Two of Africa’s poorest countries are to receive extra debt relief from the World Bank and International Monetary Fund (IMF) in a move Britain hopes will pave the way for a more generous approach to the Third World’s loans crisis.
Against stiff opposition from the United States and German governments, Britain and France have persuaded the world’s richest creditors to offer an extra $800-million writedown to Ethiopia and Niger.
Despite the promise the West made five years ago in Cologne to write off the unpayable debts of 42 of the world’s poorest countries, many are still struggling to service their loans.
United Kingdom Finance Minister Gordon Brown and his new French counterpart, Nicolas Sarkozy, who were chairing a conference on aid in Paris last week, are hoping to use Niger and Ethiopia as test cases for persuading the rest of the group of seven industrialised countries to revisit the Heavily Indebted Poor Countries Initiative (HIPC) launched in Cologne.
Niger and Ethiopia’s cases will be approved by the boards of the bank and the IMF over the next few weeks.
”The dam has broken,” said a senior source close to the G7, ”but the Americans are insisting it is not a precedent.”
He added that Washington has scant influence over the HIPC process because it pays little towards meeting the costs of the debt write-offs. Although more than a dozen African countries face similar difficulties to Niger and Ethiopia with the rising real burden of paying off their debts, Washington and Berlin are resisting the extra $1,8-billion write-off needed to compensate them.
British sources said each country’s case would have to be fought individually although it would be hard for the Americans and Germans to resist the claims of countries as poor as Zambia, Rwanda and Cameroon.
Brown told the Paris conference that, although 27 countries had so far won $70-billion in debt write-downs from the HIPC initiative, the West had to provide a better deal for those countries whose debts were still too high to service.
”We can do more — either through topping up generally or by specific, country by country initiatives — not least for countries facing higher export ratios which prevent an exit from unsustainable debt,” he said.
Brown laid down a challenge to the other leading economies to back his plan to double global aid spending.
”If debt is to be kept sustainable in the future, we will need to provide more aid in the form of grants,” he said.
Britain is proposing that Western countries raise extra cash for aid by issuing bonds on capital markets secured on future aid budgets. — Â