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Last Updated: Sunday, 25 September 2005, 00:05 GMT 01:05 UK
IMF committee backs debt erasure
Little girl scrapes rice dish in Mali
Mali is one of the 18 poorest nations due for debt erasure
A deal by the world's richest states to erase debt of up to $55bn (31bn) owed by the poorest has been backed by one of the main international lenders.

The International Monetary Fund's panel said in Washington it had approved all elements of the deal, which now goes to its twin institution, the World Bank.

Leaders of the G8 industrialised states proposed the move at the UK-chaired summit in Gleneagles, Scotland in July.

But concerns arose that the lenders would not be adequately compensated.

"Agreement has now been reached on all the elements of the debt deal," UK Chancellor Gordon Brown, who heads the IMF's steering committee, told reporters.

Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda, Zambia

He added that the IMF's 24-member executive board would meet soon to formally approve the deal.

The G8's pledge to not dilute the resources of the international financial institutions had overcome opposition by smaller rich states and the debtor nations could start benefiting by the end of 2005.

Eighteen nations stand to have $40bn in debt written off initially while $55bn could be released eventually, Mr Brown said.

The 184-member IMF and World Bank are holding their annual meeting in the US capital this weekend, and the World Bank is expected to back the deal on Sunday.

G8 pledges

The debt deal reached in Scotland is regarded as a crucial step towards meeting the United Nations' millennium development goals of halving the number of people living in extreme poverty by 2015.

The debt issue explored

It was backed by Britain, Canada, France, Germany, Italy, Japan, Russia and the US.

But a number of countries, led by Belgium and the Netherlands, complained that not enough money was being committed by rich nations to make up for the shortfall in funds that the World Bank would face if debt repayments were forgiven.

The G8 made firm pledges on Friday to underwrite the plan.

"Things were looking tricky yesterday but people seem to be coming round after the G8 statement," one unnamed diplomat told Reuters news agency.

Wolfowitz makes his mark

Global economic fallout from the US hurricanes, especially the impact on oil prices, are also on the minds of World Bank and IMF leaders.

IMF Managing Director Rodrigo de Rato (L) chats to the World Bank's Paul Wolfowitz
Wolfowitz toured some of the world's poorest regions this summer

A senior IMF economist described high oil prices - which hit a peak of $70.85 a barrel in August - as "a clear and present danger".

The World Bank and IMF meetings are the first Paul Wolfowitz is attending as head of the World Bank since taking up the post in June.

The former deputy US defence secretary has called for increased development aid to lift millions of people out of poverty.

Separately, developing nations within the IMF are also keen to push for a stronger voice within the key decision-making bodies of the organisation.

Although IMF membership has ballooned since its establishment - along with the World Bank - after the Second World War, its most influential members remain the US, Japan and the major countries of Europe.

See details of the plan backed by the IMF

World Bank hopes on debt relief
22 Sep 05 |  Business
World Bank rediscovers inequality
20 Sep 05 |  Business
Government defends G8 aid boost
09 Jul 05 |  Business
Wolfowitz seeks more Africa aid
20 Jun 05 |  Africa
G7 concern over oil price surge
23 Sep 05 |  Business

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