World Bank, IMF Approve Debt Relief Plan for World’s Poorest Countries
Finance ministers attending the annual meeting of the World Bank and International Monetary Fund over the weekend approved a plan to forgive debts owed by some of the world's poorest countries, the New York Times reports (Andrews, New York Times, 9/25). The plan would cancel an estimated $40 billion in debt owed by at least 18 poor nations -- most of them in Africa -- to the World Bank, the African Development Bank and IMF. The deal would save the 18 countries about $1 billion annually, which they could use for health care, education and poverty alleviation programs (Aversa, AP/Washington Times, 9/25). Leaders from the Group of Eight industrialized nations initially approved the plan in June (Kaiser Daily HIV/AIDS Report, 6/13). As many as 20 additional countries could be eligible for debt forgiveness if they meet specific conditions, which would increase the total amount of debt cancellation to more than $55 billion (AP/Washington Times, 9/25). According to U.S. Treasury Secretary John Snow, the boards of the World Bank and IMF are expected to approve the plan within a week, the AP/Houston Chronicle reports.
The World Bank steering committee approved the plan on Sunday -- one day after it was approved by IMF officials -- despite recent objections to the plan that emerged before the weekend meeting (Aversa, AP/Houston Chronicle, 9/26). The most significant objection to the plan came from an internal World Bank report that said the plan could deplete the bank's resources so dramatically that the institution might not be able to provide new aid for developing countries. The report says that unless donor countries make additional pledges to the bank's International Development Association to compensate for lost loan repayments, IDA's financial capacity could be significantly reduced. Other critics of the debt relief plan, including Scandinavian countries and the Netherlands, said that pledges should be made to ensure that the bank is fully compensated for the loss of loan repayments (Blustein, Washington Post, 9/13). To address concerns about World Bank compensation, G8 finance ministers on Friday signed a letter to bank President Paul Wolfowitz pledging future contributions to compensate for lost repayments (Blustein, Washington Post, 9/25). Additional objections were raised over the fact that the plan only would include countries with substantial debt. However, during the weekend meeting, IMF officials agreed to offer debt forgiveness to any member nation with an annual per capita income of less than $380, regardless of its credit status (Phillips, Wall Street Journal, 9/26).