[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
                      DEBT AND DEVELOPMENT: HOW TO
                PROVIDE EFFICIENT, EFFECTIVE ASSISTANCE
                    TO THE WORLD'S POOREST COUNTRIES

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                       DOMESTIC AND INTERNATIONAL
                 MONETARY POLICY, TRADE AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                              June 8, 2005

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 109-35



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
RICHARD H. BAKER, Louisiana          PAUL E. KANJORSKI, Pennsylvania
DEBORAH PRYCE, Ohio                  MAXINE WATERS, California
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware          LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York              NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio                  DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice Chair   JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                GREGORY W. MEEKS, New York
JIM RYUN, Kansas                     BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio           DENNIS MOORE, Kansas
DONALD A. MANZULLO, Illinois         MICHAEL E. CAPUANO, Massachusetts
WALTER B. JONES, Jr., North          HAROLD E. FORD, Jr., Tennessee
    Carolina                         RUBEN HINOJOSA, Texas
JUDY BIGGERT, Illinois               JOSEPH CROWLEY, New York
CHRISTOPHER SHAYS, Connecticut       WM. LACY CLAY, Missouri
VITO FOSSELLA, New York              STEVE ISRAEL, New York
GARY G. MILLER, California           CAROLYN McCARTHY, New York
PATRICK J. TIBERI, Ohio              JOE BACA, California
MARK R. KENNEDY, Minnesota           JIM MATHESON, Utah
TOM FEENEY, Florida                  STEPHEN F. LYNCH, Massachusetts
JEB HENSARLING, Texas                BRAD MILLER, North Carolina
SCOTT GARRETT, New Jersey            DAVID SCOTT, Georgia
GINNY BROWN-WAITE, Florida           ARTUR DAVIS, Alabama
J. GRESHAM BARRETT, South Carolina   AL GREEN, Texas
KATHERINE HARRIS, Florida            EMANUEL CLEAVER, Missouri
RICK RENZI, Arizona                  MELISSA L. BEAN, Illinois
JIM GERLACH, Pennsylvania            DEBBIE WASSERMAN SCHULTZ, Florida
STEVAN PEARCE, New Mexico            GWEN MOORE, Wisconsin,
RANDY NEUGEBAUER, Texas               
TOM PRICE, Georgia                   BERNARD SANDERS, Vermont
MICHAEL G. FITZPATRICK, 
    Pennsylvania
GEOFF DAVIS, Kentucky
PATRICK T. McHENRY, North Carolina

                 Robert U. Foster, III, Staff Director
 Subcommittee on Domestic and International Monetary Policy, Trade and 
                               Technology

                       DEBORAH PRYCE, Ohio, Chair

JUDY BIGGERT, Illinois, Vice Chair   CAROLYN B. MALONEY, New York
JAMES A. LEACH, Iowa                 BERNARD SANDERS, Vermont
MICHAEL N. CASTLE, Delaware          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California
RON PAUL, Texas                      BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio           PAUL E. KANJORSKI, Pennsylvania
DONALD A. MANZULLO, Illinois         BRAD SHERMAN, California
MARK R. KENNEDY, Minnesota           LUIS V. GUTIERREZ, Illinois
KATHERINE HARRIS, Florida            MELISSA L. BEAN, Illinois
JIM GERLACH, Pennsylvania            DEBBIE WASSERMAN SCHULTZ, Florida
RANDY NEUGEBAUER, Texas              GWEN MOORE, Wisconsin
TOM PRICE, Georgia                   JOSEPH CROWLEY, New York
PATRICK T. McHENRY, North Carolina   BARNEY FRANK, Massachusetts
MICHAEL G. OXLEY, Ohio


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 8, 2005.................................................     1
Appendix:
    June 8, 2005.................................................    29

                               WITNESSES
                        Wednesday, June 08, 2005

Birdsall, Nancy, President, Center for Global Development........     7
Kapoor, Sony, Senior Policy Advisor, Jubilee USA Network.........     9
McNamar, Tim , Member, Bretton Woods Committee...................    12

                                APPENDIX

Prepared statements:
    Pryce, Hon. Deborah..........................................    30
    Biggert, Hon. Judy...........................................    32
    Maloney, Hon. Carolyn B......................................    34
    Waters Hon. Maxine...........................................    39
    Birdsall, Nancy..............................................    41
    Kapoor, Sony.................................................    54
    McNamar, Tim.................................................    82

              Additional Material Submitted for the Record

Biggert, Hon. Judy:..............................................
    Additional questions for the record for Dr.Nancy Birdsall....    99
Frank, Hon. Barney:..............................................
    "The Price Of Gold", New York Times, June 3, 2005............   100
Moore, Hon. Gwen:................................................
    "Crumbs for Africa", New York Times, June 8, 2005............   101
Birdsall, Nancy:.................................................
    Written response to questions from Hon. Judy Biggert.........   102
Kapoor, Sony:....................................................
    Written response to question from Hon. Barney Frank..........   103
    Written response to question from Hon. Carolyn B. Maloney....   104
    "Debt Relief and Financing The MDGs," Communique on the 11th 
      Meeting of HIPC Finance Ministers, March 16, 2005..........   108
McNamar, Tim:....................................................
    Bretton Woods Committee Recommedations to New World Bank 
      Management, June 1, 2005...................................   112
    "Wolfwitz and Oil: Facts and Opportunity," position paper....   119


                      DEBT AND DEVELOPMENT: HOW TO
                PROVIDE EFFICIENT, EFFECTIVE ASSISTANCE
                    TO THE WORLD'S POOREST COUNTRIES

