Treasury shall make available on the website of the Department of the 
Treasury the full record of the remarks of the United States Executive 
Director at meetings of the boards of directors of the International 
Monetary Fund, the World Bank, and the other international financial 
institutions (as so defined), about cancellation or reduction of debts 
owed to the institution involved, with redaction by the Secretary of 
the Treasury of material deemed too sensitive for public distribution, 
but showing the topic, amount of material redacted, and reason for the 
redaction.
  ``(f) Report From the Comptroller General.--Within 1 year after the 
date of the enactment of this section, the Comptroller General of the 
United States shall prepare and submit to the Committees on Financial 
Services and on Foreign Affairs of the House of Representatives and the 
Committees on Banking, Housing, and Urban Affairs and on Foreign 
Relations of the Senate a report on the availability of the ongoing 
operations, procedures, and accounts of the IMF, the World Bank, and 
the other international financial institutions (as so defined) for 
canceling the debt of eligible low-income countries.
  ``(g) Annual Reports From the President.--Not later than December 31 
of each year, the President shall submit to the Committees on Financial 
Services and on Foreign Affairs of the House of Representatives and the 
Committees on Foreign Relations and on Banking, Housing, and Urban 
Affairs of the Senate a report, which shall be made available to the 
public, on the activities undertaken under this section, and other 
progress made in accomplishing the purposes of this section, for the 
prior fiscal year. The report shall include a list of the countries 
that have received debt cancellation, a list of the countries whose 
request for debt cancellation has been denied and the reasons therefor, 
and a list of the countries whose requests for debt cancellation are 
under consideration.
  ``(h) Eligible Low-Income Country Defined.--In this section, the term 
`eligible low-income country' means a country--
          ``(1) that is eligible for financing from the International 
        Development Association but not the World Bank, and does not 
        qualify for debt relief under the Enhanced HIPC Initiative (as 
        defined in section 1625(e)(3)) and under the Multilateral Debt 
        Relief Initiative;
          ``(2) that has transparent and effective budget execution and 
        public financial management systems which ensure that the 
        savings from debt relief are spent on reducing poverty;
          ``(3) the government of which does not have an excessive 
        level of military expenditures;
          ``(4) the government of which has not repeatedly provided 
        support for acts of international terrorism, as determined by 
        the Secretary of State under section 6(j)(1) of the Export 
        Administration Act of 1979 (50 U.S.C. App. 2405(j)(1)), or 
        section 620A(a) of the Foreign Assistance Act of 1961 (22 
        U.S.C. 2371(a));
          ``(5) the government of which is cooperating on international 
        narcotics control matters; and
          ``(6) the government of which (including its military or 
        other security forces) does not engage in a consistent pattern 
        of gross violations of internationally recognized human 
        rights.''.

SEC. 4. LIMITATION ON CONDITIONALITY OF DEBT RELIEF FOR ELIGIBLE LOW-
                    INCOME COUNTRIES.

  Title XVI of the International Financial Institutions Act (22 U.S.C. 
262p-262p-8) is further amended by adding at the end the following:

``SEC. 1627. LIMITATION ON CONDITIONALITY OF DEBT RELIEF FOR ELIGIBLE 
                    LOW-INCOME COUNTRIES.

  ``(a) In General.--The Secretary of the Treasury shall commence 
immediate efforts within the Paris Club of Official Creditors, the 
International Monetary Fund (IMF), the International Bank for 
Reconstruction and Development (World Bank), and the other 
international financial institutions (as defined in section 
1701(c)(2)), to ensure that debt cancellation is provided to eligible 
low-income countries (as defined in section 1626(h)) without any 
conditions except requiring the government of such a country to--
          ``(1) take steps so that the financial benefits of debt 
        relief are applied to programs to combat poverty (in particular 
        through concrete measures to improve economic infrastructure, 
        basic services in education, nutrition, and health, 
        particularly treatment and prevention of the leading causes of 
        mortality) and to redress environmental degradation;
          ``(2) make policy decisions through transparent and 
        participatory processes;
          ``(3) adopt an integrated development strategy to support 
        poverty reduction through economic growth, that includes 
        monitorable poverty reduction goals;
          ``(4) implement transparent policy making and budget 
        procedures, good governance, and effective anticorruption 
        measures;
          ``(5) broaden public participation and popular understanding 
        of the principles and goals of poverty reduction, particularly 
        through economic growth, and good governance;
          ``(6) promote the participation of citizens and 
        nongovernmental organizations in the economic policy choices of 
        the government; and
          ``(7) produce an annual report disclosing how the savings 
        from debt cancellation were used, and make the report publicly 
        available and easily accessible to all interested parties, 
        including civil society groups and the media.
  ``(b) Annual Reports to the Congress.--Not later than December 31 of 
each year, the President shall submit to the Committees on Financial 
Services and on International Relations of the House of Representatives 
and the Committees on Foreign Relations and on Banking, Housing, and 
Urban Affairs of the Senate a report, which shall be made available to 
the public, on the activities undertaken under this section, and other 
progress made in accomplishing the purposes of this section, for the 
prior fiscal year.''.

SEC. 5. SENSE OF THE CONGRESS.

  It is the sense of the Congress that to further the goals of debt 
reduction for low-income countries, in addition to the efforts 
described in this Act, the United States should pay off outstanding 
arrearages of $595,800,000 to the International Development Association 
and regional development banks, and become current on all debt 
reduction efforts, including those carried out by the International 
Development Association and under the Enhanced Heavily Indebted Poor 
Countries Initiative and the Multilateral Debt Relief Initiative.

