Chancellor of the Exchequer Gordon Brown was on Wednesday finalising the details of a new deal to wipe out the multilateral debts of Africa’s poorest countries after British Prime Minister Tony Blair won agreement in principle from United States President George W Bush on Tuesday in Washington.
The Treasury said officials in all G8 capitals were working on the small print of the agreement and expressed confidence that there would be a full announcement when finance and central bank ministers from the world’s richest nations meet in London on Saturday.
”We would be quite surprised if we don’t emerge with quite a healthy package at the weekend,” one Treasury source said.
Bush and Blair agreed on Tuesday that 18 African countries would be eligible for a 100% write-off of debts owed to the World Bank and the Africa Development Bank.
Aid agencies said this would be worth at least $500-million initially, rising to $1-billion as more countries became eligible for assistance.
They warned, however, that the money would still be only a fraction of what was needed if poor African countries were to meet the Millennium Development Goals established by the United Nations in 2000.
Anna McDonald, the campaigns director of Oxfam, said: ”As G8 finance ministers prepare to meet this weekend, the US/UK debt proposal looks like a step forward, but the big question is how many countries it will apply to, will it include IMF [International Monetary Fund] debt and how much money will it release?
”Debt analysts calculate that at least 62 countries will need 100% debt cancellation to effectively tackle poverty and meet the Millennium Development Goals — and this will cost around $10-billion a year.”
The Treasury said the discussions among G8 officials concerned the number of countries involved in the new scheme and the amount of extra resources they could expect.
Blair won a concession from the US president during his talks, with Bush agreeing that debt relief should not be financed out of aid programmes, but instead should involve ”new money” for countries committed to good governance.
Bush also told Blair he was making a bankable promise to raise levels of US aid to ”the poor folks” of Africa, but did not tell Blair — either in private or public — the size of the increase he is contemplating. Bush said he was not interested in formulae, such as committing 0,7% of US gross domestic product to aid.
The British prime minister is hoping for as much as a $4-billion annual increase by the Americans and that such figures could be announced at the G8 summit in Gleneagles in July. However, the chances of that are seen as slim.
Oxfam, Live 8 organiser Sir Bob Geldof and the Conservative leader, Michael Howard, all welcomed the progress made by Blair.
Geldof described it as a good start: ”Blair went [to Washington] and there were lots of signals saying it was all a disaster, but I think the US and UK have got an agreement on debt relief.
”With regard to doubling of aid, the Americans were never going to come that far, because the American economy is so bad.”
In a significant prize for Britain, Bush broke with his ideological allies in thinktanks such as the American Enterprise Institute and agreed that the debt cancellation could be accompanied by extra cash, so preserving the financial integrity of the World Bank and its sister body the African Development Bank.
However, there was no agreement on the cancellation of IMF debt — a result of an unresolved dispute between London and Washington over whether such a move should be financed by revaluing the IMF’s $100-billion of gold reserves. Powerful lobbies in the US are opposed to the move.
Hilary Benn, the British Secretary of State for International Development, said: ”The great merit of debt relief is it provides predictable resources, because if you are no longer having to make the monthly repayments you can spend that money on a monthly basis, year after year, on the things that really matter — health and education.”
Speaking in the House of Commons on Wednesday, the prime minister promised that he was pressing for an end to agricultural subsidies in the US and the European Union.
He said: ”I hope at the G8 summit we are able at the very least to negotiate a clear set of principles and I think there is every indication from the EU side that they are prepared to take a more radical look at how we ensure there is better access into our markets for the poorest countries in the world.” — Â