Some of the world's most impoverished nations, most of them in Africa, moved within striking distance of having billions of dollars in debt written off thanks to a breakthrough agreement at the International Monetary Fund (IMF) on Saturday.
IMF policymakers meeting here approved a plan drafted by the Group of Eight industrialized countries that would cancel an estimated US$40 billion in multilateral debt owed by the poorest countries.
About 70 percent is owed to the World Bank, with the remainder due the IMF and the African Development Bank.
"Agreement is now reached on all the elements," British Chancellor of the Exchequer Gordon Brown declared after a one-day session of the 24-member IMF policymaking body.
The announcement marked an abrupt turnaround in the plan's fortunes, as IMF and World Bank officials had been warning that approval here was unlikely this weekend in the face of disagreements among key donors.
But Brown said IMF managing director Rodrigo Rato would now call a meeting of the Fund's executive board "to complete the approval of the arrangements to deliver debt relief by the end of 2005."
The proposal must also win the backing of the World Bank. But the Bank's policy-setting body, which convened in Washington yesterday, is made up of many of the same finance ministers who sit on the IMF panel.
And Brown, who heads the IMF committee, said he was confident the World Bank would adopt the same position as the IMF.
"I look forward to a successful conclusion at their discussions as well," he told a press conference.
There was in addition little likelihood that the IMF's 24-member executive board would reject the policymakers' recommendations. The initial beneficiaries are expected to be 18 countries, most of them in Africa, that have completed economic reforms mandated by the IMF and the World Bank in exchange for debt relief.
In recent days the G8 plan had appeared to be in jeopardy as non-G8 countries voiced fears the World Bank would not be fully compensated for foregone repayments and would therefore be unable to continue lending to poor countries.
But the Group of Eight -- Britain, Canada, France, Germany, Italy, Japan, Russia and the US -- on Friday issued a strong pledge to cover costs imposed on the World Bank by the debt cancellation.
The G8 commitment was contained in a letter to World Bank president Paul Wolfowitz signed by finance ministers from all eight countries.
Group of Seven finance ministers, meeting without their Russian counterpart, asserted in a separate statement that they were committed "to fully financing this relief."
The IMF decision was immediately welcomed -- albeit cautiously -- by debt relief campaigners.
"For countries which believed that their debts had already been cancelled, this announcement brings a welcome sigh of relief," the group ActionAid said in a statement.
"But the deal still needs to be expanded to include more countries and to eliminate harmful strings attached."
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