                          Purpose and Summary

    H.R. 2634, the ``Jubilee Act for Responsible Lending and 
Expanded Debt Cancellation of 2008,'' authorizes the Secretary 
of the Treasury to commence immediate efforts to negotiate with 
the Paris Club and the international financial institutions to 
establish an agreement that provides full cancellation of the 
debts of eligible low-income countries, including those owed to 
the United States. Provisions of the bill stipulate that the 
agreement shall finance debt cancellation from the ongoing 
operations and accounts of the international financial 
institutions in a timely way and without a reduction in any 
other development assistance to the countries by these 
institutions or bilateral creditors. They also stipulate that 
the Secretary shall work to require the government of each 
eligible low-income country to allocate the savings from debt 
cancellation towards poverty-reducing expenditures, and engage 
a broad cross-section of civil society groups in determining 
how the funds should be allocated. The legislation requires an 
annual public report disclosing how the savings from debt 
cancellation were used. It also requires that, once a 
multilateral agreement is reached, Congress will have to 
authorize it.
    The legislation requires the Secretary of the Treasury to 
commence efforts to achieve multilateral agreements on creditor 
transparency and responsible lending. In addition, the 
Secretary of the Treasury shall promote greater transparency 
regarding the operations of the international financial 
institutions by, for instance, disclosing to the public a 
maximum level of information and supporting enhanced 
participation of, and input by, communities affected by these 
operations.
    The legislation defines eligibility for debt cancellation 
and requires that debt cancellation to eligible low-income 
governments is not conditioned on any agreement by such a 
government to implement policies except those explicitly 
outlined in the bill, such as those that foster transparent and 
participatory policies to achieve poverty reduction through 
economic growth; ensure sound budget procedures, good 
governance and effective anticorruption measures; and produce 
and disclose to the public an annual report disclosing how the 
savings from debt cancellation were used.
    The legislation requires Government Accountability Office 
(GAO) audits of the debt portfolios of countries where there is 
evidence that odious, onerous, or illegal loans were made to 
the government, and a GAO report financing sourcing for debt 
cancellation. The legislation requires annual reports from the 
President on the progress toward achieving debt cancellation 
and requires that the Treasury Department make public its 
comments in the international financial institutions' boards of 
directors as they pertain to debt cancellation.
    Finally, the legislation expresses the sense of the 
Congress that to further the goals of debt reduction for low-
income countries, in addition to the efforts described in this 
Act, the United States should pay off outstanding arrearages of 
$595.8 million to the multilateral development banks and debt 
reduction efforts.

                  Background and Need for Legislation

    This Committee has for a number of years worked in a very 
bipartisan way on the issue of debt relief for the world's 
poorest countries as an essential component in the overall 
effort to help alleviate the desperate poverty and misery that 
exists in many parts of the world. Reducing debt and freeing 
resources from debt service for investment in basic human needs 
are not just a moral or humanitarian imperative; they can be 
good economic policy. Debt reduction can complement development 
assistance by reducing the overhang of debt permanently. By 
contributing to a more sustainable debt profile, carefully 
designed debt reduction can help improve the capacity of 
governments to meet the needs of their people. It can help 
create a more attractive environment for private investment and 
improve the conditions for sustainable development in general.
    Millions of the world's poor live in countries where 
crushing foreign debt obligations, almost exclusively to 
official bilateral and multilateral creditors, stand in the way 
of economic growth and poverty reduction. While there has been 
much progress made here, there are still millions of children 
and other vulnerable people in Africa, Latin America and Asia--
in the poorest countries in the world--who continue to go 
without food, sanitation, or basic medical care. By directing 
the Administration to begin advocacy within the international 
community to provide complete debt cancellation for an 
additional group of the world's poorest countries, the 
Committee believes that H.R. 2634, the Jubilee Act for 
Responsible Lending and Expanded Debt Cancellation of 2008, 
reflects the compassion and understanding that good policy 
calls for.

            HIGHLY INDEBTED POOR COUNTRIES INITIATIVE (HIPC)

    The international financial institutions such as the 
International Monetary Fund (IMF) and the World Bank used to 
object to the idea that any debts owed to them should be 
forgiven at all. But in 1996, at the urging of the G8, the 
World Bank and the IMF launched the first ``Highly Indebted 
Poor Countries Initiative (HIPC),'' which identified 41 of the 
world's poorest countries--many of them in Africa, many ravaged 
by AIDS--for debt relief in order to help alleviate the 
suffering and misery of millions of the world's most vulnerable 
people.
    The HIPC Initiative was the first coordinated effort to 
include all creditors, particularly the international financial 
institutions, in addressing the debt problems of poor 
developing countries. The goal of the original HIPC Initiative 
was solely to bring countries' debts to ``sustainable'' levels, 
which was defined mainly in terms of the net present value of a 
country's debt in relation to its exports.
    As a condition of receiving debt relief under the initial 
HIPC program, a country had to establish a 6-year record of 
macroeconomic policy reform under existing IMF and World Bank 
lending arrangements before it received any relief. Once the 
World Bank and IMF determined that a country had successfully 
established a satisfactory track record of policy reform 
implementation, their overall debt burden was reduced to a 
``sustainable'' level, meaning that in the future,it was 
assumed that they would be able to make debt payments on time and 
without rescheduling.
    This approach of making desperately impoverished countries 
continue debt service payments on a so-called ``sustainable'' 
level of debt was viewed by many as misguided on both 
theoretical and practical grounds. Not only did this approach 
pay little attention to the negative human consequences of a 
government's continued payments on its remaining debt, but a 
government's ability to pay back its ``sustainable debt'' was 
also based on overly optimistic, often flawed assumptions by 
the international financial institutions about a country's 
future economic growth, external trade dynamics, and the 
availability of financial resources.

                    THE ``ENHANCED'' HIPC INITIATIVE

    In response to widespread criticism of the original 
program, in June 1999 at the G-7 summit in Cologne, Germany, 
the World Bank and IMF endorsed proposals to modify the HIPC 
Initiative. The ``enhanced'' HIPC Initiative represented a 
major advance over the original HIPC program, promising much 
more debt relief, more rapidly, and to more countries. Also, in 
response to concerns that the original Initiative was 
insufficiently linked to poverty reduction, the modified HIPC 
incorporated a new framework to strengthen the poverty focus of 
development programs and to promote country ownership, 
transparency and civil society participation in their design 
and implementation
    This Committee worked very closely with the Administration 
to assure that the Enhanced HIPC Initiative included a greater 
focus on poverty reduction efforts. Countries receiving debt 
relief were now be required to use money freed up by debt 
relief for poverty reduction as specified in a three-year 
national Poverty Reduction Strategy approved by its lenders.
    Before the HIPC Initiative, eligible African countries 
were, on average, spending slightly more on debt service than 
on health and education combined. Now they have markedly 
increased their spending on health, education, and other social 
services, and, on average, such spending is more than 5 times 
the amount of debt-service payments.

