Take action on global debt!

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February 2005

Take action on global debt!
From Catholic Relief Services: Urge the Administration to support major new debt relief for the world's poorest countries at major meeting of finance ministers in London.

REASON FOR THIS ALERT: The Finance Ministers of the seven highly industrialized nations (the G-7) will meet in London in early February. The agenda includes the continuing problem of poor country debt. Building on the significant work done by the Catholic community in the United States in recent years to support debt relief for poor countries, we now have a critical opportunity to do more to help the world’s poorest people. As the Holy Father reminds us, the poverty of billions of men and women is “the one issue that most challenges our human and Christian consciences.” (Pope John Paul II, World Day of Peace Message, 2000.)

We need to contact the Secretary of the Treasury to urge him to press for an agreement on major new debt cancellation for poor countries at the February meeting of G-7 Finance Ministers.

BACKGROUND: In our Action Alert of September 17, 2004, we advised that we expected the United States to make a proposal at an October meeting of the G-7 Finance Ministers for canceling up to 100 percent of the debt that many of the world’s poorest countries owe to the World Bank and other internatio nal financing institutions. (The G-7 members are the U.S., United Kingdom, Canada, Germany, France, Italy and Japan.) Unfortunately, little progress was made at this meeting or in the subsequent months. U.S. Treasury Department officials say that so far, of the other G-7 countries, only the United Kingdom is proposing major new debt relief. The UK hopes to reach agreement with the U.S. and the other G-7 countries on the shape of a new debt relief program by the time of this year’s Summit of the leaders of the G-7 (plus Russia) to be held under UK chairmanship in Scotland in July.

The G-7 Finance Ministers will hold a preparatory meeting for the July summit in early February in London. It will be very important to support and encourage the Secretary of the Treasury to push for agreement at the February meeting on up to 100% cancellation of the debts of poor countries to the international financial institutions. Without important progress towards such an agreement in London, it will be much more difficult to reach agreement by the time of the July summit.

While the U.S. proposal would represent the most important advance in poor country debt relief in five years, we have two concerns. The first is that it may allow international creditors to recover their losses from canceling debts by reducing new financial assistance to poor countries. This would amount to a “zero-sum game” for the poor countries because debt cancellation would result in no increase in their financial resources for poverty reduction. To assure that debt cancellation results in a realfinancial benefit to poor countries, the cancellation should be financed entirely through new resources from wealthy countries or international sources, rather than through reductions in other aid to poor countries.

The second concern arises out of the recent decision by rich country governments that the World Bank should provide assistance to some 42 countries entirely in the form of grants (rather than loans). The 42 include a significant number that are not eligible for the ongoing international debt relief program called the Heavily-Indebted Poor Countries Initiative (HIPC). USCCB/CRS have long supported the move to grant financing for the poorest countries and are very pleased with the new decision. However, the analysis underlying the decision shows that non-HIPC countries who will receive grant financing have debt burdens as heavy or heavier than the HIPC countries. To assure fairness in the treatment of all very poor countries, those non-HIPC countries that will now be entitled to World Bank grant financing should be eligible for inclusion in the debt cancellation proposal.

(For additional background information, see the USCCB/CRS Action Alert: Urge the Administration to Support Major New Debt Relief for the World’s Poorest Countries— But Not at the Expense of Development, dated September 17, 2004, which can be found at www.usccb.org/sdwp/international/aa0904.htm

TAKE ACTION NOW! Please contact the U.S. Treasury Secretary John Snow within the next few days to express your support for Treasury’s proposal for up to 100 percent cancellation of poor country debts owed to international financial institutions and urge him to:

• Support major new debt relief for heavily-indebted poor countries at the G-7 Finance Ministers meeting in London in February.

• Ensure that the proposed cancellation of up to 100% of the debt owed to international financial institutions is financed entirely through new resources from wealthy countries or international sources, rather then through reductions in other aid to poor countries.

• Ensure that, in addition to the HIPC countries, those other countries that now will be entitled to World Bank grant financing are made eligible for inclusion in the debt cancellation proposal.

• Make sure that the funds made available by debt cancellation go towards tackling poverty eradication.

Take action now! Write a letter to Secretary Snow, which you can easily print and fax to his office at (202) 622-0073. Click here for other ways to get involved.

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