II

106TH CONGRESS

1ST SESSION S. 1690

To require the United States to take action to provide bilateral debt relief,

and improve the provision of multilateral debt relief, in order to give

a fresh start to poor countries.

IN THE SENATE OF THE UNITED STATES

OCTOBER 5, 1999

Mr. MACK (for himself, Mr. SARBANES, Mr. DEWINE, Mr. LIEBERMAN, Mr.

JEFFORDS, Mr. KERREY, Mr. LUGAR, Mr. KERRY, Mr. DODD, and Ms.

LANDRIEU) introduced the following bill; which was read twice and referred to the Committee on Foreign Relations

A BILL

To require the United States to take action to provide bilateral debt relief, and improve the provision of multilateral

debt relief, in order to give a fresh start to poor countries.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; FINDINGS; PURPOSE.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Debt Relief for Poor Countries Act of 1999’’.

6 (b) FINDINGS.—Congress makes the following find7 ings:
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1 (1) The burden of external debt has become a

2 major impediment to economic development and pov3 erty reduction in many of the world’s poorest coun4 tries.

5 (2) Until recently, the United States Govern6 ment and other official creditors sought to address

7 the problem by rescheduling loans and in some cases

8 providing limited debt reduction.

9 (3) Despite such efforts, the cumulative debt of

10 many of the poorest countries continued to grow be11 yond their capacity to repay.

12 (4) In 1996, the World Bank and the Inter13 national Monetary Fund adopted the Heavily In14 debted Poor Countries Initiative (HIPC), a commit15 ment by the international community that all multi16 lateral and bilateral creditors, acting in a coordi17 nated and concerted fashion, would reduce poor

18 country debt to a sustainable level.

19 (5) HIPC in practice has resulted in too little

20 debt relief being granted too slowly to too few coun21 tries.

22 (6) The macro-economic and sectoral policy re23 forms which are conditions of HIPC debt relief are

24 intended to promote a private sector-led, free mar25 ket-oriented pattern of development.
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1 (7) It is essential that such fundamental and

2 wide-ranging policies be designed and implemented

3 in a transparent manner and with broad participa4 tion of the citizenry of the debtor country to assure

5 that country circumstances are adequately taken

6 into account and that the interests particularly of

7 the poor and vulnerable are protected.

8 (8) The poor and the vulnerable make up the

9 large majority of the population in the heavily in10 debted poor countries and have suffered from the di11 version of scarce domestic resources to the servicing

12 of excessive external debt.

13 (c) PURPOSE.—It is the purpose of this Act to bring

14 about more generous and rapid relief from debts owed to,

15 or guaranteed by, the United States, and to promote

16 United States leadership in improving HIPC to provide

17 more debt reduction, more quickly, to more countries.

18 SEC. 2. ACTIONS TO PROVIDE BILATERAL DEBT RELIEF

19 AND PROCEDURES FOR NEW LOANS, CRED20 ITS, AND GUARANTEES.

21 (a) CANCELLATION AND REDUCTION OF DEBT AND

22 PROCEDURES FOR NEW LOANS, CREDITS, AND GUARAN23 TEES.—The Foreign Assistance Act of 1961 (22 U.S.C.

24 2151 et seq.) is amended by adding at the end the fol25 lowing:
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1 ‘‘PART VI—CANCELLATION AND REDUCTION OF

2 DEBT OWED TO THE UNITED STATES BY

3 POOR COUNTRIES AND PROCEDURES FOR

4 NEW LOANS, CREDITS, AND GUARANTEES TO

5 DEVELOPING COUNTRIES

6 ‘‘SEC. 901. CANCELLATION AND REDUCTION OF DEBT.

7 ‘‘(a) CANCELLATION OF DEBT.—

8 ‘‘(1) IN GENERAL.—Subject to amounts pro9 vided in advance in an appropriations Act, the Presi10 dent shall, prior to September 30, 2001, cancel all

11 amounts owed to the United States (or any agency

12 of the United States) by heavily indebted poor coun13 tries described in section 902 as a result of

14 concessional loans made or credits extended prior to

15 January 1, 1996, under any of the provisions of law

16 described in paragraph (2).