               MULTILATERAL DEBT RELIEF INITIATIVE (MDRI)

    Despite these gains, after nearly a decade of HIPC, many of 
the participating countries continued to suffer under excessive 
debt burdens. Thus, in 2005, the G8 countries agreed to tackle 
this residual debt through the MDRI by canceling 100 percent of 
debts owed by the HIPC countries to the IMF, the World Bank and 
the African Development Fund. In March 2007, the Inter-American 
Development Bank has agreed to cancel the debts of the five 
Latin American countries.
    In fact, most of these countries are servicing their 
obligations, but only because the multilateral institutions 
have offered them new grants and loans to help them repay their 
old ones. Many have argued that the current cycle of defensive 
lending--in which a chunk of new money lent by the World Bank 
is sent straight back to Washington as debt-service payments on 
old debt--is absurd. This recycling of funds keeps up 
appearances on the balance sheets of the Bank and the Fund, 
making bad loans look better than they really are. But it is 
also complicated and inefficient, consuming the time and energy 
of creditors and debtors. It is far better to write off the 
debts altogether, cleaning up the accounts for both creditors 
and debtors alike.
    The Bush Administration played a critical and leading role 
in creating the Multilateral Debt Relief Initiative at the G-8 
Summit in 2005. President Bush highlighted the efficacy of debt 
relief in his 2007 State of the Union speech, stating ``let us 
continue to support the expanded trade and debt relief that are 
the best hope for lifting lives and eliminating poverty.''
    Under the MDRI agreement, no additional net assistance is 
provided because any savings from forgiven multilateral debt 
service obligations will be netted out of future International 
Development Association (IDA) flows to that country. So the 
effect on cash flow for debtor countries would be neutral 
because the World Bank will simply net out any debt service 
from new IDA credits to each country.

                    PURPOSE AND NEED FOR LEGISLATION

    Debt cancellation is a proven means to reduce poverty. In 
recent years, recipient governments have invested released 
funds in health care, education, infrastructure, job creation 
and economic development programs. Debt relief under two 
international initiatives has helped reduce significantly the 
debt burden of heavily indebted poor countries in Africa and 
freed up additional resources for poverty-reducing and social 
expenditures
    Before the HIPC Initiative and the MDRI, eligible countries 
were, on average, spending slightly more on debt service than 
on health and education combined. To date, 23 countries have 
reached their completion points and have received irrevocable 
debt relief. Ten other countries have reached the first step in 
the process and are receiving interim relief on its debt 
service falling due. Together, these countries have increased 
markedly their expenditures on health, education and other 
social services and, on average, such spending is about five 
times the amount of debt-service payments.

 H.R. 2634, THE JUBILEE ACT FOR RESPONSIBLE LENDING AND EXPANDED DEBT 
                         CANCELLATION OF 2008.

    This legislation instructs the Secretary of Treasury to 
commence negotiations within the international financial 
institutions to negotiate comprehensive debt cancellation for 
an additional 24 of the world's poorest countries that are not 
already eligible for the debt cancellation approved under the 
current initiatives. The bill explicitly states that the Act 
authorizes the Secretary of the Treasury to commence immediate 
efforts to negotiate an agreement, but it does not authorize 
the implementation of any agreement. Once a multilateral 
agreement is reached, Congress will have to authorize it by 
law.
    The Act would make 24 additional low-income nations not 
currently eligible for the HIPC/MDRI initiatives potentially 
eligible for debt cancellation from the United States and the 
international financial institutions, provided they meet human 
rights, public financial management, and budget transparency 
criteria and demonstrate their ability to use the money well. 
To benefit, countries would also have to engage interested 
parties, including a broad cross-section of civil society 
groups, in the spending allocation process and produce an 
annual report on this spending, making it publicly available 
and easily accessible. Countries would be excluded from 
receiving the debt cancellation under the Jubilee Act if they:
         have an excessive level of military 
        expenditures;
         have repeatedly provided support for acts of 
        international terrorism;
         fail to cooperate on international narcotics 
        control matters; or
         engage in a consistent pattern of gross human 
        rights violations.

           EXPANDED DEBT CANCELLATION FOR QUALIFIED COUNTRIES

    Some members of the committee have wondered why additional 
debt cancellation is necessary when so much debt relief is 
already being provided under HIPC and the more recent 
Multilateral Debt Relief Initiative. Others have long argued 
that the eligibility criteria for the HIPC Initiative fails to 
take into account one key critical factor--poverty. That is, 
the HIPCs do not include all the poorest countries, just the 
ones that are both poor and heavily indebted. The disparity of 
treatment between HIPC countries and non-HIPC countries became 
clear when the World Bank and IMF conducted an examination of 
so-called ``debt sustainability'' in the poorest countries, the 
so-called IDA-only countries, which are only allowed to receive 
from the World Bank funds from their most concessionary arm. 
The primary objective of the exercise was to determine which 
countries should receive their future IDA financing either 
wholly or partially in the form of grants.
    When the exercise was conducted in 2005, it showed that 42 
countries were at sufficiently high risk of debt distress to be 
eligible for grant financing, instead of the usual loans. The 
list included 29 HIPC countries plus 18 other countries. This 
meant that there were 18 non-HIPC countries rated as having a 
risk of debt distress equal to or greater than the HIPC 
countries. Like the HIPC countries, now they were going to get 
some grants going forward. But unlike the HIPCs, they would get 
no debt relief. One recent study showed that when using a debt-
poverty ratio, there are 30 countries that are both poorer and 
more indebted than the least poor and least indebted eligible 
HIPCs.
    H.R. 2634 addresses this concern by bringing deep debt 
relief within the reach of virtually all of the world's poorest 
countries. Some will note that the IDA-only criterion for 
eligibility under the bill will capture some countries with 
relatively low levels of external debt. But all of these 
countries are ones with very high levels of poverty, and thus 
they need to maximize the amount of resources that they can 
marshal to promote human development and move toward the 
millennium development goals for reducing poverty.