                              ----------                              


                        Wednesday, June 8, 2005

             U.S. House of Representatives,
         Subcommittee on Domestic and International
                     Monetary Policy, Trade, and Technology
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 2:25 p.m., in 
Room 2128, Rayburn House Office Building, Hon. Judy Biggert 
[vice chair of the subcommittee] presiding.
    Present: Representatives Biggert, Kennedy, Neugebauer, 
Price, Maloney, Waters, Sherman, Wasserman Schultz, Moore, and 
Frank.
    Mrs. Biggert . [Presiding.] The Subcommittee on Domestic 
and International Monetary Policy will come to order.
    Without objection, all members' opening statements will be 
made part of the record.
    Good afternoon. It is my pleasure to welcome you today to 
today's hearing on "Debt and Development: How to Provide 
Efficient, Effective Assistance to the World's Poorest 
Countries."
    We are here today to receive testimony from three witnesses 
regarding current thinking on how our international financial 
institutions can provide more effective relief to impoverished 
nations.
    I will begin with my opening statement.
    You may have noticed that I am not Chairman Deborah Pryce. 
I am Vice Chairman Judy Biggert. Chairman Pryce will have an 
opening statement for the record. She very much regrets that 
she has to miss this hearing today. She asked me to share with 
you her commitment to finding innovative ways to eliminate debt 
for countries that are showing reform.
    Today is not the first time that this committee has focused 
on debt and development issues. I am sure that it will not be 
the last. The issues are broad-ranging and global and elicit 
the interests of many persons and parties, including in my 
congressional district just outside of Chicago.
    In April of last year, I chaired a hearing of the 
subcommittee to receive a report issued by the General 
Accounting Office concerning the projected cost of the enhanced 
highly indebted poor country, HIPC, program. This report 
produced staggering, yet somewhat questionable numbers. It 
became clear from that report and from the testimony we 
received at the hearing that simply providing billions of 
dollars in aid and debt relief to developing countries is not 
enough. Money alone is not the answer. It clearly has not 
worked in the past.
    We must find ways to provide more effective and efficient 
assistance to developing countries, and we must find ways to 
support developing countries' efforts to one day graduate from 
dependency on development assistance.
    The Bush administration is taking quite a bold step in this 
area. It has called on the international community to provide 
up to 100 percent of debt relief for highly indebted poor 
countries and to provide more performance-based grants to them. 
In return, those countries would be asked to increase 
transparency in their decision-making, promote private sector 
development, and take other key steps toward self-sufficiency.
    We meet this afternoon amidst a spirited global discussion 
about new strategies to help aid the poorest countries of the 
world. Our colleagues on the Joint Economic Committee have just 
released a new study on this topic and President Bush continues 
his discussions today with U.K. Prime Minister Tony Blair on 
this and other issues. The Group of Eight summit in July 
includes as a major item on the agenda debt and development 
issues.
    As we move forward, it is clear that there is no one-size-
fits-all solution to alleviating the debt burden of all poor 
countries in the world. Each poverty-stricken country is faced 
with unique economic and social challenges. Under the current 
system, countries must continue to undergo rigorous processes 
to qualify for debt forgiveness or no-or low-interest loans, 
technical assistance and other forms of aid.
    Many believe this process should be improved. It is 
unfortunate when a country cannot qualify for aid due to its 
Government's unwillingness to set policies that will help to 
provide them with greater economic and social certainty. It is 
even more unfortunate for their citizens who are poor, 
uneducated, or dying of disease or malnutrition.
    Regardless of which approach is ultimately taken, we must 
continue to work with our international partners to encourage 
HIPC countries to implement anticorruption measures, legal 
systems, and other important reforms. If the U.S. and her 
international partners provide debt relief to countries that 
are without sound Governments, infrastructure or legal systems, 
it is the equivalent of putting water in a sieve. It will not 
carry and it leaks through.
    At the same time, we do not want to withhold funding if a 
country is on the road to reform. We need to find ways to 
strike this delicate balance. I understand that making these 
kinds of reforms is not easy, but these reforms are not 
luxuries. Encouraging impoverished countries to form democratic 
societies and free-market economies can have material human 
benefits as they alleviate the exposure to disease and poverty 
that too often accompany corruption and mismanagement. These 
reforms also can undermine the opportunity for terrorism-based 
ideologies to take hold in poor countries where it can be so 
easy to find a scapegoat.
    I look forward to hearing from our witnesses on new 
proposals to finance debt relief and update the delivery of 
development assistance. We will hear from a range of views on 
the way to fund debt relief. We will also hear a range of views 
on how funds can be mobilized to promote economic development. 
I look forward to hearing from our witnesses about their 
proposals to facilitate responsible and sustainable debt relief 
and development in impoverished countries.
    With that, I will recognize the ranking member of the whole 
committee, my friend and colleague, Mr. Frank from 
Massachusetts, for an opening statement.
    [The prepared statement of Hon. Judy Biggert can be found 
on page 32 in the appendix.]
    Mr. Frank . Thank you, Madam Chair.
    I am very proud of the work that this committee is doing 
and has been doing on an issue that is as important for 
humanity as any I can think of. We talk a lot about faith, 
about religious values, about humanitarian values that come 
from secular purposes. They all come together here.
    Members of this committee, the gentleman from Iowa, Mr. 
Leach, the gentleman from Alabama, Mr. Bachus, the gentlewoman 
from California, Ms. Waters, and myself took the lead with a 
lot of other members supporting us a few years ago when the 
House in a rare moment of independence wrote debt relief beyond 
what was being contemplated by the Administration at the time.
    I think those of us who pushed for that have been 
vindicated by the good results that we have seen. I appreciate 
the spirit of cooperation that we have since had with regard to 
going forward on that. At the time, it was a situation where 
religious and secular believers in alleviating human suffering 
came together. It was the jubilee year that the Pope 
proclaimed. That was very helpful to us in getting votes.
    There were people who have particular concern for those in 
Africa, because as we look at this question of worldwide 
poverty and the crushing debt, Africa is not the only place, 
but it is the single greatest locus of this problem, so I am 
pleased that we have been moving along.
    I want to now also express my appreciation to the Bush 
administration. We have been told that we will soon be hearing 
about an agreement that is going to be announced between the 
President and Prime Minister Blair. And without trying to 
preempt it or get into the details, from what I have heard, 
this is a very big step forward in accepting the principle of 
100 percent debt relief for the poorest countries, the highly 
indebted poor countries, and an issue that we had raised 
frequently here, one of the things that has made this agreement 
possible. Because in addition to the debt relief it will also 
mean that future aid will come in the form of grants and not 
loans. It does not make sense to give people debt relief and 
then the next day start indebting them again. You just start 
over that cycle.
    There has been a strong argument for grants. Some of us 
were concerned that the problem was that the future funding 
that was being given had been coming from debt repayments, not 
the best source of revenue in the world, but still something. I 
congratulate the Administration for apparently agreeing that we 
will make up any shortfall in the future that would come from 
the fact that we are making grants and not loans. That is, 
there will not be the re-flow of loans. We are going to, as I 
understand it, commit ourselves to supply any shortfall there.
    So that was an important breakthrough in getting this 
agreement, the willingness of this Administration to agree that 
if necessary there will be more money coming. So I am very 
pleased to see this moving forward. There will be some 
accounting issues on how this is noted. We have already voted 
on some of the budget.
    Let me say, I think we start from a reality which is if I 
were really dependent on any of this money being really paid 
back, I think I would be in big trouble. So to the extent that 
we are engaging in some accounting gestures, moves to account 
for the fact that we are not getting the money back, nobody is 
really getting hurt. We are acknowledging the reality that it 
is not likely that this money would be paid back, nor is it 
desirable that it be paid back. Accounting for that in an 
appropriate way is fine.
    I have always felt, frankly, that we overvalued some of 
that debt. That is, I think if you tried to sell some of this 
debt on the market, it would not pay for your transaction 
costs, so recognizing that reality is reasonable. So I am very 
pleased with the administration's forthcoming approach with 
regard to the World Bank debt.
    I will note that we are also apparently seeing some 
progress in conceptual terms on IMF debt. If you are a country 
that owes money, it really does not make any difference to you 
whether you owe it to the World Bank or the IMF if it is money 
that is not available to you. I am pleased to see that there is 
apparently an agreement in principle, in concept, to do a 
similar thing for the poor countries with the IMF.
    There is still a question of how to pay for it. I continue 
to believe that an orderly managed sale of gold that the IMF 
has, for which the IMF has no great need, is the best way to do 
this. In the IMF, unlike us, it is in the business of making 
gold coins. I wish we were not in the business either because I 
think it causes us more grief for less return than anything 
else this committee does, but we are stuck with it. But the IMF 
is not. So I think they could monetize some of their excess 
gold in an orderly way.
    In fact, I would ask, Madam Chair, to put into the record a 
New York Times editorial from June 3 calling for us to do that.
    Mrs. Biggert . Without objection.
    Mr. Frank . We are not there yet. I hope we will get there, 
but I do not want to cavil. The fact is that we have a good 
agreement, I understand, on the World Bank debt being totally 
cancelled. Remember that we already cancelled the bilateral 
debt, so it is not a case of asking others to do what we will 
not do ourselves. We have now cancelled one of the two pots of, 
or are about to, multilateral debt.
    The other pot also ought to be cancelled. I think that 
could be done with managed gold sales. Once again, gold sales 
were a part of the last effort. They worked well. They can 
continue to work. So this is a day I think for people to 
express, I hope, appreciation for the progress that has been 
made. All those other issues are still on the table.
    Let me just close by saying I agree that money alone does 
not solve a problem, but what is also clear to me is that the 
absence of money exacerbates the problem. Forgiving the debt, I 
agree, is not sufficient to solve the problems of poverty in 
Africa, but it certainly is necessary. If we do not begin by 
doing that, along with other measures, we will not get 
anywhere.
    So I think today is a day on which I want to congratulate 
the Administration and urge that we take what I think is just 
the one last step of putting the IMF gold in. If they can come 
up with another way to do it, I will be willing to look at it, 
but I do think we now have a recognition that cancellation of 
the debt, and I ask a 30-second indulgence, let's be very 
clear.
    The moral argument for canceling the debt, the debt would 
have to be repaid by very poor people who got very little 
benefit when it was incurred. There is no point in cracking 
down on debt collection when it comes from the people who were 
not the beneficiaries of the indebtedness. That is why we are 
not talking about an individual who borrowed money and 
forgiving that individual. We are talking about poor people who 
have been victimized, and debt cancellation is a way of 
recognizing that.
    Thank you, Madam Chair.
    Mrs. Biggert . The ranking member of the subcommittee, Mrs. 
Maloney, is recognized for an opening statement.
    Mr. Maloney. In the recognition of time, I will put my 
opening statement in the record, but I thank you and the 
ranking member and certainly welcome all of our guests.
    I just want to mention that I was original sponsor of the 
Jubilee Act which would achieve debt relief for 50 nations. I 
hope to continue working towards that with all of you. The list 
of countries needing relief is not limited to the poorest 
countries. When we introduced the legislation to forgive the 
Iraqi debt, it was certainly an example of what the ranking 
member mentioned about the poor people who did not benefit from 
it would have to pay back the odious debt from an oppressive 
regime that put them in debt to buy palaces--I think there are 
60 palaces they built--and to buy arms.
    So I certainly hope that we can apply the same realization 
to achieve debt relief for South Africa, Haiti, and the 
Philippines. I truly believe the proposal that was put forward 
yesterday by the U.S., the U.K., and Canada is a very serious 
effort on all sides to achieve real debt relief for the most 
impoverished nations and give them a chance to move forward. I 
hope we have the political will and commitment to achieve the 
promise of this moment.
    I understand that Mr. Kapoor is going to outline the 
proposal, but in brief it adopts the U.S. policy of 100 percent 
debt forgiveness for the current HIPC countries, but 
incorporates the British principle that the concessional 
facility, the International Development Association, or IDA, be 
replenished. As I understand it, the U.S. has now made a 
significant commitment to replenish the IDA in the amount 
needed to cover the reduction in re-flows to the IDA that will 
result from debt relief.
    Secretary Snow indicated before the committee that Treasury 
would do so when we asked him in his last appearance, so I am 
delighted to learn that the Administration has made good on 
that promise. These developments are truly new and exciting, 
and I look forward to hearing the testimony and to seeing the 
results of the G-8 meeting in Scotland that is coming up in 
July.
    So I place the rest of my comments in the record and look 
forward to the comments. Thank you.
    [The prepared statement of Hon. Carolyn B. Maloney can be 
found on page 34 in the appendix.]
    Mrs. Biggert . Without objection, all members' opening 
statements will be made part of the record.
    With that, we will move to our panel of expert witnesses.
    First of all, we have Dr. Nancy Birdsall, who is president 
of the Center for Global Development. She is the founding 
president, and prior to launching that center, she served for 3 
years as senior associate and director of the Economic Reform 
Project at the Carnegie Endowment for International Peace, 
where her work focused on issues of globalization and equality, 
as well as on the reform of international financial 
institutions. Prior to that, she was executive vice president 
of the Inter-American Development Bank, and prior to that she 
was with the World Bank. So she brings a wealth of experience.
    I would yield to the ranking member of the committee for an 
introduction of Mr. Kapoor.
    Mr. Maloney. I am really delighted to introduce Sony 
Kapoor, the senior policy adviser to Jubilee USA Network. I 
would like to thank him for coming all the way from London to 
offer his views and expertise to us today. We have worked with 
him, many of us on this committee, for a long time, both on my 
bill to forgive Iraqi debt and on the Jubilee Act with 
Representative Waters. I thank them for bringing Mr. Kapoor 
here today.
    Sony Kapoor works on issues relating to international 
finance, development, and governance, both with nongovernmental 
organizations and various Governments. As the senior policy 
adviser to Jubilee USA Network, Christian Aid U.K., and the 
International Tax Justice Network, which advocates regulation 
of tax havens, he has testified on several occasions before the 
British Parliament and other international groups.
    For the past 2 years, Mr. Kapoor has played a leading role 
in the international policy and advocacy effort around 
multilateral debt cancellation and other development issues. He 
has written extensively on debt and development financing. He 
is a member of the New Rules for Global Finance Coalition and 
has also written extensively on financial stability and 
taxation. He has a background in the financial services 
industry, having worked both as a banker and a derivatives 
trader.
    He has a master's degree in international finance from the 
London School of Economics and an MBA in finance. He also holds 
an engineering degree from the Indian Institute of Technology.
    We welcome you and thank you and Jubilee for all the work 
that you have done to help poor nations and to relieve debt 
around the world. We thank you.
    Mrs. Biggert . Thank you.
    Our next witness is R. Tim McNamar, who is a senior adviser 
to PricewaterhouseCoopers on advanced information technology 
for accounting. He also served in the Reagan administration as 
deputy secretary of the treasury. Since then, he has founded 
two Internet startups and served in senior management positions 
in a number of leading U.S. financial institutions.
    Welcome.
    With that, we will start with Dr. Birdsall.
    Without objection, all of your written statements will be 
made part of the record. You will be each recognized for a 5-
minute summary of your testimony. After that, each Member of 
Congress will have 5 minutes to ask questions of you all.
    With that, Dr. Birdsall, you are recognized for 5 minutes.

