Debt Cut Is Set for Poorest Nations

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By Paul Blustein
Washington Post Staff Writer
Sunday, June 12, 2005

The world's wealthiest nations agreed yesterday to cancel more than $40 billion in debts that some of the world's poorest nations owe to international lenders -- a move inspired by the belief that full debt forgiveness is necessary to give those countries a chance to escape the trap of hunger, disease and economic stagnation.

The agreement, struck at a meeting in London of finance ministers from the Group of Eight major industrial nations, is the most significant debt-relief measure yet for poor countries because it cancels the debts that the eligible countries owe to the World Bank, International Monetary Fund and other multilateral lenders such as the African Development Bank.

Previous plans offering partial relief have led to disappointment and criticism from aid activists, who said many poor countries are forced to spend more on debt service -- paying principal and interest on international loans -- than on health and education.

Under the agreement, 18 countries would receive immediate forgiveness on more than $40 billion that they owe in coming years, a combined savings for those countries estimated at $1.5 billion a year.

Most are in Africa: Benin, Burkina Faso, Ethiopia, Ghana, Madagascar, Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia. Four others -- Bolivia, Guyana, Honduras and Nicaragua -- are in Latin America. Another nine African nations are likely to qualify soon, once they satisfy IMF and World Bank requirements for improving their governance and economic policies. Another 11 countries could also benefit eventually.

"We are conscious of the abject poverty that so many countries and individuals face. We're being driven forward by the urgent need to act," said Gordon Brown, the British chancellor of the exchequer, at a news conference after the meeting. His American counterpart, Treasury Secretary John W. Snow, called the pact "an achievement of historic proportions." He added that debt has been "locking these poorest countries into poverty and preventing them from using their own resources," a situation he called "morally wrong."

The accord was a coup for the British government, which has taken the lead in exhorting other rich countries to come to Africa's aid with the aim of producing a far-reaching package of measures next month at the G-8 summit in Gleneagles, Scotland.

But it does not cover all poor countries, and it involved important compromises with the Bush administration, which also favored full debt relief but differed with London about how to go about it. Moreover, it does not include an even more ambitious British proposal, viewed negatively by Washington, to double about $50 billion in aid given annually by rich countries.

Aid activists who have played crucial roles in marshalling popular support for debt forgiveness cheered yesterday's announcement while voicing determination to press for more. A group of celebrities, led by rock musicians Bob Geldof and Bono, is planning free concerts and rallies in the hope of spurring the G-8 to adopt the aid-doubling plan.

"The journey of equality took another step today, and broke free millions of people in some of the poorest countries from the bondage of immoral and unjust debts," Bono said in an e-mailed statement. "There's long nights ahead of us all to build up the speed and accelerate for a comprehensive debt-aid-trade deal."

Neil Watkins, national coordinator of the Jubilee USA Network, a group that has put primary emphasis on debt forgiveness, said the accord "is an important first step, but the deal must be expanded to include all impoverished countries" rather than the G-8's more restrictive list. Among the low- and lower-middle income nations that do not qualify are Indonesia and Nigeria, for example.

Reaction in Africa from countries that stand to benefit was generally enthusiastic. "That's great news for us. It will be good for our programs, including education, health and poverty eradication," Ugandan Information Minister James Nsaba Buturo told the Associated Press. Finance Minister Ng'andu P. Magande of Zambia told the Reuters news agency that he already had plans for the money his country would save, including recruiting 7,000 new teachers waiting for employment since leaving college.


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© 2005 The Washington Post Company

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