Transcript of a Radio Interview on International Debt Relief
October 10, 2000
Tony Boote, Policy Development and Review Department, IMF
John Ruthrauff, Oxfam America,
and Whitney Debevoise, international finance attorney
The Diane Rehm Show
October 10, 2000
DIANE REHM, Host: International lenders are facing increasing pressure to forgive billions of dollars in loans. Supporters argue that interest payments prevent many of the world’s poorest countries from sharing in the current era of economic prosperity. Others contend that debt relief without key conditions could lead to additional hardships for impoverished people around the world. Joining me in the studio to talk about debt relief, Tony Boote of the International Monetary Fund, John Ruthrauff of Oxfam America, and Whitney Debevoise, an attorney who specializes in international finance.
Good morning to all of you. Tony Boote, if I could start with you, talk about the particular loans that are at issue here.
TONY BOOTE, International Monetary Fund: There are two major types of loans, Diane. There are loans from what are called official bilateral creditors, which are loans from export credit agencies such as the US Exim Bank and also aid agencies which have been made to the poorest countries. And the second type of loan is loaned by multilateral institutions, international financial institutions such as the World Bank or the International Monetary Fund, the IMF, and some regional multilateral development banks such as the Inter-American Development Bank. There also used to be — and I use this term because they’re really now in the past — commercial loans. Because most of the commercial loans of the poorest countries have been forgiven, reduced. That’s not really a major problem now.
BOOTE: Can I add one other thing?
BOOTE: And I want to put it in context. In terms of your introduction, I think the important thing that should be stressed is that action is already being taken. There’s something called the Heavily Indebted Poor Country initiative under which we have already agreed to reduce debts of ten countries by $17 billion US dollars. And we’re in the process of trying to do another ten by the end of this year in a way under which debt relief if provided in a way that it’s made effectively for poverty reduction.
REHM: I guess the question is, is there now some consensus, John Ruthrauff, about reducing or eliminating these loans.
JOHN RUTHRAUFF, Oxfam America: Yes, Diane. Beginning in the early nineties, a number of non-government organizations around the world, including Oxfam and governments, began seeing that it was impossible for these countries to pay back their loans. And now we have, I think, agreement by the World Bank and the International Monetary Fund that something has to be done.
RUTHRAUFF: The loans are so great and the countries incomes are so low, you can’t have an international loan with pesos or with the local currency. You have to pay it with hard currency.
REHM: What countries are you specifically talking about?
RUTHRAUFF: Well, virtually all of the countries that are in the highly indebted poor country initiative that Tony mentioned are countries where their currencies are not used on the world market. They have to use US dollars or British pounds or Japanese yen. And they can’t generate that simply by local work. They have to be able to export and they have to be able to sell goods on the market or they have to be able to get loans from abroad.
REHM: But I gather, Whitney Debevoise, that there is some disagreement among finance ministers around the world as to whether these loans should actually be forgiven.
WHITNEY DEBEVOISE, International Finance Attorney: You’re right, Diane. Essentially, we’re talking about taxpayer money. And, naturally, when you get into the political arena and taxpayers money, there are going to be differences. Some finance ministers feel that the money should be made available for debt relief, but only when certain conditions are met by the debtor countries.
REHM: Such as?
DEBEVOISE: Such as improving their governance at home, fighting corruption, conditions with respect to the management of their budget, observing good fiscal practices.
REHM: But who makes those decisions? Is it that there’s oversight on the part of these organizations or on the part of the US towards those countries? Who makes those decisions?
DEBEVOISE: This is a big question. The multilateral financial institutions such as the IMF and the World Bank and regional development banks attempt to design conditionality packages for the availability of this type of relief. And there has been a recent effort to design a system whereby the countries themselves can come up with an approach to sorting these things out. But this is all still up in the air.
REHM: Thirty-three of countries that you talk about are, I gather, in Africa, Mr. Ruthrauff.
RUTHRAUFF: Originally, yes, there were thirty-three in Africa. The number is slightly smaller now because of various changes. But, yes, most of them are in Africa. Virtually ninety percent, I think, are in Africa.
REHM: But what about this question of conditions, Tony Boote, and those, for example, placed on these countries by the IMF, the International Monetary Fund? How are the decisions made as to whether these conditions are being met?