 STATEMENT OF DR. NANCY BIRDSALL, PRESIDENT, CENTER FOR GLOBAL 
                          DEVELOPMENT

    Mr. Birdsall. Thank you very much, Vice Chairman Biggert, 
Ranking Member of the full committee Frank, Ranking Member 
Maloney, and other members of the subcommittee. I am very 
pleased to have this opportunity to speak with you today.
    What I would like to do is talk about some broad issues of 
development policy into which the debt issues that many of you 
have raised come. I would like to emphasize a few points, and I 
will try to do that as I proceed.
    As the vice chairman's introductory statement indicated, 
this is a big year on development, and it is a huge opportunity 
for the U.S. to reassert its leadership on development issues, 
both with Blair's visit, of course the G-8 summit, the 
appointment of Paul Wolfowitz to the World Bank, the U.N. 
Millennium Summit in September, and the Hong Kong ministerial 
meeting as part of the Doha Development Round in December.
    So this is the moment for the U.S. There are some short-
term issues that are arising obviously, some are reflected 
already in the statements, right now in Washington. In 
addition, there is an opportunity for this committee to work 
with Treasury and in particular with management at the World 
Bank to really set the tone for the next 4 or 5 years at least 
on what should be the direction of U.S. policy with respect to 
development.
    I would like to raise five specific issues in the short 
time I have. The first has to do with aid effectiveness and aid 
accountability. On this score, what would be great to see is a 
commitment from the U.S., already indicated in the remarks of 
Mr. Frank, for increased levels of U.S. aid money to go through 
multilateral channels. That would make U.S. aid much more 
predictable, which is important for recipient countries who are 
trying to make investments, for example, in education that do 
not make sense if they cannot foresee some continuing flows in 
the future to finance teacher salaries and books and so on. The 
same would go for health.
    In particular, more emphasis on pooling of Millennium 
Challenge Account funds with other donor funds to relieve the 
burden on developing countries who are trying to manage many, 
many sources of resources. And I would say a big push from this 
committee through the Treasury that at the World Bank and among 
other donors there be a new emphasis on creating an approach to 
having independent evaluation of the impact of development 
programs in order to justify and make more credible increases 
in the future in the budgeting for those programs.
    The second issue I would raise very quickly is debt relief, 
which has been mentioned. It is very exciting to see the 
prospect of a compromise between the Europeans and the U.S. I 
would like to make two quick points. One is that we estimate 
very crudely that that compromise in terms of what additional 
funds would be required to replenish IDA, to make up for the 
lost re-flows, is very small. Well, nothing is really small, 
but $200 million a year, which is a tiny proportion of our 
current foreign aid spending.
    With respect to gold, I would like to indicate that at the 
Center for Global Development, including in my own work, we 
have indicated the logic of the orderly gold sales, which were 
mentioned already. I think that there is still room for a 
breakthrough there because of the strong support for debt 
relief in the Congress.
    I would also mention very quickly, it is not raised in my 
written testimony, that we hope in the future when and if 
Nigeria, as it continues to demonstrate through its Government, 
its efforts on reforms, that there be an openness to joining in 
some debt relief for that country. It could be the anchor for 
security in all of West Africa.
    A third issue to raise is something we call "making 
markets" for vaccines. The U.S. could take leadership at the G-
8 summit in setting up, or at least agreeing that there should 
be set up and perhaps firmed up a year from now, what can be 
called an advanced market for the guaranteed purchase of 
malaria and AIDS vaccines.
    This would create incentives for private R&D on the part of 
our pharmaceutical firms to finally address this critical 
problem. It is a way to spend money on aid effectively without 
worrying about absorption capacity in particular countries and 
potentially to save millions of lives, including of course in 
Africa.
    The fourth issue is trade and market access. I have a 
colleague at the Center who has estimated that 500 million 
people could be lifted out of poverty were there liberalization 
of trade regimes around the world. In particular, the 
developing countries could benefit by up to $100 billion a year 
just from liberalization in the rich countries.
    What we would like to see is the Congress engage in 
strengthening the African Growth and Opportunity Act, including 
by extending its duration, and we would like to see the 
leadership of the U.S. in the WTO base system on a program to 
help countries that are losing their preferences, seeing 
erosion of their trade preferences, cope with that problem 
through some kind of transitional assistance.
    Finally, on the issue of U.S. leadership at the World Bank, 
where I am sure my colleague Mr. McNamar will have more to say, 
I would like to make two critical points where it is important 
for the Congress to provide encouragement, again through 
Treasury, to Mr. Wolfowitz. One is that he take the lead at the 
World Bank in creating some sort of a consortium of donors and 
possibly of developing country governments to address the 
problem of our lack of serious evaluation of the impact of 
programs. We are proposing that some sort of a club be set up 
that the members would pay modest dues, and that they would 
then sponsor selective impact evaluations. This could be done 
through contracts to third parties to ensure they were 
independent.
    And second, that Mr. Wolfowitz take early steps to begin a 
process of creating a setting at the World Bank where the 
developing countries can be much better represented. A 
particular example that would be appropriate in the short run, 
given the emphasis that Tony Blair and our European colleagues 
have been putting on Africa, would be that the U.S. agree to a 
proposal that for the time being two chairs be added at the 
World Bank to represent with two additional members the 48 
African countries. That would be a modest step. It could be set 
up as an interim step.
    I would like to say a final word with respect to the G-8, 
that the compromise on debt that looks like it is coming is 
very exciting. We think, however, that at the same time the 
U.S. should be the leader on the vaccine initiative. Such an 
initiative would be fully consistent with America's values, 
based on creating incentives for the private market to act, and 
consistent with America's strengths. It would be a tremendous 
innovation. I think in a decade we would look back on it as a 
major contribution that we had made to saving lives all 
throughout the poorest countries of the world.
    Thank you very much, Madam Vice Chair.
    [The prepared statement of Dr. Nancy Birdsall can be found 
on page 41 in the appendix.]
    Mrs. Biggert . Thank you very much.
    Now, Mr. Kapoor, you are recognized for 5 minutes.