                      CONDITIONS AND REQUIREMENTS

    Over the last five years there has been a growing 
international consensus that economic conditionality often does 
more harm than good. The 2005 Commission for Africa report 
stated that the ``use of policy conditionality associated with 
external assistance should be strongly reduced.'' The United 
Kingdom also recently withheld a portion of its IDA 
contribution in protest against some of the conditions imposed 
by the World Bank on poor countries.
    Still, aid to developing countries nearly always comes with 
conditions attached, which countries seeking debt forgiveness 
are under particular pressure to adopt. Even if some reforms 
are necessary to ensure that money will not be misappropriated, 
many conditions impose specific, often harmful economic 
policies on developing countries.
    Twelve years after the inception of HIPC in 1996, many 
advocates point to evidence that shows that a number of 
conditions and macroeconomic reform requirements that attach to 
both debt relief and lending from the IMF and World Bank 
sometimes undermine and even negate the benefits of debt 
cancellation. In particular, policies that force countries 
applying for debt relief to adhere to strict IMF fiscal and 
monetary targets, privatize key industries, liberalize their 
markets, and remove subsidies for sensitive commodities like 
gasoline and cooking oil have been shown to hurt the poorest 
and most vulnerable people in these countries.
    The requirement that the countries seeking debt relief stay 
on track with a Poverty Reduction and Growth Facility (PRGF) 
loan from the IMF is of particular concern. PRGF loans include 
macroeconomic policy conditions such as maximum inflation 
targets and public spending limits, specific levels of currency 
reserves that must be attained, and caps on public wages. These 
conditions give the IMF the power to dictate spending levels in 
a number of sensitive sectors, which in some cases can 
undermine democratic processes within a country.
    H.R. 2634 mandates that debt cancellation be provided to 
eligible low-income countries without any conditions except 
those that are explicitly outlined in the bill. These 
conditions include a requirement that governments of each 
country ensures that the financial benefits of debt relief are 
applied to programs to combat poverty; adopts an integrated 
development strategy to support poverty reduction through 
economic growth, that includes monitorable poverty reduction 
goals; makes policy decisions through transparent and 
participatory processes; adopts sound budget procedures, good 
governance and effective anticorruption measures; and produces 
and disclose to the public an annual report disclosing how the 
savings from debt cancellation were used.
    The Committee notes that while it supports the adoption by 
countries of an integrated development strategy to support 
poverty reduction, it also believes countries should have the 
necessary flexibility to independently change its strategy in 
light of changing economic circumstances, or in response to 
adjustments made to national development plans by 
democratically elected parliaments.

     ESTABLISHING A FRAMEWORK FOR TRANSPARENT, RESPONSIBLE LENDING

    One of the greatest challenges facing nations that have 
received debt cancellation under existing initiatives is the 
range of new lenders which threaten to send nations back into 
unsustainable debt. To ensure that countries that benefit from 
debt relief do not fall back into unsustainable debt, the 
Jubilee Act calls on the Secretary of the Treasury to: provide 
that the external financing needs of low-income countries are 
primarily met through grants rather than new lending; develop 
and promote policies to ensure that all creditors work together 
to preserve the gains of debt relief; promote the adoption of a 
legal framework, binding on all creditors, and overseen by an 
independent body with significant input from affected 
communities to guarantee that no future creditor can take 
advantage of debt relief through the terms of their new lending 
(known as free-riding) and to ensure that free-riders would pay 
their share of future debt relief made necessary in part by 
their irresponsible lending.
    The Jubilee Act also calls for greater transparency in 
lending. The legislation calls on the Department of Treasury to 
commence immediate efforts to encourage Paris Club creditors, 
the International Monetary Fund and the World Bank to promote 
greater transparency regarding their activities and follow a 
policy of maximum disclosure and support continued efforts to 
allow greater participation and input by affected communities 
and institutions in affected areas.

      FINANCING OF DEBT CANCELLATION AND COST TO THE UNITED STATES

    This legislation only provides authorization for the 
Secretary of the Treasury to commence immediate efforts to 
negotiate a multilateral agreement on debt cancellation, but it 
does not authorize the implementation of any agreement. Since 
the Committee explicitly withholds authorization for any future 
agreement that might be reached, there should be no budgetary 
impact associated with this Act. The following section provides 
estimates on what future costs might be, contingent on the 
timing and scope and nature of any future agreement.
    Bilateral Debt: The budgetary cost to forgive the U.S. 
bilateral debts of the 24 countries that could potentially 
qualify for debt cancellation under the Jubilee Act is 
estimated at approximately $700 million to $1 billion, spread 
over 9 years (2009-2017), or an average annual appropriation of 
$106 million.
    International Monetary Fund Debt: The 24 countries 
potentially covered under the Act owe a total of roughly $2 
billion to the IMF. There is growing support for selling a 
portion of the IMF's gold holding to pay for some IMF debt 
forgiveness, as well as to bolster the World Bank's soft-loan 
arm. This approach provides purely additional funds and does 
not require any additional contributions.
    The IMF's gold reserves are the third largest in the world 
after the United States and Germany. The IMF currently holds 
103.4 million ounces of gold that are valued on its balance 
sheet at about $9 billion. At the current market prices of 
about $913/ounce, the IMF's gold holdings amount to roughly $94 
billion. In 1999, it revalued 12.9 million ounces of the gold 
in off-market transactions as a way to fund the HIPC debt 
cancellation.
    An internal IMF staff report presented to the board in 2005 
shows that selling a small portion of the fund's gold to pay 
for debt relief need not cause disruption to the market if the 
sale is well managed. By adhering to the terms of the 1999 
Central Bank Gold Agreement, which governs future sales of gold 
by central banks, the IMF could raise the required resources 
without causing market volatility or hurting gold-producing 
countries. The report also stresses the need to make clear that 
a sale would not be the first stage in an ongoing disposal of 
the IMF's gold--and that it would retain large holdings for 
prudential reasons.
    The World Gold Council, a body representing gold-mining 
companies, also voiced conditional support for the sale of some 
IMF gold to help pay for the Fund's share of debt relief, 
saying it would prefer any sales to be conducted under the 
auspices of the Central Bank Gold Agreement to avoid disruption 
to the market.
    The Administration has indicated support for a proposal to 
sell a small portion of the IMF's gold holdings in order to 
help fund IMF operations. The Committee believes some 
additional gold sales would be appropriate to help finance debt 
relief for additional poor countries that are not already 
eligible for the debt cancellation approved under the current 
initiatives.
    The Fund needs near universal support (an 85 percent 
majority of voting power) from the IMF Executive Board to 
engage in the sale or use of its gold reserves. The IMF is 
required under U.S. law to gain support from the U.S. Congress 
before selling any IMF gold.
    World Bank Debt: The 24 countries potentially covered under 
the Act owe a total of roughly $24 billion to the World Bank. 
While the cost to cancel the multilateral debts that eligible 
countries owe to the World Bank by eligible countries is much 
greater, the cost to the United States would be less because 
the World Bank has the financial capacity to responsibly 
mobilize a share of its large reserves and/or transfer funds 
from the annual net income of the IBRD or IFC to cover the 
costs of cancellation without any impact on the World Bank's 
ability to lend or its credit rating. In fact, the World Bank 
Board of Directors recently considered a Capital Adequacy 
Report which recognized that the Bank's current equity to loans 
ratio is significantly higher than what is necessary to cover 
risk and generate sufficient income. The report also identifies 
a $10 billion ``capital buffer'' that could be mobilized to 
fund debt cancellation.
    African Development Bank and Asian Development Bank Debt: 
The 24 countries potentially covered under the Act owe a total 
of roughly $11.1 billion to the African Development Bank and 
Asian Development Bank. While some costs could be borne by the 
institutions themselves, the remaining burden would be shared 
among other donor governments.

