Clinton announces $70 billion debt relief proposal

President Clinton has announced a US initiative on debt relief. It recalls the pledge he made on his trip to Africa last year to “stay on top” of the debt issue. It also follows on from proposals by the German, British and French governments on debt relief – demonstrating the growing pressure of the international Jubilee 2000 movement in the run-up to the G7 Summit in Cologne. However, there are strict conditions attached to the Clinton proposal, which make it very unlikely that $70 billion will be available in the same time frame proposed by Gordon Brown.

The US proposal shows considerable overlap with other G7 initiatives (German, British, French), but in true poker style Mr Clinton selected a headline figure for the amount of debt relief—$70 billion—that trumps the existing offers on the table, notably the British Chancellor Gordon Brown's call to “wipe out $50 billion” by the end of 2000.

The announcement included Mr Clinton's strongest statement yet on debt: “One of the most serious issues we must deal with together, and one of truly global importance is debt relief.”

However, the amount pledged for debt reduction as a contribution from next year's US budget is small. Only $237 million is allocated for relief of African debt, a fall from last year's allocation of $245 million. Moreover the US allocation of a total of $420 million general debt relief only includes $120 million in new money – a tiny amount in the context of the USA's booming economy, which is currently providing $30 billion in receipts to the Treasury each week.

Clinton's $70 billion figure is also highly qualified. In his announcement, he said that it was vital to ensure “that no country committed to fundamental reform is left with a debt burden that keeps it from meeting its people's basic human needs”. In practice, this closely ties the US policy to controversial structural adjustment programmes, and risks many countries being excluded from the process. The proposal may also come under attack from other G7 creditors. France in particular argues that the costs of debt relief must be equally shared by creditors. The US have said that these plans will provide $70 billion in debt relief if all HIPC-eligible countries qualify. However, only $3 billion of this comes from a reduction in US bilateral debt, $67 billion from other creditors.

His proposals also included the call for 100% cancellation of aid debt, raising the reduction of Paris Club debts to 90 percent, call for new aid to be given in grants, support for gold sales by the IMF and action for post conflict countries. These proposals did not reflect new ground, but demonstrated the gradual shifting of creditors towards Jubilee 2000's position.

The US proposals have demonstrated that the HIPC initiative is not delivering the debt relief that is needed – even in the opinion of the G7 creditors. The international campaign is clearly having an impact. However there is still no attempt to realistically assess the needs of debtor countries, with the G7 and International Financial Institutions continuing to rely on controversial track records of structural adjustment before delivering debt relief.

Ann Pettifor, Director of Jubilee 2000 Coalition, commented: “We welcome the fact that the USA and other G7 countries are starting to recognised the severity of the debt crisis. However it is not enough to produce magic figures from a hat. The creditors instead need to look at the level of debt cancellation that is needed to bring effective resources into the areas that need it most – health, education and clean water. Only then can we achieve our goal of a fresh start to the new millennium.”

• Clinton's Speech