17 ‘‘(2) PROVISIONS OF LAW.—The provisions of

18 law described in this paragraph are the following:

19 ‘‘(A) Part I of this Act, chapter 4 of part

20 II of this Act, or predecessor foreign economic

21 assistance legislation.

22 ‘‘(B) Title I of the Agricultural Trade De23 velopment and Assistance Act of 1954 (7

24 U.S.C. 1701 et seq.).

25 ‘‘(b) REDUCTION OF DEBT.—
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1 ‘‘(1) IN GENERAL.—Subject to amounts pro2 vided in advance in an appropriations Act, the Presi3 dent shall, prior to September 30, 2001, reduce, by

4 not less than 90 percent, amounts owed to the

5 United States (or any agency of the United States)

6 by each heavily indebted poor country described in

7 section 902 as a result of nonconcessional loans

8 made, guarantees issued, or credits extended prior to

9 January 1, 1996, under any of the provisions of law

10 described in paragraph (2).

11 ‘‘(2) PROVISIONS OF LAW.—The provisions of

12 law described in this paragraph are the following:

13 ‘‘(A) Sections 221 and 222 of this Act.

14 ‘‘(B) The Arms Export Control Act (22

15 U.S.C. 2751 et seq.).

16 ‘‘(C) Section 5(f) of the Commodity Credit

17 Corporation Charter Act.

18 ‘‘(D)(i) Section 201 of the Agricultural

19 Trade Act of 1978 (7 U.S.C. 5621).

20 ‘‘(ii) Section 202 of such Act (7 U.S.C.

21 5622).

22 ‘‘(E) The Export-Import Bank Act of

23 1945 (12 U.S.C. 635 et seq.).
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1 ‘‘SEC. 902. ELIGIBLE COUNTRIES.

2 ‘‘(a) HEAVILY INDEBTED POOR COUNTRIES.—Ex3 cept as provided in subsection (b) and subject to the fulfill4 ment of the additional requirement in subsection (c), a

5 country shall be considered to be a heavily indebted poor

6 country and eligible for cancellation or reduction of debt

7 under section 901 if the country—

8 ‘‘(1) is eligible to borrow from the International

9 Development Association;

10 ‘‘(2) is not eligible to borrow from the Inter11 national Bank for Reconstruction and Development;

12 and

13 ‘‘(3) has outstanding public and publicly guar14 anteed debt, the net present value of which on De15 cember 31, 1996, was at least 150 percent of the av16 erage annual value of the exports of the country for

17 the period 1994 through 1996.

18 ‘‘(b) EXCEPTIONS.—A country shall not be eligible

19 for cancellation or reduction of debt under section 901 if

20 the government of the country—

21 ‘‘(1) has an excessive level of military expendi22 tures;

23 ‘‘(2) has repeatedly provided support for acts of

24 international terrorism, as determined by the Sec25 retary of State under section 6(j)(1) of the Export

26 Administration Act of 1979 (50 U.S.C. App.
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1 2405(j)(1)) or section 620A(a) of the Foreign As2 sistance Act of 1961 (22 U.S.C. 2371(a));

3 ‘‘(3) is failing to cooperate on international nar4 cotics control matters; or

5 ‘‘(4) (including its military or other security

6 forces) engages in a consistent pattern of gross vio7 lations of internationally recognized human rights.

