Richest nations OK debt relief
Published 9:00 pm Saturday, February 5, 2005
LONDON – Finance ministers from the world’s seven richest nations agreed in principle Saturday to write off up to 100 percent of the debts of the world’s poorest countries but remained deeply divided on the best way to do it.
Treasury chancellor Gordon Brown of Britain, the meeting’s host, said Group of Seven ministers achieved a breakthrough by agreeing not only to work toward wiping clean the debts owed to their nations by the 27 poorest countries – most them in Africa – but also to eliminate debts these countries owe to multilateral institutions such as the World Bank and International Monetary Fund.
“This is the first time we have ever made this offer,” Brown said at the conclusion of the meeting, which he characterized as “the 100 percent debt-relief summit.”
“It is the richest countries hearing the voices of the poor … (and) showing that no injustice can last forever,” said Brown, who has been promoting the idea of a new “Marshall Plan for Africa” in recent weeks. He brought former South African president Nelson Mandela to London for a speech in Trafalgar Square and a personal lobbying session with the ministers Friday night in which he sought a new $50 billion aid commitment.
While U.S. officials insisted they supported debt relief and increased aid in principle, they made clear they could not support the specific mechanisms Brown and other European leaders proposed.
Brown proposed having rich nations put up money to pay off the Africans’ cost of servicing their debts to the World Bank and the African Development Bank, and using the International Monetary Fund’s vast gold reserves – perhaps selling some of them – to cover the cost of canceling the fund’s loans to poor countries. He also proposed doubling aid to about $100 billion a year, by creating an international financing facility that would essentially require rich nations to make long-term aid commitments.
The Bush administration opposes those ideas. Washington prefers an approach in which the World Bank would essentially convert future assistance to poor countries to grants rather than loans – an approach the Europeans fear could undermine the bank’s financial strength.
The United States is willing to consider using IMF gold reserves in some way to help fund debt relief, but “we’re not convinced of the need at this time,” John Taylor, the Treasury undersecretary for international affairs, said.
On the question of Brown’s proposed financing facility, Washington has rejected it outright because future Congresses cannot be bound by commitments made by the current one. “This particular mechanism does not work for the United States,” Taylor said.
Taylor repeatedly stressed the Bush administration’s support for increased aid to Africa. He noted U.S. aid to Africa had quadrupled from $1.1 billion to $4.6 billion per year over the last four years.
