G-8 nations' finance ministers discuss debt relief
Saturday, June 11, 2005
LONDON -- Backed by the United States, Britain pressed the world's economic powerhouses Friday to cancel $15 billion owed by 18 poor nations and free up money to spend on health care, education and infrastructure in those struggling lands.
There was support for the plan at talks among finance ministers from the Group of Eight nations, but some reported differences on how to the finance the loan write-offs and said an agreement was unlikely before next month's meeting of G-8 leaders in Scotland.
Britain and the United States want their G-8 partners to support eventually canceling 100 percent of all debts that poor countries owe multilateral institutions such as the World Bank, the International Monetary Fund and the African Development Bank.
The proposal, negotiated earlier this week in Washington by Prime Minister Tony Blair and President Bush, followed a significant concession from the White House that money used to reimburse the lending institutions would not come out of future aid, British officials said.
The agreement would initially cover 18 nations eligible for debt relief under an IMF-World Bank program to encourage economic and government reforms. Aid experts estimate that would leave those countries with an extra $1 billion to spend at home each year.
A further nine countries are said to be close to meeting targets set out under the initiative and would then qualify for debt relief. Eleven nations have been too hampered by corruption, poor governance, wars or other challenges to complete the economic reform stage of the initiative, which was started by the World Bank and IMF in 1996.
British Treasury chief Gordon Brown said Friday he was optimistic the G-8 nations -- the United States, Britain, Japan, Germany, France, Italy, Canada and Russia -- would approve canceling debts.
"Much is still to be done, but I think there is a will to do this in a way that would see the biggest debt settlement the world has ever seen," Brown said.
Support appeared strong from some countries at the talks, which were to continue today.
Canadian Finance Minister Ralph Goodale said his country was prepared to assume its "full fair share of the cost responsibility for this."
"I am more optimistic going in to this meeting about an acceptable result than I have ever been," he said.
Italy's finance minister, Domenico Siniscalco, said he was "very optimistic" debt relief would be worked out.
Blair and Bush believe the international institutions should simply scrap the debts of poor countries -- totaling up to $68 billion for nations in sub-Saharan Africa alone -- because the crippling repayments eat up money that could be better spent on developing economies and improving peoples' lives.
They say the world's rich nations would provide extra money to the lenders to compensate for the loans and ensure future aid packages are not affected.
But disagreements remain over how to pay for the debt relief.
Britain has proposed that the IMF revalue or sell some of its gold reserves to raise cash for the plan. Washington, worried about the impact on the gold bullion market, opposes that.
German Finance Minister Hans Eichel predicted no agreement would come before the G-8 summit in Gleneagles, Scotland, on July 6-8.
"We won't finish here, as we are still a bit too far apart," he told reporters. "But I think we will come to an agreement by the time of Gleneagles."
There was no indication of Russian support for the plan. A Russian Finance Ministry official, who declined to be identified, pointed out his country's economy ias merely stable and said the international community has not forgiven Russia's debts.
Ministers discussed debt relief at a dinner Friday and would talk further today, when they also planned to tackle other topics such as the effect of high oil prices on global growth.