[stop-imf] Debt deal in pipeline after US visit

[robert weissman]

[snip]

However, there was no agreement on the cancellation of IMF debt - a
result of an unresolved dispute between London and Washington over
whether such a move should be financed by revaluing the IMF's $100bn of
gold reserves. Powerful lobbies in the US are opposed to the move.

[snip]

Debt deal in pipeline after US visit

Patrick Wintour and Larry Elliott
Thursday June 9, 2005
The Guardian

Gordon Brown was last night finalising the details of a new deal to wipe
out the multilateral debts of Africa's poorest countries after Tony
Blair won agreement in principle from President Bush on Tuesday in
Washington.

The Treasury said officials in all G8 capitals were working on the small
print of the agreement and expressed confidence that there would be a
full announcement when finance and central bank ministers from the
world's richest nations meet in London on Saturday.

Article continues
"We would be quite surprised if we don't emerge with quite a healthy
package at the weekend," one Treasury source said last night.

Mr Bush and Mr Blair agreed on Tuesday that 18 African countries would
be eligible for a 100% write-off of debts owed to the World Bank and the
African Development Bank.

Aid agencies said this would be worth at least $500m (=A3270m) initially,
rising to $1bn as more countries became eligible for assistance.

They warned, however, that the money would still be only a fraction of
what was needed if poor African countries were to meet the Millennium
Development Goals established by the UN in 2000.

Anna McDonald, the campaigns director of Oxfam, said: "As G8 finance
ministers prepare to meet this weekend, the US/UK debt proposal looks
like a step forward, but the big question is how many countries it will
apply to, will it include IMF debt and how much money will it release?

"Debt analysts calculate that at least 62 countries will need 100% debt
cancellation to effectively tackle poverty and meet the Millennium
Development Goals - and this will cost around $10bn a year."

The Treasury said the discussions among G8 officials concerned the
number of countries involved in the new scheme and the amount of extra
resources they could expect.

Mr Blair won a concession from the US president during his talks, with
Mr Bush agreeing that debt relief should not be financed out of aid
programmes but instead should involve "new money" for countries
committed to good governance.

Mr Bush also told Mr Blair he was making a bankable promise to raise
levels of US aid to "the poor folks" of Africa, but did not tell Mr
Blair - either in private or public - the size of the increase he is
contemplating. Mr Bush said he was not interested in formulae, such as
committing 0.7% of US GDP to aid.

The British prime minister is hoping for as much as a $4bn annual
increase by the Americans and that such figures could be announced at
the G8 summit in Gleneagles in July. However, the chances of that are
seen as slim.

Oxfam, Live 8 organiser Sir Bob Geldof and the Conservative leader
Michael Howard all welcomed the progress made by Mr Blair.

Geldof described it as a good start: "Blair went [to Washington] and
there were lots of signals saying it was all a disaster but I think the
US and UK have got an agreement on debt relief.

"With regard to doubling of aid, the Americans were never going to come
that far, because the American economy is so bad."

In a significant prize for Britain, Mr Bush broke with his ideological
allies in thinktanks such as the American Enterprise Institute and
agreed that the debt cancellation could be accompanied by extra cash, so
preserving the financial integrity of the World Bank and its sister body
the African Development Bank.

However, there was no agreement on the cancellation of IMF debt - a
result of an unresolved dispute between London and Washington over
whether such a move should be financed by revaluing the IMF's $100bn of
gold reserves. Powerful lobbies in the US are opposed to the move.

Hilary Benn, the international development secretary, said: "The great
merit of debt relief is it provides predictable resources, because if
you are no longer having to make the monthly repayments you can spend
that money on a monthly basis, year after year, on the things that
really matter - health and education."

Speaking in the House of Commons yesterday, the prime minister promised
that he was pressing for an end to agricultural subsidies in the US and
the EU.

He said: "I hope at the G8 summit we are able at the very least
negotiate a clear set of principles and I think there is every
indication from the EU side that they are prepared to take a more
radical look at how we ensure there is better access into our markets
for the poorest countries in the world."