*EPF307 02/02/00
Text: Summers on HIPC Debt Relief and Congress
(Says Congress needs to provide more HIPC funding) (1550)

Secretary of the Treasury Lawrence Summers has called on Congress to approve additional funds for the Heavily Indebted Poor Countries (HIPC) debt relief initiative, explaining that the legislation passed last year will only get part of the job done.

President Clinton will submit a supplemental budget request for the current fiscal year that will seek an additional $210 million for the HIPC trust fund managed by the World Bank and International Monetary Fund (IMF), Summers said late February 1. Clinton will also seek authorization to use remaining earnings on the revalued IMF gold for debt relief, Summers said in remarks at a reception on Capitol Hill of members of Congress and nongovernmental organizations that support HIPC. In addition, the president's upcoming budget request for the 2001 fiscal year, which begins October 1, that will be sent to Congress February 7, will ask for $225 million more for debt reduction through the HIPC initiative and to reduce bilateral debts, Summers said.

In November, Congress passed legislation that allowed the IMF to revalue some of its gold reserves and to engage in "non-market" sales of the revalued gold to generate profits that will be used in financing the HIPC debt relief program. Congress also appropriated $123 million for debt relief.

"We have not yet done our full share," Summers said. If the United States cannot provide more money for the HIPC trust fund, the Latin American HIPC beneficiaries will be particularly affected. "If we do not play our part in this area, debt relief for Bolivia, Guyana, Honduras and Nicaragua will not happen," he said.

The HIPC program, launched in September 1996, provides a procedure for the world's poorest countries to negotiate debt reduction with the IMF and World Bank. The countries must enter IMF/World Bank reform programs and, as they successfully implement reforms, their debts -- owed to the Fund and the Bank, as well as to donor governments -- are reduced or canceled. Most of the 41 countries eligible for HIPC are in Africa.

The IMF and World Bank approved the launching of an expanded HIPC initiative at their annual meetings last September. The Group of Seven industrialized countries had endorsed an expanded HIPC at the summit last June in Cologne.

Following is the text of Summers' remarks:

(begin text)

OFFICE OF PUBLIC AFFAIRS

February 1, 2000

Moving Forward with Millennial Debt Relief
Remarks by Treasury Secretary Lawrence H. Summers
Reception to Celebrate HIPC
House Banking Committee Room
United States Congress
Washington, DC

Thank you. I have two tasks today. The first is to join with the rest of the Administration in thanking everyone in this room - and, especially, the individuals we are honoring today - for your hard work on the HIPC initiative during the past year. Chairman Leach, Ranking Member LaFalce, Senator Mack, Senator Sarbanes, Congressman Bachus, Congresswoman Waters - quite simply, without your support and commitment to this effort it would not have happened. Literally hundreds of millions of the world's poorest people owe you their thanks and so does the Administration.

My second task is to remind you that we have more to do to make HIPC happen - and to assure you that the Administration is one hundred percent committed to working with you to get it done. Debt relief for the poorest countries is a global moral imperative. It is also a global economic imperative, at a time when nearly all of the growth in the world's labor force and productivity will be in the developing countries - and their success in a new 21st century global economy is going to be important to the success of us all.

As you know, the work you all did for the FY2000 budget made it possible for the international community to move forward with providing broader, deeper and faster debt relief to countries committed to growth, economic reform and reducing poverty. That success was a tribute to the dedication of the NGO community and the people who have supported this effort in Congress from the beginning. And it is enormously important. Indeed, with these appropriations in place, as many as eleven countries will begin to benefit from debt reduction by the spring of 2000, with Bolivia, Mauritania, and Uganda now due to qualify in a matter of days.

That is the good news. The bad news is that the HIPC countries as a whole will not fully benefit from the time and energy that we have all invested in HIPC - unless we invest some more. The steps agreed last year will help us to cover roughly one-third of the direct costs to the United States of the enhanced HIPC we all want to see. And they will make it possible for the IMF to free up a substantial part of the internal resources it needs to write down the debts that are owed to it.

But we have not yet done our full share, notably with respect to the HIPC Trust Fund and other multilateral pieces of HIPC, where every dollar of our total request will leverage $20 dollars in multilateral debt relief. The Latin American HIPCs will be especially affected if we fail to ensure that the HIPC Trust Fund is adequately funded. To put it bluntly: if we do not play our part in this area, debt relief for Bolivia, Guyana, Honduras, and Nicaragua will not happen.

That is why he asking for a supplemental request for the FY2000 budget of $210 million for the HIPC Trust Fund and authorization to use the remaining earnings on revalued IMF gold for debt relief. In the upcoming budget request for FY 2001 we will ask for a further $225 million to make good on our commitment to HIPC going forward: $150 million for the HIPC Trust Fund and $75 million to meet the cost of reducing out bilateral debts. To underscore our commitment to seeing this initiative through, he is also requesting $375 million in FY 2001 in advance appropriations for these two elements of HIPC.

It is good accounting to write off debts that will never be repaid. And it is good economics to reduce debts when the effort to collect those debts creates such an overhang that you reduce he amount you will ultimately collect. It is also morally right - at a time when interest payments on foreign debt, in some of the poorest countries in the world, exceed their annual spending on education or health.

The choice we face is a simple one. We can do more to play our part in making HIPC happen. Or we can achieve less: HIPC can provide less support for market-led growth in the poorest countries in the world; it can free up fewer resources to invest in social priorities such as child immunization, clean water, and primary education in places where a child is more likely to die before the age of 5 than to go to secondary school; it can provide less effective support for better governance and wider participation in policy in these countries, even though we know that true growth and human development will not happen without them. We do not believe this is a difficult choice to make.

As you know, in his budget the President is also requesting Congressional support for an initiative that supports these same crucial goals - by promoting faster development and wider delivery of vaccines for infectious diseases. Diseases such as HIV/AIDS, tuberculosis and malaria are responsible for almost half of all deaths worldwide of people under 45. Providing vaccines to prevent these deaths is one of the most cost-effective ways there is of raising the well being and productivity of people in the poorest countries. To this end, the President is proposing:

-- First, a $50 million contribution to vaccine purchase through the purchase fund of the Global Alliance for Vaccines and Immunization (GAVI).

-- Second, that the World Bank and other multilateral development banks dedicate an additional $400 million to $900 million each year of their concessional lending to enhance efforts to immunize, prevent and treat infectious diseases in the poorest countries.

-- Third, a significant increase in funding for National Institutes of Health research on malaria, tubercolosis and HIV/AIDS.

-- Fourth, a new tax credit to help accelerate the development for these and other diseases, which would provide matching funds of up to $1 billion over ten years upon sale of a newly-invented vaccine.

I hope that you will continue to support us on every part of this full and urgent agenda. In the end, the only ones who can build a better future for these countries are their own governments and people. But as we enter this millennial year, we have the capacity, and the responsibility to play our part in helping them to help themselves. Again, thank you for what you have already done - and thank you what we are able to do in the months ahead, to make this historic effort a reality.

With that, let me hand over to our vital supporter in this effort - Chairman Leach.

(end text)

(Distributed by the Office of International Information Programs, U.S. Department of State.)

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