BOOTE: The decisions are made, Diane, by the IMF board on which all of our member countries including the US and other major shareholders are all represented. What I’d like to stress is that the conditions are really designed to make sure that there is effective use of scarce resources, taxpayers money, for the goal we all share of poverty reduction. That’s what we’re trying to do here. That’s what the conditions focus on. And I particularly agree, for example, with Whitney when he mentioned one of the first issues was an important issue of governance. I don’t think one can get away from that. One of the tricky issues we’re trying to grapple with now with several of the countries is, how can one assure the money is being used effectively for poverty reduction and it is not being used for corruption or white elephants or other things like that. And its particular interest at this point in trying to develop systems, in trying to have systems which tell you, this is what the debt relief was and this is how it’s being used, i.e. fiscal reporting or tracking systems.
REHM: So as you use these fiscal reform tracking systems, I’m still asking who is making the decisions as to whether these changes, these reforms are actually being made.
BOOTE: Well, ultimately, the Bank and the Fund, the World Bank and the IMF boards have to decide whether they think that the conditions that are set down in advance, for example, for irrevocable debt relief have been met. That, in a sense, is the international community asking itself the question: do we have assurances that this money that we are providing is going to be well used.
REHM: Why wasn’t the debt repaid to begin with? You talk about the fact that we’re dealing with poor countries in poor areas of the world who are not gleaning results from the worldwide economic boom. What has happened to the money that has been loaned? Mr. Boote?
BOOTE: That’s a very good and very wide question. But, in a sense, ultimately what’s happened is most of the money was loaned to lead to higher production, better exports--
BOOTE: --through a series of projects, through a series of general loans from IMF supporting imports to the countries which were supposed to develop productive capacity. Clearly, as you can see from the way that I’m answering your question, the answer really is that money was not productively, effectively used.
REHM: Why not?
BOOTE: Because of a series of issues, but probably, ultimately because policies were not as effective, were not designed in the right way, they didn’t lead to the results that everybody wanted. You also have to add that these countries have been hit by a series of rather serious shocks like wars. In many places conflict is a big issue. Governance, as we’ve all mentioned, is a major issue. And commodity prices is another issue. But, if you like, economic mismanagement plus shocks was the main reason that the money has not been repaid.
REHM: Is economic mismanagement a pseudonym for theft, for some individuals who use that money for their own purposes? Some governments which use the money to expand their control rather than to use it for medicine and the poor? Mr. Ruthrauff?
RUTHRAUFF: I think it’s clear, if we look at history, that heads of countries like Suharto, Marcos, Samoza in Nicaragua have used some of those loans for their personal benefit and have not been benefiting the poor people in the country. Our belief is that the Oxfam and other organizations working on this believes that the local organizations and the local populace — what’s called the civil society — the non-governmental side, the non-army side of the country needs to have more influence into how these loans are spent.
REHM: And joining us now by phone is Treasury Secretary Lawrence Summers. Good morning Mr. Secretary. Thanks for joining us.
LAWRENCE SUMMERS, US Treasury Secretary: Good to be with you Diane.
REHM: Please talk about what you believe should be done as far as loans and debt forgiveness.
SUMMERS: There’s a basic principle here. We are the richest country that there has ever been. We made mistakes in the past of loaning money badly to countries that are desperately poor. Countries where a fifth of the population has AIDS; countries where the average spending per person on health care is less than five dollars; countries where a child born today is more likely to die before the age of five than to go to secondary school.
REHM: I’m not questioning why the loans were made. But now, you have a situation where there seems to be some consensus on loan forgiveness.
SUMMERS: Absolutely, Diane. That’s what I was getting to. These loans were mistakes.
SUMMERS: To try to collect these loans from countries that are so desperately poor--
REHM: Are you saying instead--
SUMMERS: Is wrong as morality.
REHM: Are you saying that these should not have been loans but grants?
SUMMERS: Probably in the past it would have been better if, in some cases, they hadn’t been made at all because they were made for geopolitical reasons during the cold war, or they were made when we looked the other way to corruption of the international institutions. Probably, in some cases they should have been grants. But we can’t change the past. What we can do in this millennium year is prepare for the future. And the right way to do that is for us to forgive our debt and to participate with the international institutions in forgiving their debt for these poorest countries when, and only when, we can be sure that the conditions are in place to assure that the savings of interest and principal will go into healthcare, will go into education, will go to meet key social needs. That’s what the international agreement that’s been worked out has sought to do. That’s what the United States has been championing.
