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Last Updated: Monday, 18 April, 2005, 01:59 GMT 02:59 UK
Debt relief delayed by indecision
By Andrew Walker
BBC economics correspondent in Washington

Finance ministers from the G7
The world's richest nations have different approaches to aid
Finance ministers from rich and poor countries came to Washington at the weekend, with debt relief for the poorest countries high on their agenda.

They arrived agreeing in principle that there was a need for more of it.

And they left still agreeing that there was a need for more of it.

What they did not agree was a lot of the practical detail about how to make it work.

To be fair, the president of the World Bank, James Wolfensohn, warned us not to expect everything to be sorted out.

He likened the process to an opera - this was the first act, and we had heard the main themes.

The arias, he said, would be sung by the stars, and they were not here.

Using a different metaphor, he said that the big decisions on debt were above the "pay grade" of finance ministers. They were a matter for leaders.

So he is expecting something concrete from the G8 summit of major powers in Scotland in July, or the United Nations summit in New York in September.

Cold reception

If there is not decisive action on a range of fronts this year, Mr Wolfensohn warned, "we can kiss good-bye to the Millennium Development Goals", the set of objectives for tackling poverty and related problems, most of them with a deadline of 2015.

On debt relief, the Group of Seven (G7) leading industrial countries agree in principle to 100% relief on debts owed to the World Bank and official regional banks such as the African Development Bank by the highly indebted poor countries.

Countries would be assessed case by case.

Police outside the World Bank in Washington
Development groups want an agreement on the specifics

But they do not agree whether to include debts to the IMF.

The US Treasury Secretary, John Snow, told the IMF meeting that the US was not convinced of the need to do so.

He also poured cold water on the idea of funding debt relief by selling some of the IMF's gold reserves.

Such action "is not warranted", he said.

That idea came from the UK, in the shape of the Chancellor of the Exchequer, Gordon Brown.

He has not given up, and he said he was hoping for an agreement at the next IMF meeting in September.

He said there had been progress this time on debt relief: "It is now recognised, I think for the first time as a result of these meetings, that more money will have to be made available."

Different approaches

Another of Mr Brown's ideas seems to be moving very slowly.

It is an idea for increasing development aid spending over the next 10 years - the deadline for most of the Millennium Development Goals - by borrowing money on the financial markets and repaying it after 2015.

He calls it the International Finance Facility, and says that several European countries support it.

The US, however, does not.

Children in Sierra Leone
Poor countries were hoping for quicker results

Mr Brown says it could go ahead with what he has called a "coalition of the committed", but he would be happier if the US were involved too.

The Americans prefer their own approach, an initiative called the Millennium Challenge Account. The US says it is aid for countries that invest in their people, rule justly and encourage economic freedom.

All that leaves a lot of work to be done, and development groups do not think much of the weekend's proceedings.

Romilly Greenhill of Actionaid said the statement made at the end of the meetings was "little more than a repetition of previous commitments, with no substantive progress on aid or debt".

Stephen Rand of the Jubilee Debt Campaign said: "It's not good enough that rich country governments are yet again asking us to wait and see. The burden of debt on the world's poor is neither a game nor and opera - it's a crisis."

So the aid and debt spotlight moves to the G8 summit at Gleaneagles in July.


SEE ALSO:
G7 fails to agree on debt relief
16 Apr 05 |  Business
Gold falls on IMF sale concerns
07 Feb 05 |  Business
G7 backs Africa debt relief plan
05 Feb 05 |  Business
Hard work to finance debt relief
05 Feb 05 |  Business


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