Debt Relief

G7 agree to tsunami debt relief

UK’s Gordon Brown gets industrialised countries to agree to freeze repayments.

London: UK finance minister Gordon Brown had full support from other major industrialised nations to freeze debt repayments immediately from countries affected by the Indian Ocean tsunami, he said yesterday.

The deal between members of the Group of Seven (G7) will be announced at a creditors’ meeting next week as Brown sets off on a week-long trip to Kenya, Tanzania, Mozambique and South Africa.

Both Brown and Prime Minister Tony Blair aim to put development high on the agenda as Britain holds the presidency of the Group of Eight (G8) – the G7 plus Russia – this year.

But the attention on the tsunami nations, where about 145 000 people have died, threatens to challenge the stated focus on Africa.

Asian countries affected have roughly $272 billion (R1.55 trillion) in external debt, with Indonesia owing $48 billion to the Paris Club group of creditors, which could generate more than $3 billion in repayments this year.

Britain has said it is eager to tackle Africa’s economic woes and wants its allies in the G8 to agree to multilateral debt relief, set a timetable for raising development aid to 0.7 percent of national income and sign up to a scheme to double aid to poor countries.

Brown also renewed a broad call to liberalise trade for the benefit of poor nations as well as making a renewed bid for a so-called international finance facility, which would leverage existing aid budgets in the capital markets to raise more funds.

“We need to not only do all we can to aid the reconstruction of those countries devastated by the Asian tsunami, but we must make a wider offer as bold as the offer that was made in the Marshall Plan of the 1940s,” Brown said in Edinburgh.

In 1948, US secretary of state George Marshall launched a broad initiative to rebuild Europe’s economy and social fabric from the ruins of World War 2, to which the US pledged 1 percent of national income a year.

Brown called for a similar “new deal” between rich and poor nations ahead of the G7 finance ministers’ meeting in London next month.

The concerted move by the creditor nations to help south Asia could bring debt relief or write-offs to the poorest nations, mainly in Africa, to centre stage.

Brown proposed that in 2005 the richest countries match 100 percent bilateral relief and offer 100 percent multilateral relief on the $80 billion of debt the poorest countries owe to the International Monetary Fund, the World Bank and the African Development Bank.

His speech, however, was overshadowed by Blair’s monthly press conference, which had been brought forward by two hours.

There was speculation that Blair, who was criticised for not cutting short his holiday to address the tsunami disaster, was attempting to wrest back control of the issue.

Brown sought to play down concerns, as did Blair, who supported Brown’s Africa agenda.

Blair said: “The tragedy of the tsunami was through the force of nature. The tragedy of Africa is through the failure of man. There is the equivalent of a man-made, preventable tsunami every week in Africa.”

Governments so far have pledged $3.7 billion in tsunami aid and corporations and individuals have promised another $630 million.

Ross Finley, January 7, 2005

Categories: Debt Relief, Odious Debts

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