REHM: We have to take a short break here. Secretary Summers, I hope you can stay with us. I want you to talk more about what this loan forgiveness will mean to those countries and to US taxpayers.
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REHM: Welcome back, as we talk about international debt relief. In the studio, Tony Boote of the International Monetary Fund, John Ruthrauff of Oxfam America, and Whitney Debevoise, an attorney who specializes in international finance. On the phone with us is Lawrence Summers, Secretary of the Treasury. We do invite your questions, comments: 1-800-433-8850.
REHM: Mr. Secretary, to what extent, if these loans are forgiven, can there be assurance than any further loans which I would assume would be made, that those loans would be used differently and more effectively?
SUMMERS: I think you’ll have very strong assurances of that kind. You’ll have them in the form of requirements that there not be new interest-bearing loans for some period after the loans are forgiven. You’ll have them in the form of careful conditionality that assures that there are satisfactory policies in place and you could see the tangible benefits of the loan reductions, of the debt reduction. You’ll have them in the form of the way in which new assistance programs are being devised to put more emphasis on working through community organizations to use, where possible, grants as a tool of finance to work with civil society in these countries, rather than simply working through the governments. It’s very important there be conditionality associated with--
REHM: Well, that’s the question I have. To what extent do you believe that US trade policies have contributed to this continued indebtedness, and how might that trade policy change to accommodate new loans.
SUMMERS: The US has, probably, the most open market in the world of the major industrialized countries. We took a substantial step earlier this year with the African Growth and Competitiveness Act that substantially reduced US trade barriers to some of the poorest countries in the world, and therefore will make it possible for countries in Africa and in the Caribbean to export more than they otherwise would have been able to which, of course, will help their economic viability. Because trade, not aid, is the best way for any country to benefit. So trade is a piece of the equation. But the fundamental thing here-- you know this is one issue that in my lifetime I can remember where economists and evangelicals have come together. It’s bad economics to try to collect debts in a situation where they can’t be paid.
REHM: Whitney Debevoise, from your point of view, what are the major concerns about debt forgiveness.
DEBEVOISE: I would say that the question you raised about trade policy is an important question. I think that it does no good to eliminate debts if countries cannot subsequently grow their economies. And on of the fastest ways to do that is through exports. We have a current example, just a small microcosm of what’s going on. After five years of examination, the Agriculture Department has determined that it’s safe to import citrus into the United States from Argentina. Twenty million dollars a year worth of citrus. And one senator from a far western state has introduced legislation to try and reverse this situation. We have to get over these types of very small, minute interest groups affecting large populations.
REHM: Now, spell that out. You’re saying that with this importation of citrus that that would affect the economy of one western state. And thereby that senator is trying to make sure that that citrus doesn’t come in, which in turn affects the exportability of that small country.
DEBEVOISE: That’s right. And this would really be a drop in ocean for the economy of this particular state. But it also affects the economies of other states here in our country. And, in fact, some eastern states which run the ports which would import this fruit, have made their views known on the Hill. I think the larger point is that we need to continue to press hard to liberalize trade on a global basis, but that effort really begins at home with an opening of minds.
REHM: We talking, I gather, Secretary Summers, about a $200 billion debt forgiveness. Is that correct?
SUMMERS: Ultimately, the debt that could be forgiven could be that large. Although the cost to the United States would be vastly, vastly, vastly less, because there are many creditors of these countries, because the debt in many cases is concessional, and so the present value of cost is reduced because the international institutions are significant parts of the creditors. So we could take a major step to provide new opportunities for these countries with a congressional appropriation this year that would be about a tenth of a percent of the federal budget.
REHM: Tony Boote?
BOOTE: Two points, Diane. I think you raised a very important point. But on the overall debt. The overall debt is about $200 billion. The program, the HIPC initiative program I described before, together with other things that are happening, is estimated to reduce that debt by around about two-thirds. So reduce it by two-thirds. Second point, I’m very happy to very much agree with you and with Whitney raising the trade issue. Because, for example, the best estimates that we have of the effects of current barriers to trade from all developing countries — I stress that — if you reduce current barriers by a half, that would benefit trade to all developing countries by more than $100 billion. So that gives you an idea of the magnitude here. Trade is extremely important. I think it’s very good that you brought that into the issue.