                              DEBT AUDITS

    The Jubilee Act also addresses the problem of odious and 
unjust debts (debts accrued by undemocratic regimes or that did 
not benefit the population) by requiring the Comptroller 
General of the U.S. to undertake audits of debt portfolios of 
previous regimes in countries where there is accepted evidence 
of odious, onerous or illegal loans, such as the Democratic 
Republic of Congo and South Africa. Such audits should consider 
debts owed to the World Bank, IMF, and other multilaterals, as 
well as export credit debts owed to governments, and commercial 
creditors, and assess whether or not past investments produced 
the intended results. Furthermore, such audits would 
investigate the process by which the loans were contracted, how 
the funds were utilized and their product, and determine 
whether U.S. and/or international laws were violated in the 
contraction of these loans. This is imperative in order to 
learn from past errors and ensure more responsible and 
productive lending and borrowing moving forward. The audits 
should be planned and executed in a transparent and 
consultative manner, engaging Congressional bodies and civil 
society groups in the countries in question.

                                Hearings

    The Committee on Financial Services held a legislative 
hearing entitled ``H.R. 2634, the Jubilee Act for Responsible 
Lending and Expanded Debt Cancellation Act of 2008'' on 
November 8, 2007. The following witnesses testified:
           Mr. Neil Watkins, National Coordinator, 
        Jubilee USA Network
           Ms. Emira Woods, Co-Director, Foreign Policy 
        in Focus, Institute for Policy Studies
           Mr. Gerald F. Flood, Counselor, Office of 
        International Justice and Peace, U.S. Conference of 
        Catholic Bishops
           Mr. Aldo Caliari, Director, Rethinking 
        Bretton Woods Project, Center of Concern

                        Committee Consideration

    The Committee on Financial Services met in open session on 
April 3, 2008, and ordered H.R. 2634, the ``Jubilee Act for 
Responsible Lending and Expanded Debt Cancellation Act of 
2008,'' as amended, favorably reported by a voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. No 
record votes were taken in conjunction with the consideration 
of this legislation. A motion by Mr. Frank (MA) to report the 
bill, as amended, to the House with a favorable recommendation 
was agreed to by a voice vote.
    During the consideration of the bill, the following 
amendment was considered:
    An amendment by Mr. Frank (MA), No. 1, a manager's 
amendment making various technical and substantive changes, was 
agreed to by a voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    H.R. 2634 authorizes the Secretary of the Treasury to 
commence immediate efforts to negotiate with the Paris Club and 
the international financial institutions to establish an 
agreement that provides full cancellation of the debts of 
eligible low-income countries, including those owed to the 
United States. The Secretary shall work to require the 
government of each eligible low-income country to allocate the 
savings from debt cancellation towards poverty-reducing 
expenditures, and engage a broad cross-section of civil society 
groups in determining how the funds should be allocated.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, April 9, 2008.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2634, the Jubilee 
Act for Responsible Lending and Expanded Debt Cancellation of 
2008.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Michelle S. 
Patterson.
            Sincerely,
                                         Robert A. Sunshine
                                             (For Peter R. Orszag).
    Enclosure.

H.R. 2634--Jubilee Act for Responsible Lending and Expanded Debt 
        Cancellation of 2008

    H.R. 2634 would require the Secretary of the Treasury to 
begin negotiations to cancel debt owed by eligible low-income 
countries to the United States and to certain global 
organizations, such as the International Monetary Fund and the 
World Bank. Agreements to cancel debt could not be finalized 
without authorization from the Congress. The bill also would 
require the Secretary to promote within the international 
community transparent lending processes and responsible 
financing policies for the benefit of debtor nations.
    Because the Congress must approve any agreements to cancel 
bilateral or multilateral debts, CBO estimates that enacting 
H.R. 2634, by itself, would have no budgetary impact.
    H.R. 2634 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Michelle S. 
Patterson. This estimate was approved by Peter H. Fontaine, 
Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional Authority of Congress to enact this legislation 
is provided by Article 1, section 8, clause 1 (relating to the 
general welfare of the United States) and clause 3 (relating to 
the power to regulate interstate commerce).

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 2634 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

             Section-by-Section Analysis of the Legislation

Sec 1. Short title

    Title of the bill: the ``Jubilee Act for Responsible 
Lending and Expanded Debt Cancellation of 2008''

Sec. 2. Findings

    The Findings of the bill: (1) outline the record of success 
under the Heavily Indebted Poor Countries Initiative and the 
Multilateral Debt Relief Initiative, as well as the unfinished 
agenda on international debt, including effective 
implementation of existing commitments and the need for a 
broader debt cancellation program; (2) review the strong 
Congressional leadership in supporting previous bilateral and 
multilateral debt relief efforts; (3) express concern about the 
harmful impacts of some of the economic policies imposed on 
poor countries as a condition for receiving debt relief; (4) 
discuss appropriate conditionality; and (5) raise the critical 
issue of new non-concessional loans to countries that have 
benefited from debt relief.