 STATEMENT OF SONY KAPOOR, SENIOR POLICY ADVISER, JUBILEE USA 
                            NETWORK

    Mr. Kapoor. Members of the committee, thank you so much for 
the opportunity to appear before the committee and testify 
about debt and development issues. I will try and be brief.
    The situation for many developing countries is very grave. 
Each year, more than 6 million children die from malnutrition 
before their 5th birthday. We cannot keep ignoring this. The 
HIV-AIDS pandemic kills more than 2 million people every year 
and adds to the leagues of millions of orphans in Africa, 
creating long-term social and economic problems.
    It is both in the interests of the United States as a 
compassionate Nation, as well as in the interests of the U.S. 
having strong economic partners to take the issues of 
development more seriously and act immediately.
    Debt cancellation and development can bring resources and 
hope where there is none and also foster economic growth. 
Former Secretary of State Colin Powell has argued that 
development is a core national security issue and that the U.S. 
cannot win the war on terror unless we confront the social and 
political roots of poverty. So this highlights the importance, 
as previous speakers have done, of this particular issue.
    My opinions have been formed on the basis of two strong 
experiences in my life. One is having grown up in India and 
being surrounded by poverty. The second is having worked in the 
financial services industry. To summarize two completely 
dichotomous fields of experience, what I try and do in my work 
is to try and bring together solutions that are acceptable to 
all sides, developing countries to the private sector, as well 
as to Governments in the rich countries. That is what I will 
try and highlight.
    This is, as Nancy said, a very unique opportunity where 
there is an unprecedented attention on the issues of 
development. The U.S. is in a unique position to assume its 
natural leadership role, especially by advancing the bold 
agenda on debt cancellation and some of the other issues that 
Nancy highlighted.
    There are three main issues in financing development today. 
One is how to enable developing countries to maximize domestic 
resources. The second is what mechanisms and sources of 
external funds exist that can be used to support these domestic 
resources. And the third is how can these domestic resources 
best be kept in the country, something I call "plugging the 
leaks."
    Overseas development aid, foreign direct investment and 
portfolio flows all fall in the first category. I have 
addressed them in my revised written testimony. Plugging the 
leaks is also something I have addressed in my written 
testimony. I shall try and concentrate on debt. I have also in 
my written testimony addressed the issue of trade 
liberalization, the issue of restructuring the international 
financial institutions and other systemic issues.
    Fifty-thousand children die every day because of 
preventable poverty, and that is from hunger and lack of clean 
water and diseases which would be prevented if the money to 
treat them existed. This has been proven to be effective in the 
past. Many children have been vaccinated; many more have gotten 
access to clean water and past debt relief initiators have made 
a real tangible difference in these countries.
    In 2003, Senegal and Malawi each spent about one-third of 
their Government revenue on debt service. These are just some 
of the African countries which spend more on debt than on 
health expenditure. This happens when life expectancy in 
countries such as Zambia, Mozambique, and Malawi is just about 
37 years, which is less than half of what it is in the 
civilized world.
    It is pointless and debilitating that the churning of 
resources, money going in as new aid, comes out almost 
immediately as debt servicing. This is part of the reason why 
there is a reluctance on the part of rich countries to put more 
money in because this money is seen to be coming out 
immediately as debt service. This is a problem which we need to 
address very seriously and immediately.
    Debt cancellation is a very effective and efficient way of 
transferring resources to developing countries, not just for 
this reason, but also because of several reasons such as it 
provides direct budgetary support, reduced administrative 
costs. It is durable and predictable. It engenders a deeper 
sense of country ownership, which is extremely important for 
the development of long-term democratic institutions.
    A high level of debt discourages private investment, which 
is very critical to the idea of U.S. foreign policy. Debt 
cancellation is also anti-inflationary and helps keep domestic 
interest rates low. There has been some skepticism expressed 
about how and why the money of debt cancellation that is 
released by debt cancellation be utilized. Past experience has 
been good on this front. Countries that received the very 
limited debt relief that was available under the Heavily 
Indebted Poor Country Program have doubled poverty reduction 
expenditures from 1999 to 2004 and saw no net increase in 
military spending.
    After Mozambique was granted debt relief, it was able to 
offer all children free vaccinations. In Uganda, debt relief 
led directly to 2.2 million more people getting access to clean 
water. These are just some of many, many real examples and 
tangible impacts on the lives of millions of people.
    The issue of multilateral debt is particularly important, 
as it constitutes a growing and more pernicious part of debt. 
The reason it is more pernicious is because multilateral debt 
is almost always serviced because multilateral institutions are 
considered to be preferred creditors. Bilateral debt, a large 
proportion of it, was in arrears which was not being repaid. 
Hence, despite the fact that it existed on books, it was not 
actually diverting resources away from countries.
    This has been, in part, the failure of the HIPC initiative, 
where a large proportion of the debt that has been cancelled 
has actually been debt that was worthless in any case, which 
has just been a paper transaction and, hence, has not resulted 
in new resources flowing to these countries. Multilateral debt, 
for every dollar cancelled, results in a dollar of additional 
resource to the country that it is cancelled for. That is why 
it is so important.
    Various discussions over the past months have now been 
narrowed down to two major groups. One is the so-called U.S.-
U.K. compromise, and the second is the new particularly 
dangerous proposal which has come out from Japan, France, and 
Germany, which is still in an informal format. The reason I 
call it dangerous is that despite this momentum which has been 
built up over 5 years, with the number of countries with the 
need for 100 percent cancellation, this new joint initiative 
which is still in its infancy actually will deliver debt 
cancellation only to about five countries.
    It is very, very limited in its scope. It is extremely 
limited in the way it does it. And it treats countries on a 
case-by-case basis and deals with the debt sustainability 
framework, which actually the United States to its credit was 
pushing for grants, not loans, for all poor countries and has 
not been accepted by the Bank and Fund.
    The U.S. and the U.K. proposal is extremely encouraging. It 
looks to cancel 100 percent of IDA and African Development Fund 
debt stock, which is the critical point because the U.K.'s 
original proposal was only looking at debt service through 
2015. So this expands that. We really commend that.
    The country list, unfortunately, still stays narrow. The 
country list from the beginning of the proposals being 
discussed last year has been steadily narrowed, and it is now 
likely that the actual list of countries within the HIPC 
initiative that will receive that cancellation is going to be 
somewhere between 18 and 33, which is not enough. The HIPC 
group of countries, they are extremely needy. They really need 
these resources, which will save lives.
    However, they have already got more than their share of 
debt cancellation. They have attracted more than a fair share 
of overseas development aid, and other countries which were 
arbitrarily left off the initial heavily indebted poor country 
scheme will be at a further loss. This is not a fair 
proposition. These countries need debt cancellation as much as 
the HIPC countries do. We strongly request the members of the 
committee to agree with us on this issue and try and influence 
the U.S. Treasury to expend the country list.
    In discussion, it is also reported that the Administration 
is calling for an inclusion of IMF debt, which is a very 
positive development because in the past few months, we had 
been extremely scared that the International Monetary Fund debt 
was left off the agenda. That is an unacceptable situation 
because IMF debt accounts for a significant proportion, up to 
25 to 30 percent of the debt service that these poor countries 
will pay over the next 10 years leading up to the international 
development goals, the Millennium Development Goals in 2015. So 
it is extremely important that IMF debt be addressed.
    The second reason is that IMF debt actually is less 
concessional and is more expensive than IDA debt. So for these 
two reasons and others, the IMF portion of the debt needs to be 
considered.
    The current idea seems to be that the United States favors 
the use of sources of funds within the IMF, including the PRGF, 
the Poverty Reduction and Growth Facility, and the corpus, the 
principal from the gold transaction back in 1999, to cancel 
this debt. The U.K. Government favors the gold sales idea. We 
are hoping that a compromise can be struck.
    Mrs. Biggert . Mr. Kapoor, if you could sum up and we will 
get to the questions.
    Mr. Kapoor. Thirty seconds?
    Mrs. Biggert . Yes.
    Mr. Kapoor. Excellent.
    There have been several misunderstandings of what we have 
proposed about dealing with the issue of IMF gold. I am very 
happy to answer those questions and clear those 
misunderstandings. I am also happy to answer all questions 
about other things that I have not addressed.
    In summary, there are four more issues in tackling the 
problem of development. What we need to do is we need to free 
up more policy space for countries. This could help them have 
domestically owned and flexible policies which are conducive to 
the local circumstances. We cannot push for a one-size-fits-all 
approach because countries are extremely different in their 
local circumstances, educational infrastructure, raw 
commodities, and basic country development.
    We are also very aware of the issue of the debate about 
increased aid without increasing aid effectiveness. I think 
that is something that Nancy will speak more about.
    And last of all, we reiterate the importance of stopping 
the leakage of billions of dollars from these countries in the 
form of dirty money flows, capital flight, and debt servicing.
    Thank you very much.
    [The prepared statement of Sony Kapoor can be found on page 
54 in the appendix.]
    Mrs. Biggert . Thank you.
    Mr. McNamar, you are recognized for 5 minutes.

