Debt Relief

G7 nations find some common ground on debt relief for Africa

The Group of Seven industrialised countries inched towards a compromise on debt relief to ease poverty in Africa at its weekend meeting but again failed to strike a detailed agreement on how to proceed.

The Group of Seven industrialised countries inched towards a compromise on debt relief to ease poverty in Africa at its weekend meeting but again failed to strike a detailed agreement – ahead of the leaders’ G8 summit in July – on how to proceed. A G7 statement recognised that additional funds would be needed for debt relief while Gordon Brown, the chancellor of the exchequer, said he would be happy to proceed with US proposals for writing off the debt stock of poor countries rather than paying the interest on their behalf. There were, however, few signs of agreement among the G7 countries on how to come up with the additional funds to pay for debt relief – or for increased aid generally. If no agreement on financing aid can be struck this summer, Europe and north America will go their separate ways.

“We’re getting more and more buy-in towards the goals [of easing poverty] but at the same time countries are fairly far apart on how to achieve those goals,” said one G7 official. “As there are common goals, everybody doesn’t have to agree on exactly how to do it.”

Mr Brown said: “I still hope that this can be a global initiative . . . and that all continents and all major countries will come in in a joint project.” He stressed that the weekend meeting had been positive. “Everybody now accepts that more money is needed. I think that is the big change that has taken place over the last few weeks.”

There was some movement towards a common position on debt cancellation. While the US favours writing off the stock of multilateral debt, most of which is owed to the World Bank, Canada, the UK and other European countries prefer to reduce the burden of debt service paid to international institutions.

John Snow, the US Treasury secretary, said: “The momentum is toward the US proposal for 100 per cent debt cancellation and then using grants going forward in lieu of debts.” Mr Brown confirmed a shift in the UK position when he said: “We are quite happy to write off the stock or service the existing debt.”

The US has stated that it will not take part in the UK’s proposal for an International Finance Facility to borrow money against future aid flows. France and Germany have said they will support an IFF pilot programme only in return for UK support for an airline tax to repay the IFF.

Scheherazade Daneshkhu and Andrew Balls, Financial Times, April 18, 2005

Categories: Debt Relief, Odious Debts

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s