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The Jubilee Act for Responsible Lending and Expanded Debt Cancellation of 2007 For decades, many impoverished countries were spending billions of dollars each year repaying debts to donor countries and international financial institutions. Many of these loans were given for political reasons during the Cold War to prop up particular governments, and in many cases, were wasted by corrupt and unaccountable regimes. These large debts became a serious impediment to poverty reduction and economic development. Countries began taking on new loans to repay old ones.
Debt Cancellation Works
Mozambique used its debt service savings to vaccinate children against tetanus, whooping cough and diphtheria, as well as build and electrify schools.
Nigeria is using the $750 million in debt service savings from 2006 to train and recruit new teachers.
Cameroon used its debt savings to launch a national HIV/AIDS plan for prevention, education, testing and mother-to-child transmission abatement.
WHY DEBT CANCELLATION IS CRUCIAL
For the world's most impoverished countries, the cost of debt overshadows their ability to provide access to clean water, education and basic healthcare. Some countries spent as much as 25-30% of their annual budgets servicing their debt, more than was spent on education and healthcare combined. Debt cancellation would help ensure funds were used for poverty reduction, ultimately decreasing poor countries dependence on foreign aid. While the debt crisis is far from over, the U.S. and other industrialized countries have taken action to relieve debt burdens in many of the most impoverished countries and these commitments have proven effective. Debt relief has been extended through two initiatives: the Highly Indebted Poor Country (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI). However, only 21 of 40 countries that are eligible for the HIPC program have obtained 100% cancellation.
The majority of the 19 remaining countries have been delayed by the requirement that they comply with harmful economic reforms, including moves to privatize water or restrict spending on health care workers. For every dollar African countries receive in aid, they still pay out $2.30 in debt service.
KEY PROVISIONS OF THE JUBILEE ACT
Calls on the U.S. Treasury to support 100% cancellation of bilateral and multilateral debts
Calls for an audit of other outstanding debt claims, to determine the odious and illegitimate origins of impoverished country debts
Prohibits specific structural adjustment conditions including the imposition of user fees on health and education and mandated privatization of water
Contains a provision that governments should allocate 20% of their budgets on social services and development, including education and health care
Debt cancellation would be financed through the IMF and World Bank's existing resources to the extent possible
WHAT YOU CAN DO
Ask your Member of Congress to cosponsor the Jubilee Act (HR 2634) - sponsored by Reps. Maxine Waters (D-CA) and Spencer Bachus (R-AL) - which will extend debt cancellation without imposing harmful economic conditions on all impoverished countries that are required to meet the Millennium Development Goals (MDGs).