[stop-imf] Debt Deal for Poorest Nations Moves Ahead

[Robert Weissman]

http://www.nytimes.com/2005/09/24/politics/24ministers.html

Debt Deal for Poorest Nations Moves Ahead
By EDMUND L. ANDREWS

Published: September 24, 2005

WASHINGTON, Sept. 23 - The United States moved closer on Friday to a final
deal with other industrialized nations on wiping out about $18 billion in
debt owed by the world's poorest nations.

In a strong letter to the World Bank, finance ministers from the Group of 8
industrialized nations promised that their governments would reimburse the
bank and the International Monetary Fund for all the loan repayments the two
institutions would be giving up.

Treasury Secretary John W. Snow said the letter resolved the biggest
criticism of the debt-relief plan and predicted that the boards of both the
fund and the World Bank would be able to approve it within a week.

President Bush and Prime Minister Tony Blair of Britain hammered out a basic
agreement on debt relief in July, but other countries - notably the
Netherlands - demanded stronger assurances that the major industrialized
countries would pick up the full cost of the plan.

In a letter on Friday to Paul D. Wolfowitz, president of the World Bank, the
G-8 finance ministers promised to cover "dollar for dollar" all the lost
principal and interest payments - about $1 billion a year.

They also promised that the payments to cover debt forgiveness would come on
top of their regular contributions to the World Bank. To assure other
countries that they were not reducing their normal contributions to cover
the costs of debt relief, the finance ministers promised to report their
payments separately.

"It's a very strong statement," said Max Lawson, political adviser to Oxfam
International, which has been lobbying for debt relief. Though Mr. Lawson
cautioned that a deal could still run into opposition, he said he was
optimistic that it would be ratified.

The debt relief package would initially benefit 18 of the world's most
impoverished and highly indebted countries, most of them in Africa.

Supporters of the plan hope that it will free those countries from crippling
repayment burdens and allow them to start off with a fresh slate.

The broader goal is to provide more aid through outright grants rather than
loans to poor countries, and to direct those grants to countries that meet
benchmarks for good governance and accountability.

One of the biggest obstacles to a plan was disagreement between the United
States and many European nations about how to shore up the World Bank and
the fund when they stopped receiving payments on forgiven debt.

The two international lending institutions depend on repayments of previous
loans for a big part of their capital.

In a recent report to the board of the World Bank, the bank's staff said the
debt relief plan hammered out in July could deplete billions of dollars if
governments failed to make up for the lost money.