Debt Relief

G-7 countries willing to offer debt relief

The world’s seven wealthiest nations said Saturday they were willing to take on up to 100 percent of the debt owed by some of the poorest countries. But they failed to agree on a British plan to boost international aid by $50 billion a year.

But G-7 finance ministers said they would consider debt relief on a country-by-country basis and underlined that governments must show themselves accountable for how they would use money freed up by the relief for poverty reduction.

“It is the richest countries hearing the voices of the poor,” said Britain’s Treasury chief Gordon Brown, hailing the London gathering as a breakthrough.

The ministers did not make any firm promises or say when such a relief program would begin or how much money the nations would be willing to provide.

But it was the firmest commitment the G-7 industrialized nations have made to alleviate the debt burden that cripples the Third World.

Britain has made tackling poverty in Africa and the developing world a priority for its presidency of the G-8 – the Group of Seven industrialized nations, plus Russia – and says the U.N.’s Millennium Development Goals of tackling the poverty, hunger and disease affecting billions of people will not be met by 2015 without urgent action.

But U.S. opposition scuttled Brown’s attempts to secure backing for his plans to double international aid by raising some $50 billion on the world capital markets.

France, Germany and Italy backed his International Finance Facility, but the United States said the plan did not meet U.S. budgetary rules.

“The IFF is something that the U.S. cannot support because of our legislative process,” U.S. Treasury Undersecretary John Taylor said.

Campaigners say the poorest countries find it impossible to improve their status because of unfair trade tariffs and the massive burden of interest repayments.

The G-7 ministers said that if a nation is approved for relief, their governments would be willing to take on up to 100 percent of the country’s debt owed to international bodies such as the World Bank and African Development Bank, meeting interest repayments and paying off the principle.

“We are agreed on a case-by-case basis analysis of HIPC (heavily indebted poor countries) based on our willingness to provide as much as 100 percent multilateral debt relief,” the ministers said in a statement. To qualify, developing countries must have “sound, accountable and transparent institutions.”

Discussions on how to move forward with the relief will continue during Britain’s presidency of the EU, with further details expected at the G-8 summit in July.

Nations in sub-Saharan Africa alone owe some $68 billion to international bodies such as the World Bank, the African Development Bank and International Monetary Fund.

Oxfam senior policy adviser Max Lawson welcomed the ministers’ statement of their willingness to move on debt. “They’ve passed the first hurdle of 2005, but they need to move quickly to turn their proposals into real change,” he said.

“If rich countries are going to keep their promises to tackle obscene poverty they need deliver – and deliver quickly,” he said.

The G-7 ministers agreed to push for fairer trade and energize the round of talks started in Doha, Qatar, in 2001, aimed at slashing subsidies, tariffs and other barriers to global commerce.

Meanwhile, the IMF will look at whether it can write off debts by re-valuing its gold reserves.

Aid agencies said the G-7 had made progress on debt relief and trade, but wished they had reached an agreement to boost aid.

“It is better than expected, but could have gone further,” said Romilly Greenhill of ActionAid.

The finance ministers agreed to examine Brown’s IFF plan, a French proposal for an international tax on financial transactions or items such as plane tickets, and Washington’s Millennium Challenge Account, ahead of the G-8 summit in Gleneagles, Scotland in July.

The G-7 includes the United States, Britain, Canada, Italy, France, Germany and Japan.

Ed Johnson, Guardian (UK), February 5, 2005

Categories: Debt Relief, Odious Debts

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