Print

Mail

wiki links

G8 nations to cancel US$40bn in debt

"Grants would be used to ensure that countries do not quickly reaccumulate unsustainable debts."

John Snow, US treasury secretary

The world's wealthiest nations formally agreed on Saturday to cancel at least US$40 billion of debt owed to international agencies by the world's poorest lands, most of them in Africa.

After late-night talks in London, the finance ministers of the Group of 8 industrialized nations announced that the deal, long in negotiation, had been intended to avoid damaging the ability of international lenders like the World Bank, the African Development Bank, and the International Monetary Fund to continue helping other poor countries.

"This is a historic moment," said John Snow, the US treasury secretary, one of the participants. "A real milestone has been reached."

The deal on Saturday was expected to ease the 18 poorest countries' annual debt burden by US$1.5 billion. They are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia. All must take anti-corruption measures.

Gordon Brown, the British chancelor of the exchequer, asked at the news conference whether debt relief was also conditional on good government practices by the recipients, said part of the deal was for poor countries to use the money they saved on debt servicing for health, education, or the relief of poverty.

The agreement came after months of negotiations in which the US had been pressing the other G8 countries -- Britain, Germany, France, Italy, Canada, Japan and Russia -- to agree that the solution to poor countries' indebtedness was to cancel their debt burden completely, rather than seek simply to ease it by taking over interest repayments.

"It is my hope today that this reform will conclusively end the destabilizing lend-and-forgive approach to development assistance in low-income countries," Snow said. In the future, he said, "grants would be used to ensure that countries do not quickly reaccumulate unsustainable debts."

The agreement, which followed talks in Washington last week between US President George W. Bush and British Prime Minister Tony Blair, was struck less than four weeks before the G8 leaders hold a summit meeting at Gleneagles, Scotland. Blair is the current chairman of the G8.

Brown said G8 countries had agreed to compensate the World Bank and the African Development Bank in particular for forfeiting interest payments on poor countries' debt, so those groups would have the income to make new loans to other countries.

"We could not contemplate a situation," he said, where debt cancelation for some poor countries was made at the expense of other poor countries.

also see story:
G-8 says `vigorous action' needed to counter slowdown

This story has been viewed 1999 times.