Sec. 3. Cancellation of debt owed by eligible low-income countries

    This section requires the Secretary of the Treasury to 
commence immediate efforts, within the Paris Club and 
international financial institutions, to negotiate an agreement 
to provide full cancellation of the debts of eligible low-
income countries, including those owed to the United States.
    The Act requires the Secretary of the Treasury to ensure, 
to the extent possible, that the international financial 
institutions finance debt cancellation from the ongoing 
operations, procedures, and accounts of each institution, and 
ensure that any waiting period for the enhanced debt 
cancellation is not excessive.
    The Secretary of the Treasury shall work to ensure that the 
provision of debt cancellation to eligible low-income countries 
is not followed by a reduction of any other development 
assistance to the countries by international financial 
institutions and bilateral creditors.
    The Secretary shall also work to require the government of 
each eligible low-income country to allocate the savings from 
debt cancellation towards poverty-reducing expenditures, and 
engage a broad cross-section of civil society groups in the 
allocation determination process.
    The Act requires an annual public report disclosing how the 
savings from debt cancellation were used.
    The Act authorizes the Secretary of the Treasury to 
commence immediate efforts to negotiate an agreement, but it 
does not explicitly authorize the implementation of any 
agreement. Once a multilateral agreement is reached, Congress 
will have to authorize it.
            Establishment of framework for creditor transparency
    The Secretary of the Treasury shall commence immediate 
efforts to continue to promote greater transparency regarding 
the activities of the international financial institutions, 
including credit, grant, guarantee, and technical assistance 
operations, following a policy of maximum disclosure; and 
support continued efforts to allow informed participation and 
input by affected communities, including translation of 
information on proposed projects, provision of information 
(including draft documents) through outreach and dialogue with 
community organizations and institutions in affected areas.
            Establishment of framework for responsible lending
    The Secretary of the Treasury shall commence immediate 
efforts to seek the international adoption of a binding legal 
framework on new lending that (A) guarantees that no creditor 
can take or expect to take financial advantage of acquired or 
newly awarded debt relief through the terms and rates of their 
new lending to beneficiary countries; (B) is binding on all 
creditors, whether multilateral, bilateral or private; (C) 
foresees, as a sanction for creditors who violate it, an 
equitable share in the burden of the losses from any future 
debt relief needed by the sovereign debtor to whom lending was 
irresponsibly provided; (D) provides for decisions on 
irresponsible lending to be made by an entity independent from 
the creditors; and (E) enables fair opportunities for the 
people of the affected country to be heard.
    The Secretary of the Treasury shall support the development 
of responsible financing standards where creditors and aid/loan 
recipients alike adhere to standards to assure transparency and 
accountability to citizens, human rights, and the avoidance of 
new odious debt, while encouraging the development of renewable 
energy and helping countries to transition away from dependence 
on oil.
    The Secretary of the Treasury shall also commence immediate 
efforts to provide that the external financing needs of low-
income countries are met primarily through grant financing 
rather than new lending.
            GAO audit of debt portfolios of countries with questionable 
                    loans
    The Comptroller General of the United States shall 
undertake an audit of the debt portfolios of previous 
governments in countries such as the Democratic Republic of 
Congo and South Africa, where there is significant evidence 
that odious, onerous, or illegal loans were made tothe 
government. The Comptroller General of the United States shall prepare 
and submit to the relevant congressional committees a report that 
contains the results of these audits within 2 years after the date of 
the enactment of this section.
            Availability on Treasury Department Website of remarks of 
                    U.S. executive directors at meetings of 
                    international financial institutions' boards of 
                    directors
    The Secretary of the Treasury shall make available on the 
website of the Department of the Treasury the full record of 
the remarks of the United States Executive Director at meetings 
of the boards of directors of each international financial 
institution about cancellation or reduction of debts owed to 
the institution involved, with redaction by the Secretary of 
the Treasury of material deemed too sensitive for public 
distribution, but showing the topic, amount of material 
redacted, and reason for the redaction.
            Report from the Comptroller General
    Within 1 year after the date of the enactment of this 
section, the Comptroller General of the United States shall 
prepare and submit to Congress a report on the availability of 
the ongoing operations, procedures, and accounts of the IMF, 
the World Bank, and the other international financial 
institutions for canceling the debt of eligible low-income 
countries.
            Annual reports from the President
    Not later than December 31 of each year, the President 
shall submit to the relevant congressional committees a public 
report on the progress made in accomplishing the purposes of 
this section, including a list of the countries that have 
received debt cancellation, a list of the countries whose 
request for debt cancellation has been denied and why, and a 
list of the countries whose requests for debt cancellation are 
under consideration.
            Eligible low-income country defined
    The term ``eligible low-income country'' is defined as a 
country that (1) is eligible for financing only from the 
International Development Association and has not already 
qualified for debt relief under HIPC and MDRI; (2) has 
transparent and effective budget execution and public financial 
management systems which ensure that the savings from debt 
relief are spent on reducing poverty; (3) does not have an 
excessive level of military expenditures; (4) has not 
repeatedly provided support for acts of international 
terrorism, as determined by the Secretary of State and defined 
under U.S. law; (5) is cooperating on international narcotics 
control matters; and (6) is not engaging in a consistent 
pattern of gross violations of internationally recognized human 
rights, including through its military or other security 
forces.

Sec. 4. Limitation on conditionality of debt relief for eligible low-
        income countries

    The Secretary of the Treasury shall commence immediate 
efforts within the Paris Club of bilateral creditors and within 
the international financial institutions to ensure that the 
provision of debt cancellation to eligible low-income 
governments is not conditioned on any agreement by such a 
government to implement policies except those explicitly 
outlined in the bill, such as those that foster transparent and 
participatory policies to achieve poverty reduction through 
economic growth; ensure sound budget procedures, good 
governance and effective anticorruption measures; and produce 
and disclose to the public an annual report disclosing how the 
savings from debt cancellation were used.
            Annual reports to the Congress
    Not later than December 31 of each year, the President 
shall submit to the relevant congressional committees a public 
report on the progress made in accomplishing the purposes of 
this section.

