[stop-imf] WPost and NYTimes on Debt Deal

[Robert Weissman]

*washingtonpost.com* <http://www.washingtonpost.com/>*
Debt Cut Is Set for Poorest Nations*
Deal Would Cancel $40 Billion in Loans

By Paul Blustein
Washington Post Staff Writer
Sunday, June 12, 2005; A01

The world's wealthiest nations agreed yesterday to cancel more than $40
billion in debts that some of the world's poorest nations owe to
international lenders -- a move inspired by the belief that full debt
forgiveness is necessary to give those countries a chance to escape the
trap of hunger, disease and economic stagnation.

The agreement, struck at a meeting in London of finance ministers from
the Group of Eight major industrial nations, is the most significant
debt-relief measure yet for poor countries because it cancels the debts
that the eligible countries owe to the World Bank, International
Monetary Fund and other multilateral lenders such as the African
Development Bank.

Previous plans offering partial relief have led to disappointment and
criticism from aid activists, who said many poor countries are forced to
spend more on debt service -- paying principal and interest on
international loans -- than on health and education.

Under the agreement, 18 countries would receive immediate forgiveness on
more than $40 billion that they owe in coming years, a combined savings
for those countries estimated at $1.5 billion a year.

Most are in Africa: Benin, Burkina Faso, Ethiopia, Ghana, Madagascar,
Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal, Tanzania, Uganda
and Zambia. Four others -- Bolivia, Guyana, Honduras and Nicaragua --
are in Latin America. Another nine African nations are likely to qualify
soon, once they satisfy IMF and World Bank requirements for improving
their governance and economic policies. Another 11 countries could also
benefit eventually.

"We are conscious of the abject poverty that so many countries and
individuals face. We're being driven forward by the urgent need to act,"
said Gordon Brown, the British chancellor of the exchequer, at a news
conference after the meeting. His American counterpart, Treasury
Secretary John W. Snow, called the pact "an achievement of historic
proportions." He added that debt has been "locking these poorest
countries into poverty and preventing them from using their own
resources," a situation he called "morally wrong."

The accord was a coup for the British government, which has taken the
lead in exhorting other rich countries to come to Africa's aid with the
aim of producing a far-reaching package of measures next month at the
G-8 summit in Gleneagles, Scotland.

But it does not cover all poor countries, and it involved important
compromises with the Bush administration, which also favored full debt
relief but differed with London about how to go about it. Moreover, it
does not include an even more ambitious British proposal, viewed
negatively by Washington, to double about $50 billion in aid given
annually by rich countries.

Aid activists who have played crucial roles in marshalling popular
support for debt forgiveness cheered yesterday's announcement while
voicing determination to press for more. A group of celebrities, led by
rock musicians Bob Geldof and Bono, is planning free concerts and
rallies in the hope of spurring the G-8 to adopt the aid-doubling plan.

"The journey of equality took another step today, and broke free
millions of people in some of the poorest countries from the bondage of
immoral and unjust debts," Bono said in an e-mailed statement. "There's
long nights ahead of us all to build up the speed and accelerate for a
comprehensive debt-aid-trade deal."

Neil Watkins, national coordinator of the Jubilee USA Network, a group
that has put primary emphasis on debt forgiveness, said the accord "is
an important first step, but the deal must be expanded to include all
impoverished countries" rather than the G-8's more restrictive list.
Among the low- and lower-middle income nations that do not qualify are
Indonesia and Nigeria, for example.

Reaction in Africa from countries that stand to benefit was generally
enthusiastic. "That's great news for us. It will be good for our
programs, including education, health and poverty eradication," Ugandan
Information Minister James Nsaba Buturo told the Associated Press.
Finance Minister Ng'andu P. Magande of Zambia told the Reuters news
agency that he already had plans for the money his country would save,
including recruiting 7,000 new teachers waiting for employment since
leaving college.

In Kenya, which does not qualify under the program, a senior official
voiced a complaint commonly heard about debt relief plans -- that they
reward borrowers who fail to honor their obligations at the expense of
other debtors. "Those faithful in servicing their debt like Kenya are
being ignored," Kenyan Planning and National Development Minister Peter
Anyang Nyongo told Reuters.

An important breakthrough toward the accord came in the last few days
when U.S. and British policymakers reached a compromise after a meeting
Tuesday in Washington between President Bush and Prime Minister Tony Blair.