   STATEMENT OF TIM MCNAMAR, MEMBER, BRETTON WOODS COMMITTEE

    Mr. McNamar. Thank you, Madam Chairwoman and Ranking Member 
Maloney. I am privileged to testify--and I do regard it as a 
privilege, make no mistake--before your committee today.
    I was actually thinking, having been gone 25 years, how 
proud my father, who is long deceased, would be of me. My 
family has not done this before. We are not very good at this, 
but we love our country. I am here as a great unequivocal 
supporter of the World Bank. I am going to say some critical 
things, make no mistake, and I would hope you would take that 
as, if you will, tough love, because I believe in the World 
Bank.
    I am privileged to have testified with Barney Frank and Jim 
Leach before. I do not think they excoriated me, but I cannot 
remember. Maybe the scars have healed over. I am not sure. But 
you have a very complex and difficult task before you. I would 
like to tell you I have the answers. I do not. I know a few of 
the questions and maybe a couple of the answers, but that is 
about it. This is hard stuff, but it is stuff that, if I may 
say so, America has to step up to because there is no one else. 
It is our responsibility to the world, make no mistake. We have 
to do this.
    Democrats and Republicans can disagree on how to do it. We 
cannot disagree on our responsibility. There is no second 
choice. There is no other choice. Just as we fought the Cold 
War, we have to work on this.
    Let me make a couple of points at the outset. I am here 
speaking for myself and as a representative of the Bretton 
Woods Committee, which as I am sure many or all of you know, is 
a bipartisan group that supports the Bretton Woods 
institutions. It is composed only of Americans only because we 
can come here in Congress and testify without registering as a 
foreign agent as you would have to. But we believe in this.
    And I have been here for a couple of years now and wrote a 
book on Enron. I learned about something called XBRL, which I 
will tell you in a minute, which is extensible business 
reporting language, which is the kind of thing that will put 
you to sleep except it is revolutionary.
    How many people in this room understood when Netscape came 
out it was revolutionary? This is revolutionary. I did not 
invent it. My firm does not own it. Actually, we lose money on 
it. Okay? Just to be very clear. But the world will be better 
because of it and it is imperative that the developing world 
and the multilateral development banks push it. I am going to 
say something in a minute. It turns out that the Inter-American 
Development Bank is at the forefront of recognizing this. They 
deserve credit. My view, correct or incorrect, is that the 
World Bank needs to catch up.
    But I do want to talk about technology because that is in 
the title of the committee and that is what you are concerned 
about. I am going to say something a little provocative. I will 
say a whole bunch of things. I do not believe that the 
international finance facility proposed by Gordon Brown is 
quite correct. I do not think it is good enough. But I 
recommend the British and I commend Gordon for having tried.
    Does it look too much like what I saw in 1985? Yes. The 
fact of the matter is that he is trying and he put something 
out there and I commend him for doing that. We need to keep 
getting these things coming as opposed to saying, oh no, the 
U.S. is opposed to it. That is not the answer. The U.S. is not 
necessarily opposed.
    I want to talk about change technology and development. I 
remember as a child getting under the desk to protect myself 
from an atomic bomb attack. It did not come in Oklahoma because 
they did not have aerial refueling. The Germans did not have 
the bomb. The world has changed since then. I kissed my parents 
good-night from Ann Arbor during the Cuban missile crisis 
because I was not going to wake up the next morning and they 
were not either. The world has changed.
    I do not think we grasp that enough. Ideas, trends, 
thoughts about the World Bank and IDA have shifted with time, 
perhaps not enough. I think the United States's support for the 
World Bank in fact has been quite good. I would offer you a 
thought. Probably you have read this. It is called a Guide to 
the World Bank, published by the World Bank. I actually read 
the whole thing last week in preparation for this testimony. I 
was embarrassed.
    How many of you have read this book? I hope everybody is 
going to raise their hand. If you do not, I commend it to you.
    Mr. Frank . We have no idea what that book is.
    Mr. McNamar. I am sorry. Thank you. This is "The World is 
Flat: A Brief History of the 20th Century" by Thomas Friedman 
of the New York Times, the number-one bestseller for the last 8 
weeks or 10 weeks.
    Mr. Frank . We have been in session for the last 8 weeks.
    [Laughter.]
    Mr. McNamar. One of these books is out of date. 
Unfortunately, the committee has the responsibility to figure 
that out. I do not, but you do. And you have to figure out what 
are the things you would like to urge the U.S. Treasury to urge 
the World Bank or the Inter-American Development Bank or the 
IMF to do. And I urge you to read both books.
    You will be appalled at the one, and you will be frightened 
by the other. I did not say "enlightened." I said "frightened." 
And do you know what? You have to figure out what you are going 
to do and what your second choice is, because my view is you do 
not have a second choice. The United States does not have a 
second choice. You have to support the World Bank and IDA 
unequivocally.
    Does that mean they cannot change? Absolutely not. They 
need a lot of changes. I look at how the African Development 
Bank suffers. I look at the Millennium Challenge Corporation's 
effort. That is an experiment, no bones about it. But you know 
what? It may be directionally correct or the right answer. I do 
not know. You, unfortunately, have the responsibility that I do 
not have to decide that.
    I will give you an example. I had lunch yesterday at the 
Inter-American Development Bank. We have been chatting with 
them about this EBRL thing, which is basically the XML with 
some improvements. This is the web-based language that 
businesses use. Okay? And they have figured it out, grasped, 
grabbed on to, and believe that if their countries in Latin 
America that do not do this, there is something called a 
development gap, that is, the left-behind.
    They are going to take a role, and I do not know exactly 
what it will be, but they are going to take a role to trying to 
make this happen because if they do not, their countries are 
not going to progress like they should, have the per capita 
income increase, the improvements in living standards and 
healthcare and all the other good things that go with that. 
That is development.
    Your responsibility, which I am so glad I do not have, is 
to make sure that our multilateral development banks do that. 
It turns out that there is one in the world, the Inter-American 
Development Bank, that is ahead of the curve. I commend them. 
This is forward thinking. This is getting the fact that this 
book is history. It is not even good history. And this book is 
the future. And they want to improve their peoples' lives, 
their constituents, their countries' lives.
    We have a new paradigm for development. We have two 
choices. We can say, oh, that is not true, and reject it 
because the World Bank is doing in 2005 what it did in 1955. Or 
they can do something different. Do I think that technology and 
call centers in Kenya are going to solve all the world's 
problems? No. That is foolish. Do I think it is a component of 
development that if I dare say so, this is probably arrogant, 
but a lot of people call me arrogant so we will take that.
    Mrs. Biggert . Could you sum up your testimony?
    Mr. McNamar. Yes. I am arrogant and the committee has not 
heard it before, and that ought to be a concern.
    [The prepared statement of Tim McNamar can be found on page 
82 in the appendix.]
    Mrs. Biggert . Thank you.
    We will now turn to the questions.
    Mr. McNamar. Madam Chairman?
    Mrs. Biggert . Yes?
    Mr. McNamar. May I ask that my oral testimony be submitted, 
only because there are a couple of attachments that I think the 
committee might find useful?
    Mrs. Biggert . Your written testimony?
    Mr. McNamar. Oral.
    Mrs. Biggert . Oral. It will be in the record, without 
objection.
    Mr. McNamar. Thank you.
    Mrs. Biggert . I will now yield myself 5 minutes for 
questions.
    Dr. Birdsall and Mr. Kapoor, is it your testimony that you 
support 100 percent debt relief for HIPC countries?
    Mr. Birdsall. Yes. My testimony is that we support 100 
percent debt relief for HIPC countries who have met certain 
standards of eligibility.
    Mrs. Biggert . Okay.
    And Mr. Kapoor?
    Mr. Kapoor. It is my testimony that we support 100 percent 
debt cancellation not just for HIPC countries, but for all 
impoverished countries that need resources and are having to 
repay debt at the cost of human lives.
    Mrs. Biggert . Okay. Then is it your testimony that you 
support ending the cycle of lend-and-forgive so that poor 
countries are not receiving loans to service existing and 
increasing debt?
    Mr. Kapoor. Absolutely not. We are strongly in favor of 
getting out of the lend-and-forgive cycle. We have been 
extremely strongly supportive of the U.S. initiative to give 
grants only and not loans to especially the poorest countries. 
We believe that 100 percent debt cancellation is a way of 
wiping the slate clean. One-hundred percent debt cancellation 
wiping the slate clean and a combination shift to grants not 
loans is the only way we can get out of the lend-and-forgive 
cycle. That is what we support.
    Mrs. Biggert . Okay.
    Dr. Birdsall?
    Mr. Birdsall. Yes. And I would like exactly the same. It 
does not make sense really to make loans to countries where in 
the future we expect to have to make more loans so that they 
can repay the initial loans. But in particular, what I would 
recommend is that the Congress work with Treasury to encourage 
the World Bank to establish a kind of second window inside IDA 
with some clarity on which countries are eligible for grants.
    Certainly, all those that get 100 percent debt relief 
should have grants going forward, but what would be simple and 
straightforward is to establish an income per capita level 
below which countries should get grants until they move beyond 
that income per capita level. This would be absolutely no 
different from the existing distinction between poor countries 
who are eligible for IDA and the middle-income countries that 
are eligible for the IBRD window at the World Bank.
    Mrs. Biggert . So then is it your testimony that IBRD 
reserves could be mobilized to support the debt relief?
    Mr. Birdsall. I am not prepared to suggest that, but I 
think that the debt relief should be supported by 
contributions, new contributions to the IDA for those poor 
countries and to the African Development Bank, and by sale of 
limited managed sale of IMF gold.
    The problem with attacking, in a sense, the reserves of the 
IBRD is not about the financing. In the medium term, that might 
make sense. My concern about that and our concern at the Center 
for Global Development is that the middle-income countries 
would end up financing in part indirectly those costs. That is 
not such a bad thing in principle. It might be very sensible to 
have some of those countries be indirect donors.
    However, it should come under an umbrella in which they 
have more representation, more voice in making those decisions. 
It will create more complications for overall understanding and 
bringing in China, India, Brazil, Mexico, bringing them to the 
table if they feel that the G-8, the United States and its G-8 