REHM: John Ruthrauff.
RUTHRAUFF: I’d like to go back to the cost to the US taxpayers because that’s, of course, of key interest to many people. And, in fact, this is a very good deal for the United States. The actual cost — Tony and the Secretary were talking about the overall debt — but that’s been discounted. The actual cost is $28 billion of which we pay less than four percent, a share that the United States has committed--
REHM: What do you mean it’s been discounted $200 billion down to $28 billion? How do you get there?
RUTHRAUFF: Tony may want to explain this also. But, basically, the debts are not being paid and so, they’re not worth their face value because no one can collect them. But Tony may want to make a more detailed answer on that.
BOOTE: I can if you want, Diane. It’s fairly complicated. But you start off exactly as John has said. These debts are concessional so in present value terms, they’re worth less. Then, the $28 billion he quoted was a present value number. If you compare it to the $200 billion in nominal terms, you’re talking about debt relief of maybe about 50, 60 under the HIPC initiative. If you talk of other mechanisms, which bilateral creditors — remember I referred to the bilateral creditors before — they take a whole series of actions, as well, which very much reduce their claims. That’s how you get to this two-thirds reduction from the 200.
REHM: All right. Secretary Summers, do you want to make any final comments? All right. He’s gone. Thanks so much to Lawrence Summers, Secretary of the Department of the Treasury.
Let’s open the lines now: 1-800-433-8850. First to Ann Arbor, Michigan. Good morning Barbara.
BARBARA, Caller: Good morning. Thanks for taking my call.
BARBARA: I’d like to bring up a little bit about what structural adjustment programs are doing in these countries, especially with regard to education and health care, also. But, what we’re looking at is, with cutbacks in funding for education, that really means that we are hampering the futures of these countries. Ten years from now, where are they going to be if the children in those countries are not educated. There’s a severe long-term problem, at least for the next twenty years, if we’re not letting countries develop their education systems. And the other thing, also, is that healthcare when we have so much AIDS. We have so many countries that cannot afford the healthcare for AIDS victims, and the workforce is declining, which also hampers the ability to pay any kind of debt load.
REHM: So the question become, Mr. Ruthrauff, how much money goes to education, how money goes to healthcare. How is that designated as far as each country is concerned?
RUTHRAUFF: The position of Oxfam, as well as a broad range of organizations including Jubilee 2000, is that the money that’s saved from the debt relief should go into a poverty reduction fund specifically for education, healthcare, rural access roads, things that will help people work their way out of poverty.
REHM: All right. Thanks for your call. Do you want to make a comment, Tony?
BOOTE: If I could. I think Barbara has raised a very important issue. I very much agree with what John said as far as the future is concerned. But I want to say something about what’s happened in the past. There is a sort of myth out there that as part of fiscal adjustment, which is often required under IMF- supported programs, we tell countries to cut health and education spending. That isn’t true. Under the programs we’ve supported over the last decade, health and education spending have risen. In the case of health, by about 4% a year in real terms, in education about 2% a year. So we’re making sure that, as Barbara rightly referred to these priorities of the future, that the money is spent on that. And we very much want to, as part of the provision of debt relief now, ensure that exactly the priorities that John talked about — health, education, but also rural infrastructure, job creation which is crucial in attacking poverty, are met by the countries.
REHM: All right. To San Antonio, Texas. Hi there Robert.
ROBERT, Caller: Good Morning. I would like to thoroughly disagree with what Secretary Summers said, and the other gentleman. I’ll make just three quick points. Most of the loans that have gone to developing countries have been taken by corrupt leaders and put in Swiss banks, Bahamian banks and Cyprus banks. We should try to recover that money from those banks before we forgive the loans to the countries. Now American taxpayers have been footing the bill for forgivable loans since 1941. And it seems the bureaucrats want to spend taxpayers money like confetti. And as far as trade, the United States has the largest trade deficit per capita, dollars, how ever you want to count it — five trillion dollars — with the rest of the world. If we keep buying more than we sell, we’re going to be bankrupt on the international market. I’d like your guests to comment.
REHM: Three comments then. Whitney Debevoise.