8 ‘‘(c) ADDITIONAL REQUIREMENT.—A country that is

9 otherwise eligible to receive cancellation or reduction of

10 debt under section 901 may receive such cancellation or

11 reduction, as the case may be, only if the government of

12 the country—

13 ‘‘(1) agrees to and initiates the establishment of

14 a mechanism, which would make appropriate ac15 counts and records available to the public, to ensure

16 that all savings generated by cancellation or reduc17 tion of the debt under section 901 will be used to—

18 ‘‘(A) enable, facilitate, or encourage the

19 implementation of policy changes and institu20 tional reforms under economic reform pro21 grams, in a manner that—

22 ‘‘(i) ensures that such policy changes

23 and institutional reforms are adopted

24 through transparent and participatory pro25 cedures; and
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1 ‘‘(ii) ensures that such policy changes

2 and institutional reforms are designed to

3 promote sustainable growth, ensure that

4 the benefits of such growth are shared

5 widely by the population; and

6 ‘‘(B) initiate new or enhance existing poli7 cies, programs or projects designed through

8 transparent and participatory procedures, in9 cluding the participation of the nongovern10 mental organizations of a civil society (including

11 charitable, educational, trade union, business,

12 professional, voluntary, community, and other

13 civic organizations), to reduce the number of

14 persons living in poverty, expand access of the

15 poorest members of society to basic social serv16 ices, such as education, health, clean water and

17 sanitation, and prevent the degradation of the

18 environment; and

19 ‘‘(2) ensures that all savings realized through

20 debt relief during a given year will be used by the

21 government to increase annual expenditures, de22 scribed in paragraph (1) (A) and (B), in an amount

23 that is the greater of—
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1 ‘‘(A) the total amount of such annual ex2 penditures made by the government in the pre3 ceding year; or

4 ‘‘(B) the average total amount of such ex5 penditures for the 3 years immediately pre6 ceding the year in which debt reduction is made

7 available.

8 ‘‘SEC. 903. PRIORITY.

9 ‘‘In canceling or reducing debt under section 901, the

10 President shall give priority to heavily indebted poor coun11 tries that have demonstrated a sustained commitment to

12 poverty alleviation or have recently suffered a major nat13 ural disaster.

14 ‘‘SEC. 904. SPECIAL PROVISIONS.

15 ‘‘(a) CANCELLATION OR REDUCTION OF DEBT NOT

16 CONSIDERED TO BE ASSISTANCE.—Except as the Presi17 dent may otherwise determine for reasons of national se18 curity, a cancellation or reduction of debt under section

19 901 shall not be considered to be assistance for purposes

20 of any provision of law limiting assistance to a country.

21 ‘‘(b) INAPPLICABILITY OF CERTAIN PROHIBITIONS

22 RELATING TO CANCELLATION OR REDUCTION OF

23 DEBT.—The authority to provide for cancellation or re24 duction of debt under section 901 may be exercised not25 withstanding section 620(r) of this Act.
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1 ‘‘SEC. 905. ANNUAL REPORTS TO CONGRESS.

2 ‘‘(a) IN GENERAL.—Not later than December 31 of

3 each year, the President shall prepare and transmit to the

4 appropriate congressional committees a report, which shall

5 be made available to the public, concerning the cancella6 tion and reduction of debt under section 901, determina7 tions made under section 904(a), activities undertaken

8 under section 2(b) of the Debt Relief for Poor Countries

9 Act of 1999, and the progress made in accomplishing the

10 purposes of such section 2(b), for the prior fiscal year.

11 ‘‘(b) DEFINITION.—In this section, the term ‘appro12 priate congressional committees’ means—

13 ‘‘(1) the Committee on Banking and Financial

14 Services and the Committee on International Rela15 tions of the House of Representatives; and

16 ‘‘(2) the Committee on Foreign Relations and

17 the Committee on Banking, Housing, and Urban Af18 fairs of the Senate.

19 ‘‘SEC. 906. SENSE OF CONGRESS.

20 ‘‘It is the sense of Congress that the amounts that

21 would otherwise be provided by the United States for de22 velopment assistance or other debt relief should not be re23 duced on account of any appropriations made pursuant

24 to section 907.
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1 ‘‘SEC. 907. AUTHORIZATION OF APPROPRIATIONS.