partners, and a set of other rich countries decide in their 
wisdom that the way to finance more debt relief for the poorest 
countries is in effect to impose a somewhat higher price on the 
middle-income countries because if those reserves are used 
indirectly it will increase their cost of borrowing from the 
World Bank.
    Mrs. Biggert . How about you, Mr. Kapoor? Would you support 
using those reserves to support that relief?
    Mr. Kapoor. May I issue a point of clarification? Which is 
that I think the debate about the source of money is 
misrepresented. It goes into nuances which are not necessarily 
true. The reason behind that is that eventually when the IMF 
and the World Bank are wound up, as someday they will be, they 
are continuing institutions, but one hopes and one thinks that 
the world will not need them at some point of time. The money 
that they have in reserves and otherwise will then go back to 
the creditor countries in the proportion of their shares now.
    So the distinction between new resources from creditors, as 
well as existing resources from IFIs, currently is there, but 
it is not exactly black and white. It is shades of gray. Having 
said that, I think that it is entirely possible to in part 
finance IDA from IBRD reserves. I think Nancy does have a 
point. It might lead to a small increase in the cost of loans 
to middle-income countries.
    I have in my written paper clarified that that increase 
would be very small and insignificant, so that is entirely 
possible. However, in terms of the hierarchy of funds, and 
again for the reasons that Nancy highlighted about middle-
income countries not having a fair representation, it is 
perhaps not the most appropriate port of call of reserves to 
use. So there are other avenues that should be tapped.
    However, if there is residual demand for more funds and it 
comes at the cost of some poor countries not getting that 
cancellation, then we yes very strongly favor the use of at 
least some of those reserves. In the past, IBRD has already 
cumulatively transferred $7 billion through annual income 
transfers to IDA, so it does have a precedent. Thank you.
    Mrs. Biggert . Okay. So then it would appear that you 
support the basics that President Bush has been talking about 
for funding the World Bank debt relief?
    Mr. Kapoor. I would like to make a distinction here between 
what President Bush was saying before and what has been said 
yesterday. We strongly endorse what has been said yesterday, 
which is the additional new money which will come from the 
country donors to account for any loss in the lending capacity 
and the grant-giving capacity of IDA. What has been said before 
was slightly different, which was that the money that is used 
for cancellation would actually not be reimbursed by the United 
States.
    So between these two options, we strongly reinforce what 
has been said yesterday, but the previous idea, we are not very 
comfortable with.
    Mrs. Biggert . All right. So to be clear, then, that would 
be that they would not receive the same amount of money after 
the debt relief that they receive now.
    Mr. Kapoor. Yes, that was the previous proposal, but that 
has been addressed in the suggestion that was put forward 
yesterday. There was never a clear, explicit suggestion of the 
transfer of money from IBRD to IDA in any of the U.S. proposals 
that I have seen. So it was discussed, but never formally.
    Mrs. Biggert . Okay. Thank you. My time has exceeded.
    Mrs. Maloney is recognized for 5 minutes.
    Mr. Maloney. I thank all of the members for their 
testimony. In fact, I did read The World is Flat, literally 
last week, and it does present a wake-up call. I would be 
interested in your comments on how we should change our 
policies to address the new changes in the world.
    I would like to begin by asking Mr. Kapoor, Jubilee was 
very active in introducing the Jubilee Act in 2004. Can you 
compare the mechanism that that act uses to pay for debt 
cancellation with other proposals? In what ways is it 
different?
    In your testimony, you also expressed your grief really 
that in many cases aid money, all new aid money, is used just 
for debt service. I would like to know, and if you do not have 
that, if you could give it in writing to the committee, how 
many countries are in that category, and if there are a lot of 
countries that are not already in the HIPC area.
    I would also like you to address another one of your 
statements. You said there was tremendous ambiguity. It seemed 
like an arbitrary decision on how countries were selected for 
HIPC and that many needy ones were left off. So I would like to 
ask you what criteria should we use to respond, if you agree 
with the recommendation that Nancy put forward on per capita 
income.
    And just all of the comments, anybody who would like to 
respond to the provocative questions of Mr. McNamar on how we 
change our new policies in the international community, given 
that the world has become flat.
    Okay. Thank you all for your testimony.
    Mr. Kapoor?
    Mr. Kapoor. Thank you very much for the questions. Please 
remind me if I forget to address any of those. I am a little 
jet-lagged.
    The last question first in terms of the criteria that was 
used for HIPC. It is clearly known that the criteria used was 
politically based. It was also based on the limited resource 
envelope that the countries which were at the negotiating table 
thought they had available, and, hence, large countries, 
especially the example of Nigeria comes to mind, was left off 
simply because it was considered to be too big a case. There 
were not enough resources available.
    The criteria used was arbitrary. There had been a lot of 
analysis on that. A late report from UNDP highlights clearly 
why the criteria was arbitrary. It had to do with debt 
servicing to exports ratios. If you look at most of the numbers 
that the Fund and the Bank use in defining such criteria, they 
are always very round numbers which highlights the lack of 
rigor behind them. So most of these numbers are like 150 
percent or 200 percent or 100 percent. Amazingly, they always 
add up to multiples of 50 percent. So that is something about 
that.
    The second question, I believe, was around the leakage of 
resources of aid money coming out as debt servicing. There are 
several countries, especially many of the poorer middle-income 
countries, the example of the Philippines come to mind, wherein 
the debt servicing paid is far in excess of the new aid flows 
that go in. As to the specific numbers, I am happy to submit 
the answer as a written testimony.
    Mr. Maloney. But what criteria would you suggest we use if 
the other was arbitrary? What criteria would you suggest we 
use?
    Mr. Kapoor. We have done some work in collaboration with a 
number of other civil society organizations. We have developed 
what we call the human development approach to debt 
sustainability. The idea behind that is as long as any country 
has resources that fall short of trying to meet the Millennium 
Development Goals, goals that many OECD countries, all OECD 
countries including the United States have signed up to, as 
long as the resources available fall short of sustaining the 
basic needs of its citizens such as health and education, no 
debt should be serviced. That is the criteria we would like to 
use.
    Based on that criteria, the number of countries which 
qualify, and this relates with Nancy's criteria of having a 
purely low per capita income basis. In fact, if you look at the 
country list that comes out from both these criteria, there is 
a very large degree of overlap. We very strongly feel that 
creditor rights are important, but they should not come at the 
cost of human lives, and that is the basic criteria we want the 
Bank and the Fund to go forward with.
    Mr. Maloney. Do you see a possibility, and I know the aid 
going into many of these countries in South America and all 
over the place, Africa and Asia, it is not just Government 
money. It is from private investments also. Would you have the 
same criteria with the private investments, too, that their 
debt service not be carried if the human suffering is too 
great?
    Mr. Kapoor. There have been interesting suggestions around 
the treatment of sovereign debt. One came up from the Fund. 
There has been another suggestion called the Fair and 
Transparent Arbitration Process put forward by the Civil 
Society. The idea is that enough resources should be provided 
by the international community, including the United States, to 
help meet these basic needs so that the need to borrow at 
exorbitant rates does not arise and the problem of the debt 
forgiveness cycle again is not repeated.
    So as long as there are enough resources available in these 
countries to meet the basic human needs of their citizens, they 
should not be borrowing, especially at exorbitant rates in the 
international markets. However, there are cases where in a 
number of cases it is either desperation which has forced them 
to borrow or there are a number of cases, as you also pointed 
out, of odious debt where odious regimes, including that of 
Iraq and before that the Democratic Republic of Congo and 
Nigeria, have borrowed for nefarious purposes.
    There should be, we very strongly feel, some sort of 
lending guidelines in place the first of January, 2006 going 
forward which ensures that private as well as public lending to 
odious regimes used to suppress populations and used for 
nefarious purposes and military expenditures should not be 
enforceable in the court of law. So regimes or lending to such 
regimes should be declared odious ab initio so that the problem 
does not arise and citizens do not have to pay for money that 
they never benefited from.
    Mr. Maloney. My time is up. Thank you for your leadership 
on helping so many countries. Thank you.
    Mrs. Biggert . The gentleman from Massachusetts, the 
ranking member, is recognized.
    Mr. Frank . Thank you, Madam Chair.
    Let me ask first about the IMF and gold your reservations, 
Ms. Birdsall, about the potential effect of reserves being 
used. I have to say, I am obviously not in the business of 
lending money to the Bank and the IMF, but my own sense is that 
the security of that investment has more to do with the 
inherent advantages and the international backing than the 
actual amount of reserves. I think that there is a very clear 
commitment on the part of the donor countries not to let them 
go bust.
    Leaving that aside, does trying to get some of the monetary 
value out of the IMF gold, would that have any similar 
problems?
    Mr. Birdsall. No, it actually does not because--it is sort 
of a complicated financial system.
    Mr. Frank . We are the Financial Services Committee. We are 
supposed to pretend we can understand all of it, so it is okay.
    [Laughter.]
    Mr. Birdsall. Right. My apologies. You are the ones who 
would understand. The IMF books its gold at an old price that 
reflects the price that it paid or the market value when it 
acquired the gold. So it is booked at about $45 billion, but it 
is actually worth closer to 10 times that amount. So when it 
sells the gold, it is actually releasing resources and 
generating cash, which is much greater than the current book 
value.
    So it could sell gold and actually enhance its ability in 
the future.
    Mr. Frank . So you are in favor of using the gold to pay 
for IMF debt relief?
    Mr. Birdsall. Absolutely. I think that that holds the IMF 
accountable for what turned out to be expensive loans to 
countries.
    Mr. Frank . I agree. I gather we are getting to the point 
of agreeing on IMF debt relief, because there is certainly no 
logical reason to not also do that, and there has been the 
question of how you pay for it.
    Mr. Birdsall. I think if I could say that I think there is 
a legitimate concern on the part of gold-producing countries 