Up to that point, Washington and London had been divided over how to
handle the debts owed to the World Bank, IMF and African Development
Bank, which the rich nations control through their dominant voting power
on the institutions' boards. U.S. officials favored an approach that
would essentially pay for debt cancellation out of the resources of the
lending agencies. The British, fearful of undermining the financial
strength of those institutions, favored a plan by which rich countries
would assume the burden of making the debt payments owed by the poor
nations.

The deal announced yesterday struck middle ground. A communique issued
by the G-8 said donor countries would commit to providing "additional
contributions" to the World Bank and African Development Bank "to offset
dollar for dollar the foregone principal and interest of the debt
cancelled," with the new contributions apportioned in the same manner as
existing contributions.

Even after the Americans and British had struck an alliance, they had to
overcome objections from other members of the G-8, including Germany,
which has long taken a dim view of blanket debt-forgiveness schemes.
Other members of the group are Japan, France, Italy, Canada and Russia.

Debt forgiveness plans have been announced before with great fanfare,
but they have often fallen far short of the hoped-for results. Some
critics contend this is because the countries that benefit are
hopelessly corrupt, while others contend that the terms have simply been
too stingy.

In the 1980s and early 1990s, rich countries forgave much of the debt
owed to them directly by poor countries under successively more generous
plans.

Since those deals still left countries in debt to the IMF and World
Bank, a new program was launched in 1996 to reduce those obligations and
it was expanded in 1999. Yesterday's plan is aimed at wiping the slate
clean, at least for the countries that qualify, once and for all.

-----------------


The New York Times
June 12, 2005


  Finance Chiefs Cancel Debt of 18 Nations

By ALAN COWELL
<http://query.nytimes.com/search/query?ppds=bylL&v1=ALAN%20COWELL&fdq=19960101&td=sysdate&sort=newest&ac=ALAN%20COWELL&inline=nyt-per>


LONDON, June 11 - The world's wealthiest nations formally agreed
Saturday to cancel at least $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 W. Snow, the United States
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 $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 anticorruption measures.

Gordon Brown, the British chancellor 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 United
States had been pressing the other Group of 8 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," Mr. 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 this week between
President Bush and Prime Minister Tony Blair of Britain, was struck less
than four weeks before the Group of 8 leaders hold a summit meeting at
Gleneagles, Scotland. Mr. Blair is the current chairman of the Group of
8 and has placed the relief of African poverty along with global warming
at the head of an ambitious agenda.

Advocacy groups and charities have pressed for a deal on debt relief for
years and some welcomed the agreement on Saturday, saying it cleared the
way for a broader announcement on combating African poverty at Gleneagles.

"We want a comprehensive breakthrough on more, better development
assistance as well as trade reform at Gleneagles and with debt mostly
taken care of we can keep up the pressure for a large package," said
Seth Amgott, a spokesman for a coalition of American charities and
advocacy groups called ONE.

Some other groups noted that 44 more countries were still burdened by
debt to international lenders. Britain is also pressing for a doubling
of international aid to Africa, but it is not clear whether that goal
will be reached before the Gleneagles summit meeting.

Significantly, a statement by the Group of 8 finance ministers did not
formally exclude other initiatives to fight poverty, including a tax on
airline tickets proposed by France and Germany and a British proposal to
raise money for poverty relief on international financial markets.

Both of those ideas are opposed by the United States, but their
inclusion seemed to be part of a trade-off to secure agreement on the
cancellation of debt. Asked about American opposition to an aviation tax
on Saturday, Mr. Snow said, "Our position is the same."

Mr. Brown said Group of 8 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 cancellation for some poor
countries was made at the expense of other poor countries.

The United States agreed to pay up to $1.75 billion in compensation to
international lenders over the next 10 years, while Britain agreed to
pay up to $960 million. Other Group of 8 countries made their own,
undisclosed pledges; more pledges are expected from other members of the
World Bank and the International Monetary Fund this year.

Mr. Brown said the agreement on Saturday would immediately affect some
$40 billion in debt, including servicing costs. But the amount it will
actually cost the Group of 8 to compensate the international lenders is
$16.7 billion - a calculation based on the payments the international
lenders would have expected to receive from 18 debt countries between
now and 2015, the officials said.

Over all, international lenders are owed some $55.6 billion, Mr. Brown
said. The finance ministers said Group of 8 members would compensate the
World Bank and the African Development Bank for their losses. But the
International Monetary Fund would be able to use "existing resources" of
its own to cancel the $6 billion it is owed by poor countries. Mr. Snow
said this would require "no use of gold" - rebutting proposals by Mr.
Brown for the I.M.F. to sell or revalue gold reserves to finance debt
cancellation.