25348: Wharram - news - U.S. and Britain Agree on Relief for Poor Nations (fwd)

[Bob Corbett <corbetre@webster.edu>]

> From Bruce Wharram <bruce.wharram@sev.org>

  The New York Times
June 10, 2005
U.S. and Britain Agree on Relief for Poor Nations
By ELIZABETH BECKER and RICHARD W. STEVENSON

WASHINGTON, June 9 - The United States and Britain have reached an agreement
on how the billions of dollars that the world's poorest nations owe to
international lenders can be erased, removing the last impediment to an
accord long sought by the richest nations, a senior official involved in the
negotiations said Thursday.

Treasury Secretary John W. Snow and his British counterpart, Gordon Brown,
the chancellor of the exchequer, will present their proposal to a meeting of
the finance ministers of seven of the Group of 8 industrial nations on
Friday in London, the official said.

The plan would free 18 countries, most of which are in Africa, from any
obligation to repay the estimated $16.7 billion they owe the international
lenders, said the official, who requested anonymity because a formal
announcement of the agreement had not been made. The debts will 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.

Mr. 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 compromise they worked out in
negotiations in Washington and London over the past several days gave the
White House much of what it wanted, but also handed Prime Minister Tony
Blair of Britain a timely political lift four weeks before a scheduled
summit meeting of leaders of the Group of 8 nations, of which Mr. Blair is
the current chairman.

"Yes, we have reached an agreement spelling out what President Bush and the
prime minister outlined the other day in Washington," said the official,
referring to talks this week between the leaders.

The agreement on debt cancellation is likely to be the only big issue at the
coming Group of 8 summit meeting in Scotland on which the United States is
in full accord with the other major industrial nations. The Group of 8
includes, in addition to the United States and Britain, France, Germany,
Italy, Canada, Japan and Russia.

The White House has also rebuffed Mr. Blair's efforts to persuade the United
States to move closer to the position of the other industrial nations on how
to fight global warming.

Mr. Bush also has resisted calls by Mr. Blair for a doubling of direct
governmental aid to Africa, saying the United States has already tripled aid
to African countries in recent years and will provide more as those nations
show they can use it effectively. And the administration has rejected the
British proposal for creation of a new international body that would raise
money for Africa by borrowing against pledges of future aid.

The debt relief negotiations had been bogged down for months over which of
two possible methods should be used to eliminate the debt. One approach,
favored by Britain, was for the rich nations to take over responsibility for
repaying the debts. The second method, favored by the United States, was for
the loans to be written off entirely by the lenders.

In the end, Britain agreed to the American approach with a promise from the
United States to provide additional money to the lenders to make up for the
assets they were writing off.

The second issue was whether to sell some of the International Monetary
Fund's gold reserves to help pay off the loans owed to the fund. The United
States objected to any gold sales, saying it would drive down the price of
gold on the open market, hurting, among others, American gold producers. The
compromise was to draw, in part, on the proceeds earned by the monetary fund
from sales of gold in the 1990's, according to the official.

In theory, the deal would free the 18 countries from making $1 billion in
interest payments each year to the World Bank, the I.M.F. and other
international lenders like the African Development Bank. In practice, they
had not been making the payments, leaving them mired in debt and unable to
fully engage in the global economy.

Eventually the program can be extended to at least nine other countries with
others sure to press for similar treatment.

The 18 countries eligible for debt relief are: Benin, Bolivia, Burkina Faso,
Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique,
Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.

Canceling the debt of third-world nations has been a rallying cry for
activists for years, and Mr. Blair's government has been pressing for an
agreement. Groups that had been seeking to build public pressure on aiding
poor nations hailed the agreement, and used the occasion to seek even more
aid to the third world.

"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," said Jamie Drummond, of DATA, a lobbying
group founded by Bono.

"It is no substitute for an overall plan on aid and trade at the G-8 summit,
but this degree of cooperation should make a historic breakthrough more
likely," Mr. 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.

If the administration's position on the specifics of how to help the poorest
nations is at odds with those its main allies, it agrees with them on the
goal. Mr. Bush has pledged to channel more aid to developing nations that
show they are working to establish stable, democratic governments with good
economic policies.

On Monday, he is scheduled to meet at the White House with the leaders of
five African countries that held elections last year. They are President
Festus Mogae of Botswana, President John Kufour of Ghana, President Armando
Guebuza of Mozambique, President Hifikepunye Pohamba of Namibia, and
President Mamadou Tandja of Niger.

Mr. Bush has emphasized his view that free trade and private investment are
more powerful tools for economic growth than government aid. Two of his
senior aides are in Africa this week, studying health and economic
development programs.

Paul Wolfowitz, the former deputy defense secretary who is the new president
of the World Bank, said on Thursday that he would tell the finance ministers
meeting in London that all the pieces are in place for helping Africa this
year.

"My message will be I think that it really is important to find increased
resources to give Africa so it can turn the corner now," he said.

    * Copyright 2005 The New York Times Company

Wharram comments:  Still no relief for Haiti!  Hard to understand.  It would
seem that Haiti needs this relief as much as or more than Honduras and
Nicaragua.