The Hindu : International : $55-billion Africa debt relief agreed on at London meet

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Sunday, Jun 12, 2005

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International

$55-billion Africa debt relief agreed on at London meet

Larry Elliott and Ashley Seager

Package will benefit 18 of the poorest countries immediately

LONDON: Eighteen of the world's poorest countries will have their debts to the World Bank and the International Monetary Fund wiped out as part of a $55 billion package agreed on Saturday by the G-7 leading economies.

After weeks of intense negotiations, a deal brokered by British Chancellor Gordon Brown will save countries such as Mozambique and Ethiopia a total of $15 billion in debt payments over the next 10 years.

The U.K. Treasury said on Friday a further nine countries would qualify for debt relief within 12-18 months, and that the total could rise to almost 40 once countries beset by civil war resolved their conflicts.

Uniqueness of deal

``The uniqueness of this deal is that so much would be written off almost immediately — more than $40 billion within a few weeks of the agreement,'' Mr. Brown said.

"When I started this it was one country that would qualify but now it's 27 and potentially it's 37.'' Writing off the multilateral debts of poor countries has been one of Britain's priorities for its presidency of the G-8, and Saturday's deal will be seen as a triumph for Mr. Brown, who has cajoled sometimes reluctant G-7 countries — the G-8 minus Russia — to back his plan.

The deal goes further than the agreement between U.S. President George Bush and British Prime Minister Tony Blair earlier this week in Washington, which included debts owed to the World Bank and the African Bank but not the IMF.

Sources said the logjam had been broken when it was found that the IMF had several billion dollars available from gold sales in the late 1990s that it could use to cover the losses it would make from writing off debts.

The 18 countries named in the announcement are those which have had their bilateral debts to rich countries written off under the World Bank's heavily indebted poor country initiative, but despite the success of the Jubilee 2000 campaign, many countries were still left spending more on servicing debts to the Bank and the IMF than they were spending on health and education.

The agreement will be rubber-stamped at the Gleneagles G-8 summit next month, when the leaders of the G-7 countries will be joined by President Vladimir Putin.

Mr. Brown acknowledged last night that there was "still work to be done'' to get approval for his International Finance Facility, a scheme under which rich countries would raise money for development by selling bonds on the world's financial markets.

The beneficiaries

Eighteen countries have completed the heavily indebted poor countries initiative: Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.

Nine countries are due to reach completion point within 18 months: Cameroon, Chad, Democratic Republic of Congo, Gambia, Guinea, Guinea Bissau, Malawi, Sao Tome and Principe, and Sierra Leone. —

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