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September 30, 1999

Clinton Widens Plan for Poor Debtor Nations

  • President Clinton Announces American Effort to Forgive the Debt of Poor Nations

    W ASHINGTON -- President Clinton announced a major expansion on Wednesday in the American effort to forgive the debt of the world's poorest nations, saying those countries would not have to repay billions of dollars borrowed from American aid agencies if they could show the savings were being used for education and fighting poverty.

    Clinton's pledge to forgive 100 percent of debt of the world's most indebted nations -- mostly in sub-Saharan Africa -- expands a previous commitment by the United States in June to write off up to 90 percent of the money they owe. But the process may take years, and it is contingent on Congressional approval of a $1 billion debt-forgiveness program that Clinton sent to Capitol Hill last week as an amendment to his budget.

    The reality, Administration officials say, is that many of the countries that will benefit from the program never had much hope repaying more than a fraction of the $5.7 billion they currently owe the United States Treasury. In fact, much of that debt has already been written down on the Government's ledger books, reflecting estimates that the United States was likely to recover only pennies on the dollar.

    Thus, by the magic of Washington's budget rules, the $5.7 billion in debt can be wiped out with a Congressional expenditure of only $1 billion.

    Still, it is far from clear that Congress will go along with the move, especially as elections approach. Clinton made the announcement at the annual meetings of the World Bank and the International Monetary Fund here, just as the two financial institutions were putting the finishing touches on a $50 billion debt-reduction program that involves their own massive lending to poor nations. Clinton's announcement, during a brief appearance in a hotel ballroom where thousands of delegates from around the world were gathered, seemed to take many by surprise.

    "Today I am directing my Administration to make it possible to forgive 100 percent of the debt these countries owe to the United States," Clinton said, "when -- and this is quite important -- when needed to help them finance basic human needs and when the money will be used to do so."

    Later, speaking to reporters, Treasury Secretary Lawrence H. Summers said that Clinton's move had "symbolic importance that goes beyond its economic significance," especially in countries that are choosing between paying off their international loans or building more schools or hospitals.

    Clinton's program would initially aid countries like Uganda and Mozambique, which have gone the furthest in meeting requirements set in 1996 for debt relief. But ultimately it could help 34 more nations, from Tanzania to Zambia and Ivory Coast to Nicaragua and Honduras to rogue nations like Myanmar, if they are willing to meet the conditions.

    Clinton did not extend his spirit of forgiveness, however, to one country deeply indebted to and in trouble with the I.M.F.: Russia.

    On Tuesday the head of the fund, Michel Camdessus, said that "it would be the height of irresponsibility to turn our back on this great nation; we will not do that."

    He urged that all the allegations of misappropriation of funds should be weighed against seven years of "real progress," and praised Russia for continuing to develop a "modern market economy." Camdessus' comments, and the absence of balancing words of warning to Russia, infuriated some White House officials who felt it undermined their effort to send a stern message to Moscow.

    Clinton talked Wednesday about Russia only as an example that the Fund must heed as it reviews "its procedures and controls to strengthen the safeguards" on use of its money.

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