Debt Relief Increases Impact of US Efforts to Fight HIV/AIDS
President Bush has done more than any recent president to dramatically increase US foreign aid. The $5 billion increase in US foreign aid over the next 5 years for countries who qualify for the Millennium Challenge Account and $10 billion increase announced as part of the President's AIDS initiative a welcome improvement over years of declining US foreign aid.
Both the House of Representatives and the Senate are also considering legislative initiatives to increase US foreign aid and address the global HIV/AIDS crisis. But without more debt relief, the new US foreign aid increases and the fight against AIDS will not be as effective.
More Debt Relief Will Increase Impact of AIDS Efforts
Although the 27 HIPC countries' annual debt servicing payments have been successfully reduced by about $1 billion, together these countries are continuing to pay $2 billion a year on debt servicing payments to their creditors. These payments use scarce revenues that could otherwise be used for additional spending on health and education. US foreign aid goals and the fight against HIV/AIDS could be achieved more effectively if more debt relief was made available than in the current HIPC program.
Why should new increases in US foreign aid be used to simply help poor countries repay old loans to France, Germany and the World Bank?
In January 2003, President Bush proposed the Emergency Plan for AIDS Relief, and pledged $15 billion over 5 years to fight AIDS ($10 billion in new money.) The President's vision of a more effective fight against HIV/AIDS will be undermined by the continued loss of valuable revenue due to debt servicing payments. The US announced that 14 countries will be the targeted beneficiaries of an additional $8.5 billion to fight HIV/AIDS. However, according to the World Bank, in 2001 alone these same 14 countries paid $9.1 billion in foreign debt payments.
14 Priority
AIDS Countries
total external
debt servicing in 2001
1. Botswana
2. Ivory Coast*
3. Ethiopia*
4. Guyana*
5. Haiti
6. Kenya
7. Mozambique *
8. Namibia
9. Nigeria
10. Rwanda*
11. South Africa
12. Tanzania*
13. Uganda*
14. Zambia*
Total
$ 52 million
$ 618 million
$ 184 million
$ 57 million
$ 26 million
$ 464 million
$ 120 million
n / a
$ 2,562 million
$ 43 million
$ 4,355 million
$ 217 million
$ 105 million
$ 337 million
$ 9.1 billion
( * HIPC countries)
Therefore, although the President's AIDS Initiatives offers $8.5 billion over five years in new aid to these 14 countries, the positive impact of this increase will be dwarfed by the much larger flows of revenues spent on debt service each year.
Examples of How Debt Relief Helps Fight AIDS
In dozens of countries, debt relief savings have helped to fund the fight against HIV/AIDS. Here are only a few examples:
Uganda, the first country to receive debt relief used $1.3 million of its debt savings specifically for their national HIV/AIDS plan. This investment played a key role in the government's success in reducing HIV infection rates by 40%
Cameroon received a $114 million cut in debt service. With help from debt savings, a comprehensive national HIV/AIDS strategic plan was launched. The plan included promoting behavior change among young people, making voluntary testing and counseling widely available and preventing HIV transmission from pregnant women to their babies.
Malawi received a cut in debt service of 30%, or $28 million. These funds financed the purchase of critical drugs for hospitals and health centers, hiring extra staff and support in primary health centers, and training new nurses.
Support Legislation to Provide Deeper Debt Relief
There is currently a legislative initiative in Congress (H.R. 1376) to increase the amount of debt relief offered in the HIPC program by canceling an additional billion dollars of debt. H.R. 1376 would provide enough additional debt relief so that no qualified HIPC country pays more than 5% of its budget on annual external debt servicing (10% if the country faces no health crisis). Currently, the 27 HIPCs that have reached Decision Point still pay an average of 15% of their budgets on debt.
If countries' debt payments can be reduced to these levels, the President's newly proposed increases in US foreign aid and Congressional initiatives to fight HIV/AIDS will go a lot further towards reaching their goals.
For more information, please contact Marie Clarke, Jubilee USA Network
202-783-0215,
[email protected]
April 2003
http://www.jubileeusa.org/background/impact.html