Gordon Brown has pledged the UK will write off its share of debts owed by the world's poorest countries.
Africa's development goals are not being met
The chancellor encouraged other rich nations to do the same in a bid to lift the burden of debt repayments from Third World nations.
The UK holds about 10% of the total debt owed to the World Bank and other development banks.
He made the announcement in a speech at St Bartholomew's Church, Brighton, on Sunday, ahead of the Labour conference.
"Although there is no international agreement on 100% multilateral debt relief, Britain will do more," Mr Brown told about 400 debt-relief and fair-trade activists.
"We will pay our share of the multilateral debt repayments of reforming low-income countries.
"We will make payments in their stead to the World Bank and African Development Bank for the portion that relates to Britain's share of this debt."
His move will put pressure on other major creditors such as the US, Japan and Germany to follow suit at meetings of the IMF and World Bank later this week.
France and Canada are already understood to be planning similar announcements.
Mr Brown currently holds the chair of the IMF and has long promoted policies to solve the international debt crisis, including 100% relief on bilateral debt owed directly to the UK by heavily-indebted countries.
Brown wants to write-off debt
Campaigners believe his initiative, for which £100m a year has been put aside, could mark a turning point in efforts to lift the burden of debt on the developing world.
It would free Third World governments to devote a higher proportion of their budgets to health, education and economic development.
Lucia Fry, senior policy advisor at VSO, said: "VSO welcomes Gordon Brown's move to cancel the UK's proportion of the debt owed to the World Bank by heavily indebted poor countries.
"And echoes his call to fellow G7 members to do the same.
"While a 10% reduction in this figure is welcome, it will not be until there is full debt cancellation that achievement of these goals can be anywhere near realistic.
Peter Hardstaff, of the World Development Movement, welcomed the news but said Mr Brown should go further.
He said: "Most importantly he must drop the free market measures imposed as a condition of debt relief on developing countries.
"These conditions not only delay debt relief for months or even years but have been shown to actually hurt developing countries and increase poverty."
The UK will also continue to call for the debt payments owed to the IMF to be funded through the more efficient use of IMF gold reserves in a way that would not affect the gold price.