The UK is to pay off 10 percent of the money owed by the world's poorest countries to the World Bank and the African Development Bank in an attempt to free them from "the shackles of debt", British Finance Minister Gordon Brown was to announce today.
Brown's announcement will come on the eve of the UK's ruling Labour Party's annual conference in Brighton that the UK's international development agency will earmark at least ?100 million a year to meet the interest payments and principal owed by over 30 nations.
Alarmed that previous initiatives on debt relief have failed to provide a lasting solution to the problem, Brown will challenge other rich countries to follow Britain's lead when he attends the annual meeting of the World Bank and International Monetary Fund in Washington next week.
The aid agency Oxfam said if the rest of the Group of Seven leading industrial nations followed suit, there would be six million fewer child deaths each year, 45 million more children could attend school and clean water could be provided for 140 million people.
Under Brown's proposal, 14 countries that have qualified for debt relief under the heavily indebted poor countries initiative and 18 low-income countries that are not part of the scheme -- such as Afghanistan, Cambodia and Tonga -- would be entitled to financial help from Britain.
The countries owe money to multilateral institutions, primarily the IMF, the World Bank or the African Development Bank. Brown says the slice of debt owed to the IMF should be paid off by revaluing the Fund's stock of gold in an off-market transaction that he says would have no impact on the global price of the metal.
The IMF's gold is valued at around US$50 an ounce, against a market price of just over US$400 an ounce.
"Because we cannot bury the hopes of half of humanity in the lifeless vaults of gold, the cancellation of debt owed to the IMF should be paid for by better use of IMF gold," Brown's prepared remarks for the meeting of the Trade Justice Movement tomorrow read.
Brown was to say that in the absence of an international agreement, Britain will act unilaterally to offer poor countries help with their debts to the two development banks.
The Treasury said the UK's share of this debt amounted to around 7 percent to 8 percent of the total, but the (British) government was prepared to fund a 10 percent write-off.
Hilary Benn, the UK's international development secretary, said "This throws down a challenge to the rest of the world."
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