2 ‘‘For the cost (as defined in section 502(5) of the

3 Federal Credit Reform Act of 1990) of the cancellation

4 or reduction of any debt under section 901 of this Act,

5 there are authorized to be appropriated to the President

6 such sums as may be necessary for each of the fiscal years

7 2000 and 2001.

8 ‘‘SEC. 908. PROCEDURES FOR NEW LOANS, CREDITS, AND

9 GUARANTEES.

10 ‘‘The President shall, to the extent appropriate, en11 sure that all decisions by the Government of the United

12 States (or any agency of the United States) to make new

13 loans, extend new credits or issue new guarantees to the

14 governments (or any agency of the governments) of, or

15 private parties in, any developing country shall be subject

16 to transparent and participatory processes, including giv17 ing due notice to the public in advance of such decisions

18 of the proposed purposes, terms, and conditions of such

19 loans, credits, and guarantees.’’.

20 (b) ENSURING BURDENSHARING BY OTHER CRED21 ITOR COUNTRIES.—In order to accelerate bilateral debt

22 relief and promote economic and human development and

23 poverty alleviation in heavily indebted poor countries, Con24 gress urges the President, immediately after the date of

25 enactment of this Act, to establish diplomatic efforts with

26 countries that are members of the Paris Club of Official
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1 Creditors (in this Act referred to as the ‘‘Club’’), and, if

2 necessary, with other creditors, to accomplish the fol3 lowing by September 30, 2001:

4 (1) The cancellation of all amounts owed to

5 each such country by heavily indebted poor countries

6 described in section 902 of the Foreign Assistance

7 Act of 1961 (as added by subsection (a)) as a result

8 of concessional loans made or credits extended prior

9 to January 1, 1996, by each such country.

10 (2) The reduction, by not less than 90 percent,

11 of amounts owed to each such country by heavily in12 debted poor countries described in section 902 of the

13 Foreign Assistance Act of 1961 (as added by sub14 section (a)) as a result of nonconcessional loans

15 made, guarantees issued, or credits extended prior to

16 January 1, 1996, by each such country.

17 (3) The establishment of procedures by the

18 Club to ensure greater transparency in the decision19 making process, including publication of each deci20 sion and its rationale, on all applications to the Club

21 for debt reduction by heavily indebted poor countries

22 described in section 902 of the Foreign Assistance

23 Act of 1961 (as added by subsection (a)).
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1 SEC. 3. ACTIONS TO IMPROVE THE PROVISION OF MULTI2 LATERAL DEBT RELIEF AND PROCEDURES

3 FOR NEW LENDING.

4 Title XVI of the International Financial Institutions

5 Act (22 U.S.C. 262p—262p–5) is amended by adding at

6 the end the following:

7 ‘‘SEC. 1623. IMPROVEMENT OF THE HEAVILY INDEBTED

8 POOR COUNTRIES INITIATIVE; ENSURING EQ9 UITABLE BURDEN SHARING.

10 ‘‘(a) IMPROVEMENT OF THE HIPC INITIATIVE.—In

11 order to accelerate multilateral debt relief and promote

12 economic and human development and poverty alleviation

13 in heavily indebted poor countries Congress urges the

14 President to commence immediately diplomatic efforts,

15 within the Paris Club of Official Creditors, as well as the

16 International Bank for Reconstruction and Development

17 (World Bank), the International Monetary Fund (IMF),

18 and other appropriate multilateral development institu19 tions to accomplish the following modifications in the

20 Heavily Indebted Poor Countries Initiative:

21 ‘‘(1) LIMIT ON MAXIMUM WAITING PERIOD BE22 FORE RECEIVING DEBT RELIEF.—The period of sat23 isfactory implementation of economic and social re24 forms which a country may need to establish in

25 order to receive bilateral and multilateral debt re-
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1 duction under the HIPC Initiative shall not exceed

2 3 years.

