A plan to grant debt relief to the world's poorest countries cleared a major hurdle, while the world's richest nations pledged renewed efforts to make sure that soaring energy prices do not disrupt the global economy.
The debt deal represented a major breakthrough as the 184-nation International Monetary Fund (IMF) and its sister lending organization, the World Bank, gathered for two days of discussions beginning yesterday.
Finance officials from the Group of Seven wealthy industrial countries, joined by the finance minister of Russia, took the unusual step on Friday of signing a letter to World Bank president Paul Wolfowitz in which they pledged to "cover the full cost to offset dollar for dollar" the loan repayments the World Bank will lose because the debt is being forgiven.
The agreement will wipe out US$40 billion in debt owed by the world's 18 poorest nations -- many of them in Africa -- to the World Bank, the IMF and the African Development Bank.
A group of nations led by Belgium and the Netherlands had threatened to block the deal because of concerns that rich countries were not going far enough to make sure the World Bank's future operations were not jeopardized by the loss of loan repayments.
But a jubilant US Treasury Secretary John Snow told reporters late Friday that he believed the G7 nations' agreement would be sufficient to overcome those objections and win endorsement by the 24-member executive boards of both the IMF and World Bank.
"It would be our hope they can do that quickly within a week," Snow said.
On soaring energy prices, the G7 pledged to pursue an eight-point plan aimed at increasing supplies, promoting conservation and improving the release of timely data on oil production as a way of reducing wild price swings in global energy markets.
French Finance Minister Thierry Breton said he and British Chancellor of the Exchequer Gordon Brown would tour oil-producing countries in the next month on behalf of the G7 to urge them to improve the timeliness and quality of oil market data.
"Today there is not enough visibility between demand and supply and oil markets are not as open as others," Breton said.
The finance meetings were getting under way as Hurricane Rita bore down on the Texas Gulf Coast after Hurricane Katrina caused widespread shutdowns of oil platforms and refineries along the Louisiana Gulf Coast last month.
Katrina sent gasoline prices in the US above US$3 per gallon (3.8 liters) and oil prices briefly above US$70 per barrel. But crude oil prices posted a second straight day of declines on Friday as traders welcomed news that Rita was weakening before it hit land. Crude oil settled at US$64.19 per barrel in New York trading, down US$2.31.
Snow said he assured his G7 colleagues that the billions of dollars in federal money that will be spent in hurricane recovery will not jeopardize US President George W. Bush's goal of cutting the federal budget deficit in half by 2009.
"We are committed to a recovery effort that is not only compassionate but also fiscally responsible," Snow told reporters.
On another matter, the finance officials praised China's move on July 21 to stop linking its currency directly to the dollar. China allowed its currency to rise in value by 2.1 percent against the dollar and it announced a further slight modification to its currency system on Friday.