*EPF106 02/07/00
Fact Sheet: Clinton Budget Requests for Debt Relief Funding
(Seeks more funds for HIPC, bilateral debt relief) (750)

The U.S. Department of Treasury released the following fact sheet on the Clinton administration's requests for funding for debt relief initiatives for the poorest countries contained in the fiscal year 2000 emergency supplemental appropriation request and the fiscal 2001 budget proposal.

(Note: In the following text "billion" equals 1,000 million.)

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THE ENHANCED HEAVILY INDEBTED POOR COUNTRIES (HIPC) INITIATIVE:
FY 2000 AND FY 2001 BUDGET REQUEST FACTSHEET

In the FY 2000 budget, Congress made it possible for the international community to move forward with the enhanced HIPC Initiative to provide broader, deeper and faster debt relief to countries committed to economic reform and poverty reduction.

-- Broader debt relief: As many as 33 of the world's poorest, most heavily indebted nations will benefit (up from 20 under the original HIPC Initiative).

-- Deeper debt relief: The enhanced HIPC Initiative may reduce the debts these countries owe by $90 billion, over 70% of their total debt, and a lower indebtedness threshold provides deeper debt relief for all eligible countries. The U.S. will forgive 100% of the debt these countries owe, and urges other countries to do the same. Canada, Britain, and France plan to follow the U.S. example.

-- Faster debt relief: Debt service payments are reduced during the first stage of program (after the decision point) and floating completion points permit faster debt stock reduction.

FY 2000 budget. Congress appropriated funds that covered roughly one-third of the direct U.S. costs of the enhanced HIPC Initiative and authorized support for measures that cover a substantial part of costs of the IMF. While these funds are a credible first step, they cover only a fraction of the total funds needed to provide the promised debt relief. Unless Congress finances the U.S. fair share of the program, the enhanced HIPC Initiative will only be able to provide debt relief to a limited number of countries.

FY 2000 supplemental budget request:
-- $210 million appropriation for the HIPC Trust Fund. The HIPC Trust Fund helps regional development banks and other multilateral institutions meet their costs of debt reduction, after they have made full use of internal resources. Participation by all creditors is key to ensure that savings from debt relief generate sufficient resources to address poverty reduction effectively.

--Authorization for a $600 million contribution to the HIPC Trust Fund over the next three years, including the $210 million appropriation request for FY 2000.

-- Authorization that will allow the IMF to cover its cost of debt relief by permitting full use of the income on proceeds from IMF off-market gold sales.

FY 2001 budget request:

-- $225 million ($150 million for the HIPC Trust Fund and $75 million to reduce bilateral debt).

-- $375 million in advance appropriations ($240 million for the HIPC Trust Fund for FY 2002 and $135 million for bilateral debt reduction costs for FY 2003).

As many as eleven countries will begin to benefit from debt reduction by the spring of 2000; Bolivia, Mauritania, and Uganda will be the first three, but will fully benefit only if the U.S. contributes its full share. Debt relief will promote economic growth and reform in these countries, and the savings from debt relief will help these countries fight poverty by freeing resources to address priority social concerns, such as child immunization, clean water, and primary education. Under the enhanced HIPC initiative, the United States would reduce the debts of these three countries by about $75 million. Our participation could leverage more than $2.2 billion in total debt reduction, in today's dollars. This is on top of about $1 billion in debt reduction for these countries from original HIPC debt relief. The original and enhanced HIPC Initiatives can produce annual savings of roughly $175 million for Bolivia, $20 million for Mauritania, and $80 million for Uganda that can be used to address critical social needs.

If the U.S. does not contribute its share to the HIPC Trust Fund, many countries will be denied desperately needed debt relief. This will especially hurt HIPCs in Latin America (Bolivia, Guyana, Honduras, and Nicaragua). Due to the severe funding constraints of the Inter-American Development Bank, debt relief for these four countries is a near impossibility without our contribution to the HIPC Trust Fund.

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