3 ‘‘(2) REVISION OF COUNTRY ELIGIBILITY RE4 QUIREMENT.—A country shall be regarded as having

5 an unsustainable debt burden for purposes of quali6 fying for debt reduction (or for further debt reduc7 tion) under the HIPC Initiative if the net present

8 value of the outstanding public and publicly guaran9 teed debt of the country at the end of 1996 was at

10 least 150 percent of the average annual value of the

11 exports of the country for the period 1994 through

12 1996.

13 ‘‘(3) ADDITIONAL REQUIREMENT.—Debt reduc14 tion under the HIPC Initiative shall not be provided

15 for the benefit of a country unless the government

16 of the country has, through transparent and

17 participatory processes—

18 ‘‘(A) established a plan of action for eco19 nomic opportunity and human development (in

20 this section referred to as the ‘Action Plan’)

21 which shall include policies, programs, and in22 vestments, by the public or private sectors as

23 appropriate, designed to—
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1 ‘‘(i) promote sustainable growth and

2 ensure that the benefits of such growth are

3 shared widely by the population; and

4 ‘‘(ii) reduce the number of persons liv5 ing in poverty, expand access of the poor6 est members of society to basic social serv7 ices, including but not limited to education,

8 health, clean water and sanitation, and

9 prevent the degradation of the environ10 ment; and

11 ‘‘(B) agreed to, and initiated establishment

12 of, a mechanism, which would make appropriate

13 accounts and records available to the public, to

14 ensure that all savings generated by debt reduc15 tion provided for the benefit of the country

16 under the HIPC Initiative are dedicated to

17 achieving the purposes of the Action Plan.

18 ‘‘(4) AMOUNT OF DEBT REDUCTION.—The

19 amount of the debt reduction provided under the

20 HIPC Initiative for the benefit of a country with an

21 unsustainable debt burden shall be sufficient to

22 reduce—

23 ‘‘(A) the net present value of the out24 standing public and publicly guaranteed debt of
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1 the country to less than 150 percent of the

2 value of the annual exports of the country; and

3 ‘‘(B) the amount of annual payments due

4 on such public and publicly guaranteed debt to

5 not more than 10 percent of the amount of an6 nual current revenue received by the govern7 ment of the country from internal sources.

8 ‘‘(5) TRANSPARENCY AND PARTICIPATION IN

9 HIPC DECISION MAKING.—All decisions under the

10 HIPC Initiative concerning the amount, terms and

11 conditions, and timing of debt relief for a country,

12 and the processes by which such decisions are made,

13 shall be subject to procedures which are—

14 ‘‘(A) transparent, including publication of

15 the content of the decisions and of all relevant

16 analytical, legal, and policy documents, includ17 ing Debt Sustainability Analyses, Policy Frame18 work Papers, debt relief agreements, and na19 tional development programs and budgets; and

20 ‘‘(B) participatory, including the participa21 tion of civil society.

22 ‘‘(6) SPECIAL PROVISIONS.—

23 ‘‘(A) Debt reduction under the HIPC Ini24 tiative for the benefit of a country that has

25 demonstrated a sustained commitment to pov-
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1 erty alleviation or has recently suffered a major

2 natural disaster shall be provided in a greater

3 amount or more quickly than would otherwise

4 be the case under the HIPC Initiative.

5 ‘‘(B) Notwithstanding any longer period of

6 satisfactory performance required pursuant to

7 paragraph (1), in the case of a country emerg8 ing from civil conflict which has an economic

9 performance agreement with the IMF and is

10 otherwise entitled to begin receiving enhanced

11 bilateral and multilateral debt reduction under

12 the HIPC Initiative, the lack of a 3-year period

13 of satisfactory performance under such IMF

14 agreement shall not cause a delay in the provi15 sion of debt reduction for the benefit of the

16 country under the HIPC Initiative.

