[Congressional Record Volume 167, Number 187 (Monday, October 25, 2021)]
[House]
[Pages H5838-H5840]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  SOVEREIGN DEBT CONTRACT CAPACITY ACT

  Ms. WATERS. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 4111) to require the Secretary of the Treasury to direct the 
United States Executive Director at the International Monetary Fund to 
advocate that the Fund provide technical assistance to Fund members 
seeking to enhance their capacity to evaluate the legal and financial 
terms of sovereign debt contracts, and for other purposes.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 4111

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Sovereign Debt Contract 
     Capacity Act''.

[[Page H5839]]

  


     SEC. 2. SUPPORT TO ENHANCE THE CAPACITY OF INTERNATIONAL 
                   MONETARY FUND MEMBERS TO EVALUATE THE LEGAL AND 
                   FINANCIAL TERMS OF SOVEREIGN DEBT CONTRACTS.

       (a) In General.--Title XVI of the International Financial 
     Institutions Act (22 U.S.C. 262p-262p-13) is amended by 
     adding at the end the following:

     ``SEC. 1630. SUPPORT TO ENHANCE THE CAPACITY OF FUND MEMBERS 
                   TO EVALUATE THE LEGAL AND FINANCIAL TERMS OF 
                   SOVEREIGN DEBT CONTRACTS.

       ``The Secretary of the Treasury shall instruct the United 
     States Executive Director at the International Monetary Fund 
     to use the voice and vote of the United States to advocate 
     that the Fund promote international standards and best 
     practices with respect to sovereign debt contracts and 
     provide technical assistance to Fund members, and in 
     particular to lower middle-income countries and countries 
     eligible to receive assistance from the International 
     Development Association, seeking to enhance their capacity to 
     evaluate the legal and financial terms of sovereign debt 
     contracts with multilateral, bilateral, and private sector 
     creditors.''.
       (b) Report to the Congress.--Within 1 year after the date 
     of the enactment of this Act, and annually thereafter for the 
     next 4 years, the Secretary of the Treasury shall report to 
     the Committee on Financial Services of the House of 
     Representatives and the Committee on Foreign Relations of the 
     Senate on--
       (1) the activities of the International Monetary Fund in 
     the then most recently completed fiscal year to provide 
     technical assistance described in section 1630 of the 
     International Financial Institutions Act, including the 
     ability of the Fund to meet the demand for the assistance; 
     and
       (2) the efficacy of efforts by the United States to achieve 
     the policy goal described in such section and any further 
     actions that should be taken, if necessary, to implement that 
     goal.
       (c) Sunset.--The amendment made by subsection (a) shall 
     have no force or effect after the 5-year period that begins 
     with the date of the enactment of this Act.

  The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from 
California (Ms. Waters) and the gentlewoman from Missouri (Mrs. Wagner) 
each will control 20 minutes.
  The Chair recognizes the gentlewoman from California.