DEBEVOISE: It certainly is the case that much money has been taken by corrupt leaders. Whether it’s possible to recover it at this point or not, I think is a different question. Certainly to the extent that it still is in the banks in Switzerland, yes. But a lot of that money has been spent and squandered elsewhere. The trade question, I’ll repeat what I said earlier. It’s a question of openness on a global basis. And so it’s not just a question of opening our markets, it’s a question of opening markets worldwide.
REHM: This question about corruption and taxpayer money is going to continue. Secretary Summers, all of you, can explain this and yet, the ordinary taxpayer shares Robert’s perspective. That so much corruption has taken place, that the US, however small a percentage worldwide, is losing here. He talked about the trade deficit. Is this going to make it worse? You know, you’ve got lots of questions here. Mr. Ruthrauff?
RUTHRAUFF: We agree with Robert in that the stealing of the money by some of the corrupt dictators is something that we have denounced for many years. And that is a major problem.
REHM: You can denounce it but how do you recover it?
RUTHRAUFF: I think that it has to be done through conditioning of the loans that the governments have, what the World Bank and the International Monetary Fund call a governance issue which is, in fact, anti-corruption measures to be able to stop it. You have to be able to say to the countries that if they cannot handle the money honestly and appropriately, that they can’t receive it.
DEBEVOISE: I think we have another question that we should ask Robert, which is how much taxpayer money is he willing to devote to the fight to recover this money. The Justice Department in Washington has an Office of International Affairs that works on these matters. And that office has approximately 40 attorneys. In the last five years, the United States has signed 47 mutual legal assistance treaties with other countries to help recover proceeds of corruption and they have not increased the budget for that office one dollar. In fact, the budget for that office has been reduced. So there we have the question of allocation of taxpayers money.
REHM: And the question becomes, how much have those forty attorneys recovered? How successful has that office been? Should the US taxpayer put more money into an office if, in fact, there has been very little tangible result?
DEBEVOISE: You will have to ask a representative of the Justice Department to come on your show to answer that question. But I can tell you that I work with other countries that are attempting to recover money from corruption. And in the case of one of my sovereign clients, we have recovered substantial sums from various fraud schemes that were undertaken. So this has the potential for a big return.
REHM: To Bruce Wilkinson at World Vision. Good morning to you sir.
BRUCE WILKINSON, World Vision: On Monday I was actually at the meeting with President Clinton and principals around this issue. And the real question and comment that I’d like to hear us speak about is really the morality of the debt relief. Just rise above the bickering of the economics, the social agendas, the political agendas. And, really, there is a higher level morality to this with the United States. Of course, it’s 1/500th of our budget in terms of what we’re contributing which will free up enormous resources for these developing countries. And in that meeting it was a fascinating look into, is this really a higher level foreign policy agenda that should be emerging with the United States experiencing such economic growth. And what is our responsibility in our foreign policy to actually elevate this issue for developing countries.
REHM: We’ve got to take just a short break. When we come back we’ll talk further about this issue of morality and US responsibility.
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REHM: Bruce Wilkinson, let me come back to you on the question of your meeting at the White House and go from that to the issue of morality that you raised and how much congressional support there is for forgiveness of these loans.
WILKINSON: In the meeting at the White House, it was actually the cabinet room level and it was fascinating to have Treasury Secretary Summers there, Gene Sperling, John Podesta was there. But then you had members from both sides of the aisle. Congressional members both from the more conservative side, and also from the more liberal side. And all agreed that debt relief really is a key issue. It’s an issue of moral import. And World Vision was there representing the NGO community. It really was a fascinating, eclectic group. Pat Robertson was there; Bono from U2. There were religious leaders from the Catholic, from Episcopal, from the Jewish segments. And it really became a higher level discussion around our responsibility in this post cold war world of American leadership, in terms of alleviating poverty, which one step is in debt relief. And because it’s such an issue which really can receive wide public support, noting members from Congress from both sides of the aisle. So I do believe there was another level of support coming out of the Administration, out of Congress on this.
REHM: I appreciate your joining us this morning. Thanks for calling.
WILKINSON: You’re welcome.
REHM: And let’s go to Jason in Lorraine, Ohio. Good morning to you sir.
JASON, Caller: Good morning. Thank you for taking my call.