and gold-producing States about sales from an official 
institution not creating price volatility.
    Mr. Frank . I understand. But I think those people know how 
to put a cartel to work. The principles of a cartel could be 
employed to not have any impact on the price. They know how to 
do that.
    Mr. Birdsall. Yes, well, whatever. I am not sure whether I 
want to agree with any use of those words. But I think the 
point is that the price of gold is currently quite high, that 
there is an arrangement that has been proposed by the technical 
staff at the IMF under which IMF gold could be sold under the 
rubric of a current agreement among central banks.
    Mr. Frank . I understand the World Gold Council has 
indicated that it could be done right in a way that they could 
support.
    Mr. Birdsall. I think here what we need is some leadership 
from the administration and from both parties in Congress to 
make a kind of deal that would ensure that this could move 
forward.
    Mr. Frank . Okay. I appreciate that.
    Mr. Kapoor, you look like you want to address that.
    Mr. Kapoor. First may I just correct something that Nancy 
said, which is the amount of gold which would be the amount of 
money that would be raised would be $45 billion. Its current 
value is closer to about $8 billion. I think you said $45 
billion and 10 times 45. So we do not have $450 billion in 
gold. I wish we did, but we do not.
    I would just like to add to your first question that the 
IMF acknowledges that the sale of gold would actually result in 
a small increase in the Fund's liquidity and that it need not 
erode the Fund.
    Mr. Frank . All right. That was obvious. So none of the 
reservations, whatever they were about the use of reserves, are 
there.
    Mr. Kapoor. Right.
    Mr. Frank . My next question has to do with, and I do think 
we are making some progress, the Poverty Reduction and Growth 
Fund at the IMF, which to my mind is a lot better than the 
structural adjustment program which preceded it, and which I 
think we helped get rid of. That was one of the conditions that 
I think this committee helped put into the previous set of 
agreements.
    What should we do with the Poverty Reduction and Growth 
Fund? There have been a variety of proposals with regards to 
the IMF. Should the IMF stay in that business? Should it go to 
the World Bank? If the function goes to the World Bank, should 
resources go with it? I would be interested, all of you, in 
what recommendations you would make about that.
    Mr. Birdsall. Maybe I could start. This is not something in 
my current testimony.
    Mr. Frank . I know. That is why I asked you.
    Mr. Birdsall. I do believe that the PRGB facility, all its 
assets and all its liabilities, should be transferred to the 
World Bank.
    Mr. Frank . So you would transfer the function and the 
assets and liabilities.
    Mr. Birdsall. I would transfer not the functions that are 
the core functions of the IMF.
    Mr. Frank . No, the PRGF. We are not talking about the core 
functions of the IMF.
    Mr. Birdsall. And when the IMF would then do a program in a 
very poor country, it would do all the normal arrangements, 
with one exception, so that that very poor country does not 
need to borrow from the relatively high-cost IMF. It would do 
an IMF program with a loan subsidized from the resources at the 
PRGF. This would have the tremendous advantage of making the 
World Bank clearly accountable for the long-run structural 
issues. The IMF, sticking to its core issues--
    Mr. Frank . And getting them to work together, which I 
would appreciate.
    Mr. Birdsall. --and getting them to work together. Exactly. 
And that would also subsume a little bit the distinction now 
which says macro first, micro second.
    Mr. Frank . Let me ask Mr. Kapoor and Mr. McNamar to 
comment on this. My time is up. Go ahead.
    Mr. Kapoor. I agree that the PRGF should be wound up and 
the resources, not the function, should be transferred to the 
Bank. One possible suggestion for the use of that money could 
be setting up a compensatory finance facility for commodity 
price crashes.
    Mr. Frank . A what facility?
    Mr. Kapoor. A compensatory commodity facility to compensate 
for sharp falls in commodity prices, which is one of the 
serious problems.
    Mr. Frank . Administered at the Bank?
    Mr. Kapoor. At the Bank, administered at the Bank, or it 
could go into the general IDA pool. So the current functions of 
the PRGF need to stop.
    The second point, I would just like to go back to the 
previous question, if I have a second.
    Mr. Frank . Not for very long because we only have 5 
minutes. Mr. Kapoor, I know you are jet-lagged, but 5 minutes 
is still 5 minutes.
    Mr. Kapoor. Okay.
    Mr. Frank . Mr. McNamar?
    Mr. McNamar. I looked at this question of gold sales and 
revaluing gold sales. I am trying to figure out how the world 
would be better off after we do the right thing, whatever that 
is. I do not know.
    Mr. Frank . Okay.
    Mr. McNamar. Gold is great for jewelry.
    Mr. Frank . Mr. Kapoor and Mr. McNamar, again.
    Mr. Birdsall. Could I intervene here?
    Mr. Frank . Then Mr. Kapoor, let me go back to you again on 
gold for 30 seconds.
    Mr. Kapoor. This is the President of Ghana, one of the 
largest exporters of gold in terms of relative proportion of 
exports, making a statement yesterday. "As an exporter of gold, 
Ghana is confident that the properly managed sale of gold will 
not negatively impact the gold price. Instead, it will enable 
countries such as ours to redouble efforts to pursue pro-
growth, pro-jobs development to the benefit of our people." And 
today we have statements from the President of Tanzania, 
another major gold-producing HIPC country.
    Mr. Frank . I want you to submit those for the record.
    Mr. McNamar. May I ask how that helps poverty in Africa?
    Mr. Kapoor. It puts resources there.
    Mr. Frank . Mr. McNamar, you do not talk to each other. I 
do not mean to be rude, but we have only a limited amount of 
time. Afterwards, you have all day to talk to each other. But 
the answer to your question is that we are talking about it 
specifically to finance debt reduction at the IMF. That is how 
it would be helpful, debt cancellation.
    Dr. Birdsall, your last statement?
    Mr. Birdsall. This Administration and this Congress want 
debt relief. This is one way to help finance that debt relief. 
The cost is basically that some of the richest countries' 
central bankers will sleep slightly less well at night because 
there will be slightly less gold not being used that they could 
use in the event of a global financial crisis.
    Mr. Frank . Thank you.
    Thank you, Madam Chair.
    Mrs. Biggert . Thank you.
    The gentlewoman from Florida is recognized for 5 minutes.
    Ms. Wasserman Schultz. Thank you.
    My question is to Mr. Kapoor. I would really like you to 
share your thoughts about the effects of the overwhelming debt 
of these nations on their political stability.
    Given the Administration's interest in burgeoning 
democratic governments, and you touched on it a little bit in 
your testimony, but what that would mean in terms of global 
security, given our concern with terrorism, how that 
potentially could breed the next generation of terrorists 
without us dealing with it.
    Mr. Kapoor. For starters, the current situation as it works 
is that even countries which are getting significant aid flows 
are servicing a lot of the debt. So what happens is that the 
accountability that these countries' governments have is to the 
external donor agencies, not the people, because the tax 
revenues that are raised from the people go to service debt, 
and instead they get compensated by new aid flows. So the 
accountability, instead of being to the people, likes more with 
external aid groups.
    So canceling debt would first and foremost encourage 
accountability to local parliaments and the local population, 
the way it happened in the United States where the Federal 
Government is responsible on about how it spends the taxes that 
it raises from the population. It is responsible to the 
Congress. It is answerable to the Congress. It is scrutinized 
by the Congress. It is scrutinized by the people. So that is 
one thing in terms of long-term institutional change. It would 
encourage a more active participation, a more active stake from 
the people.
    The second is that the poverty and the desperation and the 
fact that we now live in a world where images of great 
prosperity are being beamed across the continents. When I was 
visiting some slums in India, people who had absolutely no 
access to any of the things that we take for granted, they 
still saw the same images of extreme prosperity and, in fact, 
opulence that we see on our television screens. The more 
inequality there is, the more injustice that is felt in the 
countries, the more incentive there is for people to be angry. 
And when one is angry, irrational things happen, as we have 
seen.
    The next point there is that in the cases of countries, for 
example such as South Africa and the Philippines and Indonesia 
and Nigeria, where past lending has been odious and 
questionable primarily because of Cold War dynamics, wherein 
for example the regime in the Democratic Republic of Congo was 
given the largest loan ever given to an African country by the 
Fund on the insistence of OECD countries just the year after 
the Fund's representatives said that there is no hope of any 
money ever being repaid, and the money, which was about $1 
billion, went straight into the account of Mobutu, who was the 
dictator. It never reached the people of Congo.
    The more these injustices add up, again, the more anger 
there is. And one way of redressing this would be to wipe the 
slate clean and come up with a practice wherein no more lending 
goes to support dictators. No more lending goes to prop up 
regimes which are oppressing their own people, and any money 
that goes in, goes towards development effort.
    Ms. Wasserman Schultz. Shouldn't there be a little bit more 
accountability in terms of following the money once it is lent? 
With the money that has gone to dictators and non-democratic 
governments that have mostly benefited leaders of nations 
instead of the people of those nations, what reforms do you 
think Mr. Wolfowitz should make when it comes to future lending 
decisions?
    Mr. Kapoor. I have made a suggestion earlier, which is the 
adoption or discussion of future lending practices, because 
currently even as we speak, civil society organizations have 
been campaigning for addressing the issue of historical odious 
or illegitimate dictators. But even in those 5 years that this 
campaign has gone on, new lending has happened to regimes which 
are run by dictators which are being supported for other 
political objectives, similar to what happened in the Cold War 
except the political objectives are different.
    So what one needs to do under the leadership of Mr. 
Wolfowitz is, given his credentials as a champion of freedom 
and democracy, to then have clear guidelines in place that the 
Bank and the Fund will not lend to regimes which are not 
acceptable, which violate human rights, to get this approved 
and to get broad approval on this issue from international 
creditors, so that we will not experience these problems in the 
future as we did in the past, so that people will not be 
suppressed with the money that we give to Governments 
ostensibly for development purposes. So that is one way 
forward.
    As to the question of historical debt, there are loads of 
skeletons in the cupboard of all these OECD countries. As to 
whether a realistic political compromise can be reached is 
questionable, which is why an easy solution which circumvents 
all this problem of digging the dirt out would be to cancel 
debt and then move on with a cleaner regime.
    Mrs. Biggert . The gentlelady yields back.