Sec. 5. Sense of the Congress

    This section expresses the sense of the Congress that to 
further the goals of debt reduction for low-income countries, 
in addition to the efforts described in this Act, the United 
States should pay off outstanding arrearages of $595.8 million 
to the multilateral development banks and debt reduction 
efforts.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

                INTERNATIONAL FINANCIAL INSTITUTIONS ACT

           *       *       *       *       *       *       *
TITLE XVI--HUMAN WELFARE

           *       *       *       *       *       *       *

SEC. 1626. CANCELLATION OF DEBT OWED BY ELIGIBLE LOW-INCOME COUNTRIES.

  (a) In General.--The Secretary of the Treasury shall commence 
immediate efforts, within the Paris Club of Official Creditors, 
the International Monetary Fund (IMF), the International Bank 
for Reconstruction and Development (World Bank), and the other 
international financial institutions (as defined in section 
1701(c)(2)), to negotiate an agreement to accomplish the 
following:
          (1) Cancellation by each international financial 
        institution of all debts owed to the institution by 
        eligible low-income countries, and, to the extent 
        possible, financing the debt cancellation from the 
        ongoing operations, procedures, and accounts of the 
        institution.
          (2) Cancellation by the United States of all debts 
        owed to it by eligible low-income countries.
          (3) Ensuring that any waiting period for the enhanced 
        debt cancellation is not excessive.
          (4) Ensuring that the provision of debt cancellation 
        to eligible low-income countries is not followed by a 
        reduction in the provision of any other development 
        assistance to the countries by international financial 
        institutions and bilateral creditors.
          (5) Encouraging the government of each eligible low-
        income country to allocate at least 20 percent of its 
        national budget towards poverty-alleviation programs 
        such as the provision of basic health care services, 
        education services, and clean water services to all 
        individuals in the country.
This subsection shall not be interpreted to authorize the 
Secretary of the Treasury to enter into an agreement to 
accomplish any of the foregoing without express congressional 
authorization to do so.
  (b) Establishment of Framework for Creditor Transparency.--
The Secretary of the Treasury shall commence immediate efforts, 
within the Paris Club of Official Creditors, the International 
Monetary Fund, the World Bank, and the other international 
financial institutions (as so defined), to ensure that each of 
the institutions--
          (1) continues to make efforts to promote greater 
        transparency regarding the activities of the 
        institution, including credit, grant, guarantee, and 
        technical assistance operations, following a policy of 
        maximum disclosure; and
          (2) supports continued efforts to allow informed 
        participation and input by affected communities, 
        including translation of information on proposed 
        projects, provision of information (including draft 
        documents) through information technology application, 
        oral briefings, and outreach to and dialogue with 
        community organizations and institutions in affected 
        areas.
  (c) Establishment of Framework for Responsible Lending.--The 
Secretary of the Treasury shall commence immediate efforts to--
          (1) develop and promote policies to ensure all 
        creditors, with no distinction, will contribute to 
        preserving the gains of debt relief for low-income 
        debtor countries;
          (2) provide that the external financing needs of low-
        income countries are met primarily through grant 
        financing rather than new lending;
          (3) seek the international adoption of a binding 
        legal framework on new lending that--
                  (A) guarantees that no creditor can take or 
                expect to take financial advantage of acquired 
                or newly awarded debt relief through the terms 
                and rates of such lending to beneficiary 
                countries;
                  (B) is binding on all creditors, whether 
                multilateral, bilateral or private;
                  (C) foresees, as a sanction for creditors who 
                violate it, an equitable share in the burden of 
                the losses from any future debt relief needed 
                by the sovereign debtor to whom lending was 
                irresponsibly provided;
                  (D) provides for decisions on irresponsible 
                lending to be made by an entity independent 
                from the creditors; and
                  (E) enables fair opportunities for the people 
                of the affected country to be heard; and
          (4) support the development of responsible financing 
        standards where creditors and aid/loan recipients alike 
        adhere to standards to assure transparency and 
        accountability to citizens, human rights, and the 
        avoidance of new odious debt, while encouraging the 
        development of renewable energy and helping countries 
        to transition away from dependence on oil.
  (d) GAO Audit of Debt Portfolios of Countries With 
Questionable Loans.--
          (1) In general.--The Comptroller General of the 
        United States shall undertake an audit of the debt 
        portfolios of previous governments in countries such as 
        the Democratic Republic of Congo and South Africa, 
        where there is significant evidence that odious, 
        onerous, or illegal loans were made to the government. 
        Each such audit shall--
                  (A) consider debt owed to the World Bank, the 
                IMF, and the other international financial 
                institutions (as so defined), export credit 
                debts owed to governments, and debts owed to 
                commercial creditors, and assess whether or not 
                past investments produced the intended results;
                  (B) investigate the process by which the 
                loans were contracted, how the funds were used, 
                and determine whether United States or 
                international laws were violated in the 
                contraction of these loans, and whether any of 
                the loans were odious or onerous; and
                  (C) be planned and executed in a transparent 
                and consultative manner, engaging congressional 
                bodies and civil society groups in the 
                countries.
          (2) Report.--Within 2 years after the date of the 
        enactment of this section, the Comptroller General of 
        the United States shall prepare and submit to the 
        Committees on Financial Services and on Foreign Affairs 
        of the House of Representatives and the Committees on 
        Banking, Housing, and Urban Affairs and on Foreign 
        Relations of the Senate a report that contains the 
        results of the audits undertaken under paragraph (1).
  (e) Availability on Treasury Department Website of Remarks of 
United States Executive Directors at Meetings of International 
Financial Institutions' Boards of Directors.--The Secretary of 
the Treasury shall make available on the website of the 
Department of the Treasury the full record of the remarks of 
the United States Executive Director at meetings of the boards 
of directors of the International Monetary Fund, the World 
Bank, and the other international financial institutions (as so 
defined), about cancellation or reduction of debts owed to the 
institution involved, with redaction by the Secretary of the 
Treasury of material deemed too sensitive for public 
distribution, but showing the topic, amount of material 
redacted, and reason for the redaction.
  (f) Report From the Comptroller General.--Within 1 year after 
the date of the enactment of this section, the Comptroller 
General of the United States shall prepare and submit to the 
Committees on Financial Services and on Foreign Affairs of the 
House of Representatives and the Committees on Banking, 
Housing, and Urban Affairs and on Foreign Relations of the 
Senate a report on the availability of the ongoing operations, 
procedures, and accounts of the IMF, the World Bank, and the 
other international financial institutions (as so defined) for 
canceling the debt of eligible low-income countries.
  (g) Annual Reports From the President.--Not later than 
December 31 of each year, the President shall submit to the 
Committees on Financial Services and on Foreign Affairs of the 
House of Representatives and the Committees on Foreign 
Relations and on Banking, Housing, and Urban Affairs of the 
Senate a report, which shall be made available to the public, 
on the activities undertaken under this section, and other 
progress made in accomplishing the purposes of this section, 
for the prior fiscal year. The report shall include a list of 
the countries that have received debt cancellation, a list of 
the countries whose request for debt cancellation has been 
denied and the reasons therefor, and a list of the countries 
whose requests for debt cancellation are under consideration.
  (h) Eligible Low-Income Country Defined.--In this section, 
the term ``eligible low-income country'' means a country--
          (1) that is eligible for financing from the 
        International Development Association but not the World 
        Bank, and does not qualify for debt relief under the 
        Enhanced HIPC Initiative (as defined in section 
        1625(e)(3)) and under the Multilateral Debt Relief 
        Initiative;
          (2) that has transparent and effective budget 
        execution and public financial management systems which 
        ensure that the savings from debt relief are spent on 
        reducing poverty;
          (3) the government of which does not have an 
        excessive level of military expenditures;
          (4) the government of which has not repeatedly 
        provided support for acts of international terrorism, 
        as determined by the Secretary of State under section 
        6(j)(1) of the Export Administration Act of 1979 (50 
        U.S.C. App. 2405(j)(1)), or section 620A(a) of the 
        Foreign Assistance Act of 1961 (22 U.S.C. 2371(a));
          (5) the government of which is cooperating on 
        international narcotics control matters; and
          (6) the government of which (including its military 
        or other security forces) does not engage in a 
        consistent pattern of gross violations of 
        internationally recognized human rights.