JASON: My question aims more at the making of the loans. You mentioned earlier that there were several countries that weren’t able to meet the conditions that the Congressmen want to put on the loans. My question is what stops us from creating an organization to disburse the funds inside the country, say to create IMF plants, or IMF hospitals, or IMF schools organized by the IMF or by our country to disburse the funds and thereby getting the funds directly to the people rather than working through the governments that may by corrupt or may not have efficient practices?
REHM: What about that, Tony Boote, setting up organizations within each of these countries as oversight mechanisms to ensure that the money to the poor, to education, to healthcare.
BOOTE: Well, Diane, you may want to ask John as well. But actually, quite a lot of aid is provided through NGOs who have local offices who do themselves--
REHM: Non-governmental organizations.
BOOTE: Non-governmental organizations, like Oxfam, who in their local offices do help distribute money directly to the poor. But I don’t think your listener should think that’s a very good solution, because it’s really not. The reason is, what you’re really trying to do is have effective use of all of the resources available to these poor countries to achieve poverty reduction. If you try to set up parallel governments, parallel organizations, you’re effectively undermining their current structures. And what that will mean is, they will continue to be corrupt, waste money and not make the best use of all of the resources that they have. So I don’t know that’s a very good solution. In deed, what we’re trying to do is move very much more to country ownership of overall strategies designed to bring in all of the elements you need to do, to improve the lot of the poor in countries.
REHM: But is there risk here, John Ruthrauff, of repeating the same mistakes?
RUTHRAUFF: There is that risk. But I think that I would agree with Tony that we have to hold the governments accountable. I think that it does take more transparency, which is an international word meaning more information. And so Oxfam supports more information from the International Monetary Fund and from the World Bank going to the local organizations in those countries. They have to understand what their governments are doing. The governments are signing these loans that last for 20, 30 years, and sometimes even the congress don’t know they’re doing it. And most times the local population doesn’t know. So what we need is a broader group within the local countries. They have to be able to hold their own governments accountable.
DEBEVOISE: John, isn’t that a sort of US or Western European-centric view of the world. The HIPC program depends on the development of so-called poverty reduction strategy papers, country by country. And the magic code word there is the involvement of civil society to provide inputs in the development of these papers. But you just said that in many places the congress doesn’t know what’s going on. Some of these countries don’t have congresses, and we’re saying that they have to have congresses. If they don’t have congresses they can’t get debt relief. Don’t you think that we have really taken a rather narrow view of this?
RUTHRAUFF: I believe that the local population, whether they have a congress or don’t, but the local population, the ones who ultimately are going to have to be repaying these debts have to understand what’s going on. And that has to get below the level of the finance minister and below the level of the head of the country.
DEBEVOISE: But aren’t you really saying that unless that unless they have a completely functioning democracy, which is the mirror of what we have in the United States, it’s not going to work? A previous caller called in and asked about education budgets. Education budgets in some countries are very large because they are used as political favors to friends of politicians. And thousands and thousands of people are employed by education ministries. They may not be delivering effective education. And when you cut education budgets, then people from the outside yell and scream. But, in fact, some such cuts, if they are merely eliminating unnecessary people may be contributing to fiscal stability in the country, reducing inflation which is the most insidious tax on poor people in the history of mankind. In Brazil, for example, with the elimination of inflation, twelve million people have moved from poor to lower middle class. Is that something that we ought to be promoting?
RUTHRAUFF: I think in the case of having a boiler educational system, the parents of the kids who go to those schools will know that. What we are working for is so that the people at the level who use those services have some influence over them.
DEBEVOISE: But how can someone sitting in Washington decide whether the parents are in a position where they have the power to make that decision?
BOOTE: Can I come in here, Diane? I think we’re charactering a little bit here. I don’t think anybody sitting in Washington is deciding anything. I think what’s happening is, we’re trying to encourage countries to have greater participation by civil society, but very much reflecting their own cultures, their own traditions. There’s no blueprint that anybody sitting in Washington is running. I think the other point I’d make is that there’s a general trend in these countries to create a democracy, and I think one can encourage that as part of this process. But, I think otherwise in the sense what we’re trying to do is related to the very key question of governance, trying to make sure that there are processes in place, in country, to make sure that debt relief is used effectively, not wasted.
