October 4, 1999

Unburdening the Third World

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    P resident Clinton made a dramatic and important announcement last Wednesday when he pledged to cancel the debt owed to Washington by the world's poorest nations, as long as they used the savings for health, education and other anti-poverty programs. His promise comes on top of an Administration pledge the week before to seek $1 billion for an initiative that would mainly retire poor nations' debts to international lenders. It is now up to Congress to provide the money, and other wealthy nations to match Mr. Clinton's commitment.

    The debt owed by the poorest nations -- most of the 36 countries covered by the President's announcement are in Africa -- helps trap them in misery. Most of these nations are paying debt service on loans from decades ago, when irresponsible lenders pushed profligate governments to borrow. Their creditors long ago concluded they would never be repaid, but some countries spend 60 percent of their budget to keep rolling over these debts. The burden has cut into spending on education and other social programs. In some countries in Africa, the entire health budget comes to only $6 or $7 a year per person.

    The World Bank and the International Monetary Fund began a program to try to reduce these debts in 1996. But only four nations have qualified -- Uganda, Bolivia, Mali and Guyana -- and it took years of I.M.F.-imposed austerity do so. A worldwide advocacy movement called Jubilee 2000, which includes religious groups, development organizations and artists, has led a campaign for more debt relief. At a June meeting in Cologne, Germany, the world's seven wealthiest nations agreed to forgive more of the debt owed by the poorest nations to rich countries and international lenders. The Cologne initiative was an improvement, but it still fell short of what poor countries need.

    Each wealthy country pledged to forgive some of the debt it was owed and pay for a portion of the debt owed to the World Bank. Governments are famous for failing to honor these commitments, but Treasury Secretary Lawrence Summers announced recently that the Administration would ask Congress for the full amount it had pledged. The President then followed with his decision to cancel the rest of the debt owed directly to Washington.

    Debt relief is a bargain for the United States, which had lent comparatively little to poor countries and has already written off most of the loans. The nations that could qualify for the President's plan owe the United States $5.7 billion, but canceling that entire amount will cost Washington only about $450 million because of earlier write-offs. Perhaps as important as Washington's debt forgiveness, President Clinton's announcement will challenge other nations to meet and go beyond their pledges in Cologne and cancel their own debts.

    A few nations will qualify for the debt relief by the end of this year, and Mr. Clinton said that three-quarters of the highly indebted countries could get relief next year. The international community must watch carefully to insure that the money saved does benefit the poor. A well-run program can make a big difference. Two years ago in Uganda, for example, half the children of primary-school age stayed home, mainly because their families could not pay school fees. But Uganda used most of its $40 million in debt relief to cancel those fees, and this year 90 percent of the children go to school. Now, it will qualify for another $40 million of relief. Congress should quickly approve the President's request, which is a pittance for America but can improve the lives of the most needy worldwide.

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