Debt reduction for countries vulnerable to effects of extreme weather events and slow-onset disasters

The Foreign Assistance Act of 1961 (22 U.S.C. 2151 et seq.) is amended by adding at the end the following:

Debt reduction for countries vulnerable to effects of climate change

901.

Debt reduction for countries vulnerable to effects of extreme weather events and slow-onset disasters

(a)

Purposes

The purposes of this section are— (1)to support the ability of countries to adapt to effects of extreme weather events and slow-onset climate disasters; and (2)to ensure that resources freed from debt in such countries are targeted to developing resilience to the effects of climate change. (b)

Eligibility for benefits

(1)

In general

A country is eligible for benefits under this section if the President determines that— (A)the country is— (i)a low income, lower-middle income, or upper-middle income country, as determined by the World Bank; or (ii)a small island developing state, as determined by the United Nations; (B)the government of the country is democratically elected; (C)the government of the country (including its military or other security forces) does not engage in a consistent pattern of gross violations of internationally recognized human rights; and (D)the government of the country has developed a plan to use the benefits made available under this section to conduct— (i)resilience activities; (ii)preventative disaster risk reduction planning, including nature-based solutions; or (iii)activities to recover from extreme weather events or slow-onset climate disasters. (2)

Congressional notification

Not less than 15 days before formally determining under paragraph (1) that a country is eligible for benefits under this section, the President shall notify the appropriate congressional committees of the intention of the President to determine that the country is eligible for such benefits. (3)

Preferences

In providing benefits under this section, preference shall be given to countries with plans described in paragraph (1)(D) that— (A)involve local communities and Indigenous peoples in the planning and execution of activities described in that paragraph; and (B)aim to reduce gender, income, and social inequalities through such activities. (c)

Reduction of debt owed to United States as result of certain loans

(1)

Authority to reduce debt

(A)

Authority

The President may reduce the amount owed to the United States (or any agency of the United States) as a result of loans made to an eligible country by the United States under part I of this Act, chapter 4 of part II of this Act, or predecessor foreign economic assistance legislation. (B)

Authorization of appropriations

There are authorized to be appropriated to the President such sums as may be necessary to carry out this subsection. (C)

Certain prohibitions inapplicable

(i)

In general

A reduction of debt pursuant to this subsection shall not be considered assistance for purposes of any provision of law limiting assistance to a country. (ii)

Nonapplicability of certain restrictions

The authority of this subsection may be exercised notwithstanding section 620(r) of this Act or section 321 of the International Development and Food Assistance Act of 1975 (Public Law 94–161; 22 U.S.C. 2220a note). (2)

Implementation of debt reduction

(A)

In general

Any debt reduction pursuant to paragraph (1) shall be accomplished at the direction of the President by the exchange of a new obligation for obligations of the type referred to in that paragraph. (B)

Exchange of obligations

(i)

Notification

The President shall notify the agency primarily responsible for administering part I of this Act (22 U.S.C. 2151 et seq.) of an agreement entered into under subparagraph (A) with a country to exchange a new obligation for outstanding obligations. (ii)

Cancellation and issuance of new debt

At the direction of the President, the old obligations that are the subject of the agreement entered into under subparagraph (A) shall be canceled and a new debt obligation for the country shall be established relating to the agreement, and the agency primarily responsible for administering part I of this Act shall make an adjustment in its accounts to reflect the debt reduction. (d)

Authority To engage in debt-for-Resilience swaps and debt buybacks

(1)

Loans eligible for sale, reduction, or cancellation

(A)

Debt-for-resilience swaps

(i)

Sale, reduction, and cancellation

Notwithstanding any other provision of law, the President may, in accordance with this subsection, sell to any eligible purchaser described in subparagraph (B) loans described in subsection (c)(1)(A), or on receipt of payment from such a purchaser, reduce or cancel such loans or portion thereof, only for the purpose of facilitating debt-for-resilience swaps. (ii)

Purchase of privately owned debt

(I)

In general

The President may, in accordance with this subsection, purchase privately owned debt of an eligible country, if that debt is purchased for not more than 65 percent of the face value of the debt, for the purpose of facilitating debt-for-resilience swaps. (II)

Use of proceeds

Notwithstanding section 3302 of title 31, United States Code, the proceeds of any purchase under subclause (I)— (aa)shall be credited as offsetting collections to the account that finances the activities under this section; (bb)shall be available for expenditure only to pay the costs of activities under this section; and (cc)shall remain available until expended. (B)

Eligible purchaser described

A loan may be sold, reduced, or canceled under subparagraph (A) only to a purchaser that presents plans satisfactory to the President for using the loan for the purpose of engaging in debt-for-resilience swaps. (C)