REHM: To South Bend, Indiana. Good morning Dan.
DAN, Caller: Hi, thank you. I would just like to point out-- I never thought I would quote George W. Bush, but I think there’s some fuzzy math going on on the part of the IMF in reference to the HIPC initiative. I’ve worked in Bolivia with the Jubilee 2000 campaign over the last few years. And I think policies of the IMF have failed in many places. And now it’s the IMF who claims that they should be deciding whether or not a country has a good plan in place to use money that would be saved in debt relief. They also talk about the HIPC initiative as if it’s going to save these countries, but there are people in the Jubilee campaign who would say that the amount being considered for the HIPC initiative will not break the cycle of what is, in reality, indentured servitude to pay off the debt. These countries have already paid their debts, but all of their payments have gone to high interest which have increased since the loans were taken. Also, they talk about the corruption, but it goes beyond corruption with these governments. It gets at the very idea of democracy. Now, in order to alleviate the debt, people are talking about these countries needing to be more participative and civil society needing to be part of the process. But many of the debts grew when the money was loaned to non-elective, military dictatorships as in the case of Bolivia. And now Banzer, who is the dictator who started the bulk of their national debt in Bolivia, is the president. And he was elected in great part because people remember that there was money when he was president.
REHM: Tony Boote, do you want to respond?
BOOTE: I’m not an expert on Bolivia. I can try and respond a little bit, Diane. I think the macro economic performance in Bolivia over a decade is actually quite creditable. There has been quite a reduction from hyper inflation. And that’s not so bad. But the real problem is the indigenous peoples didn’t benefit from this. And now, as part of this overall new approach, the government is having a process of participation, of consultation with those peoples to see how they can benefit from overall economic performance in Bolivia.
REHM: He talked about interest rates. He talked about money going into the hands of corrupt leaders. The question still remains: the timing, which countries, how much debt is forgiven and how these questions of whether the money is used appropriately get resolved. Is the IMF going to make these decisions about which countries get them, how the money is spent? And the new interest rates that are going to be involved in new loans, who’s going to decide all this? Whitney?
DEBEVOISE: The interest rates become a factor when the loans are originally taken at floating interest rates rather than fixed interest rates. The most significant determinant of floating interest rates for dollar denominated loans--
REHM: Don’t get too complicated.
DEBEVOISE: -- are interest rates set here in the United States by the Federal Reserve Board. And the US economy is the major driver and determinant of that. But we can’t forget, of course, that we’re part of the global economy now. But that really is where it lies, is Mr. Greenspan.
REHM: John Ruthrauff?
RUTHRAUFF: I think we need to deal with the issue of delay of getting these loans.
REHM: The timing.
RUTHRAUFF: The timing of them. In the United States Congress they’re considering appropriations of $435 million and allowing the IMF to sell a portion of their goal. This has to be moved this year because other countries are waiting for the United States to come through.
REHM: How likely is it that those decisions are going to be made before the end of the year?
RUTHRAUFF: They will certainly be made one way or the other. They will either allocate less than the $435 million that we have committed for two years, or they will allocate less. So it is important for the Congress to know that this is something that has to be done now, not in 2001 or 2002.
REHM: Do you believe it has to be done now, Whitney?
DEBEVOISE: I believe it would be important to move forward with this initiative, yes. And I think the more important question on timing — that is important; we have to have the relief — but the countries also have to proceed with the development of their poverty reduction strategy papers, and the institutions have to be flexible about the requirements for those papers.
REHM: Tony Boote, last comment.
BOOTE: We are being flexible. We’re focusing on what is required to make sure that the savings from debt relief are used effectively for poverty reduction. We’ve done ten countries under the initiative so far this year. We have the objective of doing another ten. That will be roughly two-thirds of the program done by the end of this year.
REHM: And suppose the Congress does not act?
BOOTE: We’re still aiming for that objective. It’s crucial that the Congress acts, not only because we need the American money for the financing, but because of what we call burden-sharing. Action by others depends on what the US does.
REHM: So we are left with as much debt on the part of these nations, and we shall hope that the new group of loans being made, are made in a way that these countries can deal with in a better fashion.
Thank you all so much for joining me. Tony Boote of the IMF, John Ruthrauff of Oxfam America, and Whitney Debevoise, an attorney who specializes in international finance.