G7 Finance Ministers Agree To Pursue Plan Forgiving Up to 100% of Debts Owed by World’s Poorest Countries
Finance ministers from the Group of Seven industrialized nations on Saturday at a meeting in London agreed in principle to forgive up to 100% of the debts owed by the world's poorest countries but "remained deeply divided on the best way to do it," the Washington Post reports (Frankel, Washington Post, 2/6). Several public health, AIDS advocacy and development groups have urged G7 finance ministers to support eliminating debt in more than 30 countries (Kaiser Daily HIV/AIDS Report, 10/4/04). Currently, 80% of the debt owed by the world's poorest nations is owed to institutions such as the World Bank and the International Monetary Fund (Reuters/Yahoo! News, 2/6). Sub-Saharan Africa owes such institutions approximately $70 billion (Sennott, Boston Globe, 2/6). At the end of its two-day meeting, finance ministers from the G7 nations -- Britain, Canada, France, Germany, Italy, Japan and the United States -- issued a communique saying, "We are agreed on a case-by-case basis analysis of (heavily indebted poor countries) based on our willingness to provide as much as 100% multilateral debt relief." In order to be considered for debt relief, developing nations must have "sound, accountable and transparent institutions" and create policies addressing poverty reduction and sustainable economic growth, according to the communique. It added that corruption in poor nations is a "significant barrier to growth, private sector development, investment and poverty reduction" (Johnson, AP/Arkansas Democrat-Gazette, 2/6).
U.K. Chancellor of the Exchequer Gordon Brown at the meeting also proposed to "dramatically" increase aid to developing nations to $100 billion annually through Britain's proposed International Finance Facility, the Globe reports (Boston Globe, 2/6). The facility would frontload international aid to meet the Millennium Development Goals. Brown has said that more than 50 countries, including France and Italy, have expressed support for the initiative, although the United States so far has failed to fully endorse the plan (Kaiser Daily HIV/AIDS Report, 1/13). French President Jacques Chirac last month at the World Economic Forum in Davos, Switzerland, proposed a global tax on international financial transactions to raise $10 billion annually to fight HIV/AIDS (Kaiser Daily HIV/AIDS Report, 1/27). Although the Bush administration has supported 100% debt cancellation "for quite awhile," the United States does not support either the U.K. or French plan to raise funds for poverty alleviation, according to U.S. Treasury Under Secretary John Taylor. He added that the U.S. proposal for total and immediate debt cancellation had not "won unanimous approval" at the G7 meeting, according to the New York Times. Although the G7 communique said that G7 ministers would "work toward resolving differences" before the July meeting of Group of Eight industrialized nations in Scotland, Taylor said that the United States is promoting its plan through a system that would allocate about $2.5 billion in assistance to 17 countries, according to the Times. He added that U.S. law does not allow the country to take part in Britain's proposed finance facility, the Times reports (Cowell, New York Times, 2/6). Brown on Sunday also wrote to the organizers of the Make Poverty History campaign and other church groups, saying that debt relief will be followed by increased resources to fight HIV/AIDS, tuberculosis and malaria worldwide (Elliott/Seager, Guardian, 2/7).
Despite "discord" over poverty alleviation plans, Brown said that the meeting was a "landmark in the road" toward a debt-forgiveness policy that would eliminate loan payments in order to "free up" money for developing nations to spend on health, education and "other basic needs," according to the Wall Street Journal (Phillips, Wall Street Journal, 2/7). "This is the first time we have ever made this offer," Brown said, adding, "It is the richest countries hearing the voices of the poor ... (and) showing that no injustice can last forever" (Washington Post, 2/6). Jeffrey Sachs, economics professor and head of the Earth Institute at Columbia University, said, "This was a major meeting; a lot of diplomatic work went into it. The U.S. is willfully blocking the European initiative headed by the British government, and it's a shame, and it's sad that there is a complete disconnect between what the U.S. government knows is needed in Africa, what it has promised to give Africa and what it has actually done" (Boston Globe, 2/6). Jubilee USA Network -- which advocates for debt relief -- said in a statement, "Delay is unfathomable when the poorest nations continue to spend more on debt service payments to the IMF and World Bank than on health care for their own people, while three million people will die in Africa this year from the HIV/AIDS pandemic" (Agence France-Presse, 2/5).
Britain Pledges Immediate Debt Relief
Brown also announced this weekend that the United Kingdom will provide immediate debt relief for 19 of the world's poorest countries by underwriting 10% of their debt owed to the World Bank and IMF at a cost of $26.5 million this year, Reuters reports. Brown made an initial offer of debt relief to Tanzania and Mozambique on a recent trip to Africa and also has reached agreements with Benin, Burkina Faso, Ethiopia, Ghana, Mali, Madagascar, Mauritania, Niger, Senegal, Uganda, Bolivia, Guyana, Nicaragua, Armenia, Mongolia, Vietnam and Sri Lanka (Reuters, 2/6).