    The gentlelady from Wisconsin, Ms. Moore, is recognized for 
5 minutes.
    Mr. Moore. Thank you, Madam Chairperson.
    A really distinguished panel, thank you for coming.
    I guess my first question is I would like to address it to 
Ms. Birdsall. It is really related to comments that you have 
made in your written testimony that may be a little bit off the 
beaten track and also sort of dovetails with the question that 
Mr. Frank talked about earlier.
    We are talking about debt relief here, and there seems to 
be a consensus, I think you agree, that debt cancellation is 
just not enough to really relinquish this unsustainable debt 
that some of these countries have. And so aid, really we are 
looking at what Tony Blair has been doing with trying to get 
the European Union together to come up with this millennial 
program. It is embarrassing how little the United States has 
contributed to that. I refer, Madam Chair, and would like to 
enter into the record an article from today's New York Times, 
Crumbs for Africa.
    Mrs. Biggert . Without objection.
    Mr. Moore. It really talks about how only one-quarter of 1 
percent of money in foreign assistance goes to Africa from the 
United States. So even if we were to provide debt relief and 
again we would not be this lend-borrow-lend-borrow cycle, 
places like Africa would be in a tremendous amount of trouble.
    So I guess my question to you first of all would be really 
to affirm that that is the case and to really describe what 
other sorts of programs besides debt relief that you would want 
to encourage us to look at. I thought I heard you say that 
canceling debt service was also an important element of debt 
relief. Did I hear you correctly?
    Mr. Birdsall. The proposals that I support include a write-
down at 100 percent of the debt owed by the poorest countries 
to the multilateral creditors. Most of those countries have 
already had their bilateral debt largely forgiven. So once all 
of that existing debt is written down, they would not really 
have the same problem of debt service going forward. That would 
mean that as long as the current level of aid flows continued, 
they would be much better off. So first, yes, write off the 
debt of these poorest countries.
    Second, it is absolutely the case that the U.S. gives less 
for foreign aid overall than virtually all of our allies, with 
the possible exception of Japan. You take a dime out of your 
pocket and add three pennies every day, and that is how much we 
spend through our public budget on foreign aid, and another 
nickel through private giving. The Bush administration has 
justifiably emphasized the importance of using existing 
resources as well as possible.
    At the same time, there is certainly room if we are to be 
the leader of the free world to move forward and find ways to 
provide additional resources, always attending to the reality 
that those resources need to be used as effectively as 
possible. That is why I emphasized the importance of 
evaluation, the importance of signaling to places like the 
World Bank and the Inter-American Development Bank what a 
positive thing it could be for us to learn from what is working 
and to create the evidence base that would justify larger 
increases in the future.
    Mr. Moore. Well, given that, Ms. Birdsall, here we are on 
the horns of a dilemma. If in fact we would agree with the Bush 
administration's assertions that we ought to do more effective 
work with our current resources, if we forgive debt and 
presumably the funds that would be returning into a revolving 
loan fund, and I am sorry I do not know which one of the funds 
operates like a revolving loan fund, so that those other 
countries like China, for example, who are now doing better and 
are repaying their loans, if we forgive debt and we do not have 
these funds revolve back in and be available for reinvestment, 
then how are we justifying not upping our contributions and 
grants when we know for a fact that there will not be efficient 
and effective ways, that the current resources will shrink with 
debt relief? We have all agreed that debt relief is important, 
but then that is a smaller pot to do good.
    Mr. Birdsall. Yes, we are hoping that the outcome of the 
ongoing discussions between Prime Minister Blair and President 
Bush will be an agreement that the U.S., among the other 
advanced economies, will make up the difference going forward 
by increasing U.S. contributions to the IDA funds at the World 
Bank. It would apply also to the soft money window at the 
African Development Bank.
    This would have the additional advantage, as I emphasized 
in my written testimony, of moving more of the U.S. foreign aid 
money through multilateral channels. I believe that is 
important because we are no longer living with a donor system 
that can be unilateral. Leadership from the U.S. has to be done 
in a multilateral context because the U.S. now, although it is 
still a very important donor, is a much smaller part of the 
picture certainly than it was when we invented the Marshall 
Plan.
    Mr. Moore. Thank you. My time has expired.
    Mrs. Biggert . Thank you.
    The gentleman from California, Mr. Sherman?
    Mr.Sherman. Thank you.
    I would like to use my 5 minutes mostly to make comments. 
The first is that debt relief is money for the countries to 
which it is granted. Countries could stop making debt payments. 
They do not because by getting debt relief, they are in a 
position to borrow more.
    Now, I believe we should do more in foreign aid. I believe 
we should give more, and debt relief is one way to do it. But 
we should provide debt relief only to those countries that we 
would give cash to. It is just like our domestic policy. You 
see people advocating tax credits for programs they would not 
advocate writing a Government check. There are two ways to 
provide U.S. Treasury funds or dispensation to a particular 
cause, and we ought to do so when the cause warrants it.
    The second point I would make is that the folks before us 
have testified and are experts in many things, but you are not 
experts at what it takes to get the average American to take 
money out of their pocket, money away from their own family, 
money that means they cannot send their kids to a higher-priced 
college, and give it for foreign aid. I have some expertise in 
that, and I have advocated higher foreign aid throughout my 
career.
    The one piece of advice I would give you is please do not 
disparage America in order to encourage generosity. And do not 
say that all we do for the world is contained in the foreign 
aid budget, while ignoring the hundreds of billions of dollars 
we spend to provide stability for the world, which I might add 
is more important than anything aid does. If you look around 
the world as to where people are dying, it is places where 
there is instability, places where there is conflict.
    You can doubt very much the effectiveness and intelligence 
of our foreign policy and military efforts designed to provide 
stability and promote democracy around the world, but you 
cannot doubt that money spent promoting democracy, defending 
democracy, and promoting order does as much as money spent on 
any other aspect of foreign aid. To count what Japan does and 
compare it to the United States while ignoring the vast bulk of 
our military budget is not to defend the United States, but is 
to defend a world order and is an unfair disparagement to those 
very taxpayers I represent.
    Finally, we have heard testimony about multinationalism in 
our aid. Imagine going to my district and saying you want to 
increase foreign aid, and oh by the way, $1 billion is going 
from the World Bank to the people who run and mis-run the 
Government in Iran, the very people trying to develop a nuclear 
weapon, smuggle it into the United States, and threaten to blow 
up or actually blow up an American city, and that is what your 
foreign aid dollars are being used for.
    I will tell you now, if you want us to continue to 
participate in multilateral organizations, you must remove the 
malignancy from those organizations. A little inefficiency? 
Hey, we are used to that. But when you take money from my 
district to spend to help keep in power the people who are 
trying to literally destroy my district or some other town, 
whichever town they happen to choose, then you can only hope 
for the ignorance of the American people and that ignorance of 
the fact that their foreign dollars are going to Teheran 
through these multilateral organizations.
    I look forward to an Administration which after 5 years 
will have the guts to do something about the World Bank 
disbursements to the Government in Iran. I have talked to the 
President many times. He has a worldwide image of 
aggressiveness which he has gained only through his dealings 
with one particular country. When it comes to dealing with the 
World Bank, it is rather frustrating.
    So I thank you for your time. I do not know if I have any 
time to allow a response from our witnesses, and I do not know 
if any of them are itching to make such a response.
    Mrs. Biggert . Thank you. The gentleman yields back.
    I do appreciate the gentleman's comments.
    I would like to just ask Dr. Birdsall, what country 
provides the largest amount of money right now for development?
    Mr. Birdsall. In absolute terms, I believe the U.S. still 
contributes the largest single amount. If you compare the U.S. 
to all of our European allies, we are about 50 percent of what 
they together provide.
    Mrs. Biggert . And what country comes in second to the U.S. 
in terms of development assistance in dollar terms?
    Mr. Birdsall. I am afraid I am not sure. It is probably 
Japan. Right. So Japan and the U.S. are the smallest relative 
to the size of their economies in their giving on public aid 
and the largest in absolute terms.
    Mrs. Biggert . So you are just going from percentage, 
rather than dollars.
    Mr. Birdsall. Well, I am answering your question in terms 
of absolute amount of dollars. So the U.S. currently provides I 
think an estimated $15 billion or $16 billion a year.
    Mrs. Biggert . Nineteen billion?
    Mr. Birdsall. It depends on the definition, how much is 
included for our efforts in Iraq, for example, and Japan would 
be behind that.
    Mrs. Biggert . Eight or 9 billion.
    Mr. Birdsall. Thank you very much.
    Mrs. Biggert . Yes. Thank you.
    I would like just to say that I think that the American 
people are the most generous in the world, and we have always 
been willing to open our hearts and our pocketbooks for others. 
I think we have to keep that in mind.
    Mr. Birdsall. Absolutely. May I make a comment on 
Representative Sherman's points? To endorse the general view 
that it is important to look not only at our aid budget, but at 
the many different ways we affect developing countries. At the 
Center, we have an index that ranks rich countries in terms of 
a set of policies, including trade, migration, environment and 
so on, and the U.S. is first generally on trade. It is the 
least-worst, you might say, among all the countries.
    Mrs. Biggert . Let me just note that some members may have 
additional questions for this panel which they may wish to 
submit in writing. Without objection, the hearing record will 
remain open for 30 days for members to submit written questions 
to these witnesses and to place their responses in the record.
    With that, I would like to thank the witnesses. You have 
been outstanding. We have had a spirited debate and thank you 
for coming from all the distances that you have come. We really 
appreciate it.
    With that, this hearing is adjourned.
    [Whereupon, at 4:00 p.m., the subcommittee was adjourned.]


                            A P P E N D I X



                              June 8, 2005


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