                             General Leave

  Ms. WATERS. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days in which to revise and extend their remarks on 
this legislation and to insert extraneous material thereon.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentlewoman from California?
  There was no objection.
  Ms. WATERS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, earlier this year, the Financial Services Subcommittee 
on National Security, International Development and Monetary Policy 
held a hearing on China's lending practices and their impact on the 
international sovereign debt architecture. The hearing examined China's 
dominant position as the largest official creditor in the world, with 
China's outstanding claims larger than those of all other bilateral 
creditors combined. We also examined how China lends with respect to 
the terms and conditions China imposes on borrowing countries through 
its sovereign debt contracts.
  Among the witnesses who testified were authors of a recent study that 
examined 100 China sovereign debt contracts, which found that since 
2014, every sovereign debt contract examined contained strict 
nondisclosure requirements that prohibited the borrower from disclosing 
the terms of, and even the existence of, the debt itself.
  Many of the contracts examined sought to elevate Chinese Government 
loans over other creditors by requiring the creation of China-
controlled offshore collateral accounts and by explicitly prohibiting 
the debt from being included in any multilateral debt restructuring 
initiative.
  The study also found a number of contracts with cross-default and 
accelerated payment provisions that give China substantial leverage 
over an array of domestic and foreign policy decisions that a borrowing 
country might undertake.
  The absence of transparency not only prevents citizens from holding 
their governments accountable for their borrowing decisions, but it 
also obscures a country's true financial picture from other creditors, 
which can undermine sovereign debt rescheduling operations that are 
based on systems of trust and equitable burden sharing among all of a 
country's creditors.
  For example, in Zambia, one of three countries that has applied for 
debt relief under the new G20 Common Framework initiative, new 
revelations about undisclosed Chinese debt nearly doubled its total 
official amount owed from $3.4 billion to $6.6 billion.
  Opacity also creates greater opportunity for political capture and 
corruption and undermines debt risk management and surveillance work.
  It was this context in which I introduced, with Ranking Member 
Patrick McHenry, H.R. 4111, the Sovereign Debt Contract Capacity Act, 
which directs the Secretary of the Treasury to instruct the United 
States executive director at the International Monetary Fund to use the 
influence of the United States at the IMF to advocate that the Fund 
provide technical assistance to bolster the capacity of developing 
country debt managers to evaluate and negotiate both the financial and 
the legal terms in sovereign debt contracts.
  It is important that this kind of capacity building also be available 
through multilateral channels like the IMF, which have a wider global 
reach. Multilateral approaches can also be more effective since 
national programs risk being perceived as an instrument of power 
politics and beholden to certain interest groups within a country.
  To be sure, some countries sign bad contracts for the wrong reasons, 
including corruption and governance problems. In a country that is 
running up oppressive, hidden debt because its leaders are corrupt, 
training is not going to help a lot. But ensuring that technical 
assistance is available to any developing country that requests help in 
assessing the technical, legal complexities of sovereign debt contracts 
would be an important step in reform of the sovereign debt crisis 
management system.
  Mr. Speaker, for these reasons, I urge my colleagues to support this 
bill, and I reserve the balance of my time.
  Mrs. WAGNER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in strong support of H.R. 4111, the Sovereign 
Debt Contract Capacity Act, an important piece of legislation sponsored 
by our chairwoman and cosponsored by our committee's lead Republican.
  China has now become the world's largest official creditor, but the 
details of its lending remain notoriously opaque.
  At a hearing in May, the Financial Services Committee examined how 
China has been using strict confidentiality arrangements, cross-default 
provisions, and other tools to hide the details of its loans and 
potentially influence borrowers' domestic and foreign policies.
  A recent analysis by the research group AidData has also shown that 
42 countries now have public debt exposure to China in excess of 10 
percent of their GDP, which is largely hidden from conventional 
reporting to the World Bank.
  H.R. 4111 would address this problem by supporting technical 
assistance from the International Monetary Fund to help developing 
countries better assess these debt contracts.
  This legislation builds on a bipartisan law authored by our 
colleague, Congressman Hill from Arkansas, that requires the Treasury 
Department to push for greater Chinese debt transparency at the 
international financial institutions.
  Together, these two bills are a clear statement that our committee 
wants the Treasury Department to prioritize the threat of China's 
hidden debt and give countries the necessary technical assistance to 
push back on Beijing.

  H.R. 4111 is especially timely since the IMF is confronting serious 
difficulties carrying out new programs since China has been so slow 
negotiating its loans to IMF borrowers.
  If the International Monetary Fund can't accurately assess borrowers' 
liabilities to Beijing, it will have trouble providing its own 
financing. In other words, China's opaque lending practices are not 
just a threat to borrowing countries; it puts at risk the operations of 
the IMF, World Bank, and other multilateral lenders. This is 
unacceptable.
  I commend the chairwoman for sponsoring this legislation and hope 
that our committee can continue to work in such a bipartisan manner to 
address

[[Page H5840]]

China's exploitation of countries around the world.
  Mr. Speaker, I urge my colleagues to support H.R. 4111, and I reserve 
the balance of my time.
  Ms. WATERS. Mr. Speaker, I am prepared to close, and I reserve the 
balance of my time.
  Mrs. WAGNER. Mr. Speaker, I thank the chairwoman, again, for her 
strong legislation. I would urge all my colleagues to support H.R. 
4111, the Sovereign Debt Contract Capacity Act, and I yield back the 
balance of my time.
  Ms. WATERS. Mr. Speaker, I yield myself the balance of my time.
  In closing, I want to note that H.R. 4111 also directs the U.S. to 
advocate for the IMF to develop and promote a shared understanding of 
standard terms and sound practices with respect to sovereign debt 
contracts.
  Officials for countries that sign oppressive debt contracts are often 
told that the proposed terms are market standard where either there is 
no standard or where the standard is quite different from what is being 
proposed. This would be another positive reform of the sovereign debt 
architecture.
  I would like to thank Ranking Member McHenry for working with me on 
this important bill. H.R. 4111 has been endorsed by Oxfam, Bread for 
the World, ONE, and the AFL-CIO.
  Mr. Speaker, I urge my colleagues to support this bipartisan bill, 
and I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentlewoman from California (Ms. Waters) that the House suspend the 
rules and pass the bill, H.R. 4111.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds 
being in the affirmative, the ayes have it.
  Ms. WATERS. Mr. Speaker, on that I demand the yeas and nays.
  The SPEAKER pro tempore. Pursuant to section 3(s) of House Resolution 
8, the yeas and nays are ordered.
  Pursuant to clause 8 of rule XX, further proceedings on this motion 
are postponed.

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