Consultation requirement

Before the sale under subparagraph (A)(i) to any eligible purchaser described in subparagraph (B), or any reduction or cancellation under subparagraph (A)(i), of any loan made to an eligible country, and before the purchase of privately owned debt under subparagraph (A)(ii), the President shall consult with the country concerning the amount of loans to be sold, reduced, or canceled, or debt to be purchased, as the case may be, and their uses for debt-for-resilience swaps. (D)

Authorization of appropriations

There are authorized to be appropriated to the President such sums as may be necessary to carry out this subsection. (2)

Debt buybacks

Notwithstanding any other provision of law, the President may, in accordance with this subsection, sell to any eligible country any loans described in subsection (c)(1)(A) or on receipt of payment from an eligible country, reduce or cancel such loans or portion thereof, only for the purpose of facilitating a debt buyback by an eligible country of its own qualified debt in order to support resilience activities. (3)

Terms and conditions

Notwithstanding any other provision of law, the President shall, in accordance with this subsection, establish the terms and conditions under which loans may be sold, reduced, or canceled pursuant to this subsection. (4)

Deposit of proceeds

The proceeds from the sale, reduction, or cancellation of any loan sold, reduced, or canceled pursuant to this subsection shall be deposited in the United States Government account or accounts established for the repayment of the loan. (e)

Consultations with Congress

The President shall consult with the appropriate congressional committees on a periodic basis to review the operation of this section and the eligibility of countries for benefits under this section. (f)

Annual reports to Congress

(1)

In general

Not later than April 15 of each year, the President shall prepare and submit to Congress an annual report concerning the operation of this section during the preceding calendar year. (2)

Elements

Each report required by paragraph (1) shall include— (A)a description of the activities undertaken under this section during the preceding calendar year; and (B)a description of any agreement entered into under this section. (g)

Definitions

In this section: (1)

Appropriate congressional committees

The term appropriate congressional committees means— (A)the Committee on Foreign Relations and the Committee on Appropriations of the Senate; and (B)the Committee on Foreign Affairs and the Committee on Appropriations of the House of Representatives. (2)

Debt-for-resilience swap

The term debt-for-resilience swap means the reduction of amounts owed to the United States (or any agency of the United States) by an eligible country in exchange for the commitment of that country to conduct resilience activities. (3)

Eligible country

The term eligible country means a country determined under subsection (b) to be eligible for benefits under this section. (4)

Extreme weather event

The term extreme weather event means an occurrence of unusually severe weather or climate conditions that can cause devastating impacts on communities and agricultural and natural ecosystems. (5)

Resilience activities

The term resilience activities means activities undertaken to make changes to processes, practices, or structures that moderate potential damage from hazardous events, trends, or disturbances associated with extreme weather events and slow-onset climate disasters. (6)

Slow-onset climate disaster

The term slow-onset climate disaster means an event that evolves gradually from incremental changes occurring over many years or from an increased frequency or intensity of recurring events, such as sea-level rise, loss of biodiversity, desertification, increasing temperatures, or ocean acidification.

Advocacy for international climate insurance program at World Bank

(a)

In general

The representatives of the United States to the World Bank shall use the voice and vote of the United States to advocate for the establishment of a parametric international climate insurance program that provides immediate financial assistance, in the form of insurance payments, to eligible countries to meet recovery needs following natural disasters. (b)

Elements

The structure and requirements of the program described in subsection (a) shall be determined by the World Bank, but may include— (1)payments to— (A)small producers and vulnerable sectors affected by natural disasters; and (B)the governments of member countries affected by natural disasters for— (i)program restoration; (ii)disaster cleanup; (iii)climate adaptation; (iv)ecosystem restoration and nature-based solutions; and (v)other recovery efforts; (2)eligibility criteria that are comparable to the eligibility criteria for debt reduction under section 901(b) of the Foreign Assistance Act of 1961, as added by section 2; (3)consideration of the aggregate risk of natural disasters across eligible countries to reduce premiums; and (4)support for existing international climate-related insurance programs such as the Caribbean Catastrophe Risk Insurance Facility. (c)

Definitions

In this section: (1)

Eligible country

The term eligible country means— (A)a low income, lower-middle income, or upper-middle income country, as determined by the World Bank; or (B)a small island developing state, as determined by the United Nations. (2)

Natural disaster

The term natural disaster means any hurricane, tornado, storm, flood, high water, wind-driven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, drought, fire, or other catastrophe that causes, or may cause, substantial damage or injury to civilian property or persons, ecosystems, or services of ecosystems. (3)

World Bank

The term World Bank means the following, collectively: (A)The International Bank for Reconstruction and Development. (B)The International Development Association. (C)The International Finance Corporation. (D)The Multilateral Investment Guarantee Agency.