SEC. 1627. LIMITATION ON CONDITIONALITY OF DEBT RELIEF FOR ELIGIBLE 
                    LOW-INCOME COUNTRIES.

  (a) In General.--The Secretary of the Treasury shall commence 
immediate efforts within the Paris Club of Official Creditors, 
the International Monetary Fund (IMF), the International Bank 
for Reconstruction and Development (World Bank), and the other 
international financial institutions (as defined in section 
1701(c)(2)), to ensure that debt cancellation is provided to 
eligible low-income countries (as defined in section 1626(h)) 
without any conditions except requiring the government of such 
a country to--
          (1) take steps so that the financial benefits of debt 
        relief are applied to programs to combat poverty (in 
        particular through concrete measures to improve 
        economic infrastructure, basic services in education, 
        nutrition, and health, particularly treatment and 
        prevention of the leading causes of mortality) and to 
        redress environmental degradation;
          (2) make policy decisions through transparent and 
        participatory processes;
          (3) adopt an integrated development strategy to 
        support poverty reduction through economic growth, that 
        includes monitorable poverty reduction goals;
          (4) implement transparent policy making and budget 
        procedures, good governance, and effective 
        anticorruption measures;
          (5) broaden public participation and popular 
        understanding of the principles and goals of poverty 
        reduction, particularly through economic growth, and 
        good governance;
          (6) promote the participation of citizens and 
        nongovernmental organizations in the economic policy 
        choices of the government; and
          (7) produce an annual report disclosing how the 
        savings from debt cancellation were used, and make the 
        report publicly available and easily accessible to all 
        interested parties, including civil society groups and 
        the media.
  (b) Annual Reports to the Congress.--Not later than December 
31 of each year, the President shall submit to the Committees 
on Financial Services and on International Relations of the 
House of Representatives and the Committees on Foreign 
Relations and on Banking, Housing, and Urban Affairs of the 
Senate a report, which shall be made available to the public, 
on the activities undertaken under this section, and other 
progress made in accomplishing the purposes of this section, 
for the prior fiscal year.

           *       *       *       *       *       *       *

                            ADDITIONAL VIEWS

    H.R. 2634, the ``Jubilee Act for Responsible Lending and 
Expanded Debt Cancellation of 2008,'' authorizes the Secretary 
of the Treasury to negotiate with the Paris Club and 
international financial institutions a debt relief agreement 
for certain low-income countries that have not received debt 
relief under previous programs. Such an agreement is expected 
to include bilateral and multilateral debt cancellation for 
low-income countries that are eligible for International 
Development Association assistance. Once negotiated, 
implementation would require Congressional approval.
    The Jubilee Act will build on the immensely successful debt 
relief efforts begun more than a decade ago under the Heavily 
Indebted Poor Countries (HIPC) initiative and continued in the 
``Enhanced HIPC'' and the Multilateral Debt Relief Initiative 
(MDRI). In countries where debt relief has been completed, 
national debt has been reduced by two-thirds and spending on 
reducing hunger and improving health, education, and social 
services now is four times greater than the amount of previous 
debt payments. The Jubilee Act would build on these successes. 
By doing so, it would serve United States national interests by 
helping to combat the poverty that breeds unrest and 
instability and creates the conditions that allow dictators and 
terrorists to thrive. Paying for the U.S. share of the expected 
first round of debt relief under the Jubilee Act would cost no 
more than 50 cents apiece for every man, woman, and child in 
this country.
    The bill reported by the Committee on Financial Services 
makes a number of important improvements to the introduced 
version: establishing conditions for receipt of the debt 
reduction, breaking debt relief into a two-step process--
negotiation, followed by implementation--and deleting language 
that would be either controversial or duplicative of other 
legislation. It also contains a ``Sense of Congress'' section 
expressing the view that while pressing forward on new debt-
relief programs, the U.S. should become current in its existing 
debt relief obligations, which are currently $600 million in 
arrears.

                                   Spencer Bachus.
                                   Judy Biggert.

                                  
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