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Hopes raised of Africa debt deal

Should a debt relief plan for poor nations start at:
5 countries
18 countries
25 countries
62 countries
International aid
G8 Summit

LONDON, England -- Hopes of an accord on debt relief for poor African nations were raised Friday with reports of an agreement between the United States and Britain on writing off $16.7 billion owed by 18 countries.

British officials said they were confident the world's most powerful financial ministers would reach a historic deal at their meeting in London this weekend -- although some differences remain between the Group of Eight (G8) major industrialized nations.

With the deadline of the G8 summit in Gleneagles, Scotland, just a month away, finance ministers meeting in London on Friday and Saturday were trying to find common ground.

In addition to the United States and Britain, the G8 nations include France, Germany, Italy, Canada, Japan and Russia.

UK Prime Minister Tony Blair -- current G8 president -- has demanded that poor countries' debts be cancelled and their aid doubled. He and U.S. President George W. Bush agreed this week in Washington that help on debt should be given only to countries ready to tackle corruption.

The New York Times reported that the United States and Britain had reached an agreement on freeing 18 countries, mostly in Africa, from any obligation to pay $16.7 billion in debt.

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

A significant omission from the list is Nigeria, whose external debt is put at $36 billion. Nigerian President Olusegun Obasanjo was in London this week for talks with Blair.

The number of countries to be helped is a sticking point. Blair's spokesman said earlier this week that about 25 countries would benefit, while charities say 62 countries need urgent debt relief.

France, Germany and Japan have their own proposal that would mean debt relief for only five countries.

The New York Times Friday quoted a senior official as saying that U.S. Treasury Secretary John Snow and his British counterpart, Chancellor of the Exchequer Gordon Brown, would present their proposal to a meeting of the finance ministers of seven of the G8 nations on Friday in London.

The debts would be written off by the lenders in an effort to allow the debtor countries to start fresh, get their books in order and eventually be able to borrow again for economic development, health, education and social programs, rather than simply to repay existing loans.

Bush had signaled his willingness to go along with writing off the debts in principle, but the United States and Britain had very different approaches to how such a plan would work, the newspaper said.

Britain wanted the rich nations to take over responsibility for repaying the debts. but Washington wants the loans to be written off entirely by the lenders, the Times said.

In the end, said the paper, Britain agreed to the U.S. approach with a promise from Washington to provide additional money to the lenders to make up for the assets they were writing off.

Sub-Saharan Africa has $230 billion in external debt and pays $12 billion a year on servicing the loans, according to the most recent figures from the World Bank, Reuters reported.

A third of the debt is owed to multilateral lenders like the International Monetary Fund. Britain has said that without 100 percent multilateral debt relief, the poorest countries would pay up to $27.5 billion in principal and interest payments to international organizations between now and 2015.

"President Bush and Prime Minister Blair made great progress and Gordon Brown and John Snow agreed on an excellent proposal for debt cancellation for many of the poorest countries," Jamie Drummond of DATA, a lobbying group founded by rock star Bono, told The New York Times.

Bono joined European Commission President Jose Manuel Barroso Thursday in an appeal to government leaders to double development aid to Africa and other poor regions over the next 10 years. (Full story)

"It is no substitute for an overall plan on aid and trade at the G8 summit, but this degree of cooperation should make a historic breakthrough more likely," Drummond said.

All of the countries eligible for debt relief have had to show that they have acted to improve governing, reduce corruption and pursue what the international lenders consider sound economic policies.

Bush has pledged to channel more aid to developing nations that show they are working to establish stable, democratic governments with good economic policies, The New York Times said.

It added that on Monday, Bush is scheduled to meet at the White House with the presidents of five African countries that held elections last year.

They are Presidents Festus Mogae of Botswana, John Kufour of Ghana, Armando Guebuza of Mozambique, Hifikepunye Pohamba of Namibia and Mamadou Tandja of Niger.

British finance minister Brown was upbeat ahead of the weekend G8 meeting and said in an interview with The Guardian newspaper on Friday that there would be no scaling back of Britain's ambitious plans.

"There is a shared understanding that a resolution on the crushing burden of debt is urgent, and that at the Gleneagles summit we will reach agreement that action together on aid, trade and debt relief is essential," he was quoted as saying.

"I'm still aiming for 100 percent debt relief. I'm still aiming for a doubling of aid. I'm still aiming for trade justice. I'm still aiming for all these issues."

But others were less optimistic.

A German government official said in Berlin on Thursday he did not expect a final decision on debt relief at the weekend. A Canadian official said much the same in Ottawa on Wednesday.

Meanwhile, says Reuters, Washington has rejected Brown's other big idea -- an International Finance Facility (IFF) -- which could raise an extra $50 billion in aid money up front by issuing bonds using future development budgets as collateral.

However, Britain is determined to launch at least a pilot IFF to fund vaccinations, even without U.S. support.

Aid agencies said they hoped that getting a deal on debt relief out of the way at this weekend's meeting might keep the door open for negotiations on increasing aid at Gleneagles.

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