The G7 nations willing to write off up to 100 percent of debt of the world's poorest countries

Brown wins debt promise

Saturday February 5, 2005
Guardian Unlimited

The G7 nations are willing to write off up to 100 percent of the debt of the world's poorest countries, chancellor Gordon Brown said after a meeting of G7 finance ministers. "We are willing to provide as much as 100 percent debt relief on all multi-lateral debt for individual HIPC (Highly Indebted Poor Countries)," he told a news conference.

Brown, chairing the G7 talks, had pushed for a complete write-off of African debt and a doubling of aid flows to $100 billion a year but the latter proposal ran into US opposition.

Britain launched a last-ditch bid to muster support for its plan to rid Africa of poverty despite a flat rejection by the United States in talks among the Group of Seven industrial powers.

Finance ministers engaged in heated and occasionally angry exchanges late into Friday night but failed to achieve any kind of resolution, sources said as talks went into a second day.

"The Americans are on a different wavelength," German deputy finance minister Caio Koch-Weser told reporters.

British finance minister Gordon Brown wants approval for his International Finance Facility (IFF) scheme to double aid to Africa to $100 billion a year and write off the debts of the poorest countries completely.

The plan has the backing of South Africa's Nelson Mandela who made an emotional appeal to the G7, equating the fight against poverty to the struggle against apartheid.

"Do not delay while poor people continue to suffer," the 86-year-old former political prisoner said putting all his moral weight behind his plea. He demanded a full write-off of African debt and $50 billion extra a year in aid for the next decade.

But without US support the chances of any breakthrough appear remote.

US Treasury under secretary John Taylor yesterday rejected Brown's plan to double existing aid by using rich countries' guarantees to raise money in the capital markets.

Washington also said it was not keen on a separate Brown idea of re-rating the undervalued gold reserves of the International Monetary Fund to finance a debt-write off.

US officials stressed today that they fully support debt relief but do not think Brown's plan is the most efficient way to do so.

Europe's backing seemed to be fading with both Italy and Germany saying they would prefer something less ambitious than the British proposals.

But G7 officials said that a debt write-off was not dead in the water. "The issues are very open on the question of development," one G7 source said.

Others said some kind of deal was possible in time for a leaders' summit in July. Koch-Weser said his country liked the idea of a jet fuel tax to aid Africa, a proposal floated by French President Jacques Chirac but backed by few others so far.

The G7 includes the United States, Japan, Germany, Britain, France, Italy and Canada.

Back seat for other issues
The bulk of the meeting was devoted to the Third World but the ministers also discussed ways of reducing volatility in the oil market after prices hit record highs last October.

They were also discussing the more familiar G7 topics of currency management and economic risks.

US Treasury Secretary John Snow is not attending because of a cold so there appeared little chance of ministers straying from a year-old policy statement in which they called for less volatile currency markets and greater exchange rate flexibility.

The latter point is aimed mainly at China, which sent its finance minister and central bank officials to meet G7 members.

"We are determined to move towards a flexible exchange rate, but no timetable," Chinese central bank deputy governor Li Ruogu told reporters after breakfast talks.

Beijing says it is not going to rush into altering its yuan peg to the dollar, which many say keeps the yuan artificially low and makes life unfairly difficult for other trading nations.

Guardian Unlimited © Guardian Newspapers Limited 2005

No comments: