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Debt-relief talks hit bumps

"Our proposal not only drops the debt of yesterday, but prevents debt from burdening countries again well into the future."

John Snow, US treasury secretary

A solution to the crippling debt burden of poor countries eluded finance ministers and central bankers from around the world, but there are expectations an agreement could be reached later this year.

Officials at the weekend meetings said they were making progress on debt relief. International aid groups derided the claim, saying the major industrialized nations were dragging their feet and worsening the plight of the poor.

The spring meetings of the World Bank and its sister institution, the International Monetary Fund (IMF), were preceded by a session on Saturday of the Group of Seven (G-7) major industrialized nations.

There was little sign of protesters on Sunday but several hundred gathered outside the bank on Saturday to urge debt forgiveness. Security was tight around the headquarters of the World Bank and the IMF, two blocks from the White House with streets closed to traffic.

The G-7 -- the US, Japan, Germany, France, Britain, Italy and Canada -- said the global economy would continue to grow. They also endorsed debt relief.

Competing plans

The US and Britain have competing proposals, but officials have failed to settle differences.

Under the US' plan, the poorest countries would not have to repay loans to the World Bank, the IMF and the African Development Bank. The Bush administration also wants future aid delivered as grants, which do not have to be repaid, rather than loans.

"Our proposal not only drops the debt of yesterday, but prevents debt from burdening countries again well into the future," US Treasury Secretary John Snow said on Sunday.

Critics say that deprives the lending institutions of additional money to compensate for loan repayments no longer required and they eventually will have less money to lend.

Britain has proposed an international finance facility to increase development aid by US$50 billion a year until 2015 through the use of off-balance-sheet financial instruments

The US has said its budget laws would not allow it to support the UK's plan because it would bind future governments to providing money.

Some outside advocates want the IMF to sell part of its massive gold reserves to pay for the debt relief. The US does not favor that. The UK, the current chairman of the G-7, insists the idea is still on the table.

US and British officials sought to play down their differences and said that they were encouraged by developments.

"I believe we are making considerable progress now on these issues," said Gordon Brown, Britain's chancellor of the exchequer. "I think for the first time as a result of these meetings, that more money will have to be available."

A more pessimistic view came from groups demanding the forgiveness of billions of dollars of debt for poor nations.

Stalled

"Progress has stalled, not because of disagreement over the principle of debt cancellation, but over the mechanics of how to finance such cancellation," said Debayani Kar, communications and advocacy coordinator for Jubilee USA Network.

But finance officials believe that their work this weekend would make a deal possible at meetings of world leaders in July and September.
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