Statement by Treasury Secretary Lawrence H. Summers
On The Enhanced HIPC Debt Relief Initiative
July 12, 2000

Let me thank Congresswoman Pelosi for arranging this press conference at such a critical moment. I would also like to recognize the remarkable efforts of the religious community to raise awareness about this important issue.

Today, even as we speak, scientists and health workers from around the world are meeting in South Africa to confront the urgent task of tackling the AIDS pandemic that has affected so many countries, particularly in Africa, where the disease has left 12 million children orphaned and is already rolling back hard won economic gains.

Both the AIDS conference in Durban and the approaching G8 summit in Okinawa highlight the overriding need for Congress to act quickly to fulfill the commitments the United States has made to provide clear international leadership in granting debt relief to the poorest countries. In that respect, we also need to move forward with the President's Millennium Vaccines Initiative, including the vaccine tax credits that will help us develop cures for some of the diseases killing millions of the world's poor every year.

Owing to the delay in providing funding for the enhanced HIPC initiative, debt relief for Latin America is already stalled. Unless the U.S. funds its share of the initiative, this vital global undertaking will also stall in Africa. We should have no doubt that such an outcome would have serious implications for U.S. global leadership.

There is no justification for such a delay. Countries that qualify for relief have demonstrated a clear track record of economic reform and commitment to poverty reduction. Under the initiative, the eight countries that have qualified so far are designated to receive more than $15 billion in debt reduction. On average, this means $95 million per year that can be spent on productive investments designed to reduce poverty and stimulate economic growth.

Debt reduction for the poorest, most heavily indebted countries is both a moral imperative and an economic imperative for the United States. Debt reduction also has an impact on our national security. As the President has often said, today the U.S. has as much to fear from states that are too weak as states that are too strong.

By freeing up billions of dollars to invest in educating and vaccinating children, protect the environment, fight the scourge of AIDS, and fund other poverty reduction efforts in the poorest countries around the world, the President's HIPC initiative will help stabilize countries that are at risk on many fronts. The case for providing debt relief is therefore overwhelmingly in our national interest. And yet, the U.S. contribution to the initiative represents only about 3 percent of the total. The Administration has requested $435 million this year for debt relief.

For the poorest and most indebted countries in Latin America, the delay in U.S. funding is already having significant consequences where a U.S. contribution to the HIPC Trust Fund is essential to enable the Inter-American Development Bank to participate in debt reduction. Bolivia and Honduras have qualified to receive debt relief under the enhanced HIPC initiative. However, significant debt relief will not move forward until the U.S. contributes to the HIPC Trust Fund.

Bolivia - a model economic reformer and strategic U.S. ally in coca eradication - however will not receive the roughly $850 million in debt relief that it qualified for because of the delay in U.S. contribution to the HIPC Trust Fund. Over two-thirds of the population live in poverty, yet without HIPC debt relief Bolivia would continue to spend $35 a year per person on debt servicing - more than its per capita spending on health or education.

Honduras is one of the poorest countries in our Hemisphere; over half of its people live in poverty and nearly half of the rural population suffers from malnutrition. Yet for every dollar the government spends on health care, its sends $4.00 to its creditors to paying off old debts. Earlier this month, the international creditors agreed that Honduras met the qualifications for $556 million in debt relief. Yet Honduras will not be able to put all of these resources to bear on attacking poverty until Congress acts.

Due to some initial contributions from the European Union and other creditors, there is funding for the early African countries to qualify for debt relief. However, because these donors have based additional contributions to the HIPC Trust Fund on an American contribution, many of the more than 25 African countries in the HIPC program will have to await a contribution from the U.S.

Many of the countries that qualify for the President's enhanced initiative have identified prevention of HIV/AIDS as the top priority for re-investing savings that result from debt relief. I had the privilege of visiting Africa recently. In Tanzania, I saw first-hand the country's commitment to fighting disease. Tanzania will save about $100 million per year in debt service and will use HIPC debt relief in part to conduct a nationwide campaign to fight the spread of HIV/AIDS and to immunize children against infectious diseases.

I also visited Mozambique where I witnessed commitment of the government to fighting poverty and disease. Mozambique is the 10^th poorest country in the world, with an annual per capita GDP of barely $200, has an illiteracy rate of 60 percent and recent floods have caused hundreds of millions of dollars in damage. Despite these obstacles, the Government of Mozambique has designed an impressive poverty reduction strategy that depends on funds freed from debt relief for its financing. Mozambique's planned spending increase on health and education is funded by the over $100 million in annual debt savings that it has received from HIPC.

The delay in providing US funding for this initiative is jeopardizing the critical efforts of countries such as Tanzania and Mozambique to fight disease and poverty within their borders. Without United States support, debt relief for the nine Sub-Saharan Africa and Latin America that have qualified under the enhanced initiative is at risk.

This is a remarkable moment for the United States. We are richer than ever before and we are growing faster than ever before. Yet the Achilles Heel for the U.S. is our reluctance to engage adequately in the world. The bill before Congress provides grossly inadequate funds to help the poorest countries in the world to fight poverty and disease. As a result, the President's advisers will recommend that the President vetoes the bill in its current form.

Back to Home Page