17 ‘‘(7) HIPC REVIEW.—The Secretary of the

18 Treasury shall make every effort (including instruct19 ing the United States Executive Directors at the

20 IMF and the World Bank) to ensure that a com21 prehensive external assessment of the HIPC Initia22 tive shall take place by December 31, 2001, shall in23 corporate the views of debtor governments and civil

24 society, shall be made public, and shall include—
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1 ‘‘(A) an analysis of the contribution of the

2 HIPC Initiative to the poverty reduction and

3 social development goals for the 21st century

4 established by the Development Assistance

5 Committee of the Organization for Economic

6 Cooperation and Development; and

7 ‘‘(B) recommendations to the IMF, World

8 Bank, and the governments of the United

9 States and other creditor countries that may be

10 necessary to strengthen the contribution of the

11 HIPC Initiative to the poverty reduction and

12 social goals referred to in subparagraph (A).

13 ‘‘(8) TERMINATION OF THE HIPC INITIATIVE.—

14 The HIPC Initiative shall not terminate until all the

15 debt reduction contemplated by this section has been

16 carried out.

17 ‘‘(b) PROMOTION OF EQUITABLE BURDEN SHAR18 ING.—In order to promote equitable burden-sharing by bi19 lateral, multilateral, and private creditors under the HIPC

20 Initiative, Congress urges the President to commence im21 mediately diplomatic efforts to ensure that such creditors

22 draw upon their own resources to finance debt reduction

23 under the HIPC Initiative to the extent possible without

24 diverting funds from other high priority poverty alleviation

25 programs.
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1 ‘‘(c) CONTRIBUTIONS TO THE HIPC TRUST FUND.—

2 For payment to the Heavily Indebted Poor Countries

3 Trust Fund of the International Bank for Reconstruction

4 and Development, there are authorized to be appropriated

5 to the President such sums as may be necessary for fiscal

6 years 2000, 2001, and 2002, except that if, with respect

7 to fiscal year 2001 or 2002, the President has not deter8 mined that, during the then preceding fiscal year, satisfac9 tory progress was made in accomplishing the improve10 ments in the HIPC Initiative described in subsections (a)

11 and (b), then no sums are authorized to be appropriated

12 for such purpose for the fiscal year.

13 ‘‘(d) SENSE OF CONGRESS.—It is the sense of Con14 gress that the amounts that would otherwise be provided

15 by the United States for development aid or other debt

16 relief should not be reduced on account of any appropria17 tions pursuant to subsection (c).

18 ‘‘(e) REPORT TO CONGRESS.—Not later than Decem19 ber 31 of each year, the President shall submit to the

20 Committees on Banking and Financial Services and on

21 International Relations of the House of Representatives

22 and the Committee on Foreign Relations of the Senate

23 a report, which shall be made available to the public, on

24 the activities undertaken under this section, and on the
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1 progress made in accomplishing the purposes of this sec2 tion, for the prior fiscal year.

3 ‘‘SEC. 1624. IMPROVEMENT OF PROCEDURES FOR NEW

4 LENDING.

5 ‘‘The President, acting through the Secretary of the

6 Treasury, shall work with the member countries of the

7 international financial institutions (as defined in section

8 1701(c)(2)) to ensure transparency and public participa9 tion in decisions to make new loans, and the terms and

10 conditions of such loans, to developing countries,

11 including—

12 ‘‘(1) disclosure of Policy Framework Papers,

13 Public Expenditure Reviews, Country Assistance

14 Strategies, International Monetary Fund Letters of

15 Intent, appraisal documents, and other reports rel16 evant to proposed lending operations;

17 ‘‘(2) participation of civil society in developing

18 countries in the design of national development pro19 grams and in decisions to borrow from such institu20 tions in support of such programs; and

21 ‘‘(3) provision of detailed information to the

22 Board of Directors of such an institution and to the

23 public, prior to the approval of a lending operation

24 for a developing country, as to the nature and extent
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1 of civil society participation in the design of, and ap2 proval process for, such operation.’’.

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