World’s Wealthiest Nations Agree To Cancel $40B in Debt Owed by 18 of World’s Poorest Countries

Finance Ministers from the Group of Eight industrialized nations on Saturday at a meeting in London agreed to cancel at least $40 billion in debt owed by the world's 18 poorest nations, the New York Times reports (Cowell, New York Times, 6/12). Under the agreement, 18 countries -- Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia -- will receive immediate forgiveness for the more than $40 billion they owe to the World Bank, African Development Bank and the International Monetary Fund (Blustein, Washington Post, 6/12). The deal will save the initial 18 countries about $1.5 billion annually that they could use toward health care, education and poverty alleviation programs, according to British Chancellor of the Exchequer Gordon Brown (New York Times, 6/12). An additional nine African countries likely will qualify for debt forgiveness once they have satisfied IMF and World Bank requirements for good governance and sound economic policies. Another 11 countries eventually might qualify (Washington Post, 6/12).

Lender Compensation
The agreement also requires G8 countries to compensate the World Bank and AFDB at a total cost of $16.7 billion, based on the payments the lenders would have received from the 18 countries between now and 2015 (Hundley, Chicago Tribune, 6/12). The debt-forgiveness cost to the IMF will be absorbed by the institution's already existing resources (Hitt, Wall Street Journal, 6/13). The United States agreed to pay up to $1.75 billion to the lenders over the next decade, and the United Kingdom agreed to pay up to $960 million (New York Times, 6/12). Germany will pay between $848 million and $1.2 billion to the World Bank and AFDB (Johnson, AP/Washington Times, 6/12). Other G8 countries made undisclosed pledges, and additional pledges are expected from World Bank and IMF members this year. According to Brown, G8 members agreed to the compensation requirements so that lenders would have the ability to make new loans to other countries in the future. "We could not contemplate a situation" where debt relief for some countries was agreed upon at the expense of other countries, Brown said, the New York Times reports (New York Times, 6/12).

Implications
The debt-forgiveness deal will allow countries to address health care, social issues and poverty eradication only if leaders agree to good governance and transparency, according to Brown. The G8 deal is the "biggest debt settlement that can be reached, and I believe that [it] is the starting point. But it's only going to succeed if it's matched by aid, by trade justice, by transparency, by tackling corruption, by dealing with the governance issues. ... They realize in African countries that if they're not transparent about what they do they will get less help, and they realize also that they're accountable in the end to their own people and not just to donor agencies around the world" (Baldwin, Reuters AlertNet, 6/12). Some African countries view debt relief as a vital element to meeting the U.N. Millennium Development Goals, which include combating HIV/AIDS, malaria and other diseases and reducing childhood mortality (Esipisu, Reuters, 6/12). However, not all major African countries are included in the deal, according to the Christian Science Monitor. "If you're talking about stabilizing Africa, you've got to focus on countries like Nigeria, Sudan, Congo and Angola, which pull regional weight," Francis Kornegay of the Centre for Policy Studies said. Other Africans say that the G8 focus on the continent will distract from African institutions such as the New Partnership for Africa's Development, the Monitor reports (McLaughlin, Christian Science Monitor, 6/13).

Reaction
Brown said the debt-forgiveness agreement reflects the "intention of world leaders to forge a new and better relationship -- a new deal -- between the rich and poor countries of the world, and I believe that the advances that we have made can be built upon ... in the next few weeks." He added that during the G8 summit next month in Gleneagles, Scotland, wealthy nations likely will agree on additional poverty-eradication programs, including providing no-cost treatment for all people living with HIV/AIDS by 2010 (Daniszewski, Los Angeles Times, 6/12). Some advocacy groups that have campaigned for debt relief welcomed the agreement and said that it opens the possibility for greater aid initiatives, according to the New York Times. However, other groups said that 44 additional countries still are obligated to pay their debts to international lenders (New York Times, 6/12). "This deal is an important step forward, but it is not the giant leap on debt that is needed," Stephen Rand, co-chair of the Jubilee Debt Campaign, said, adding, "This deal still leaves major issues on debt unresolved -- the damaging economic policy conditions attached to debt relief, the many indebted countries not on the list, debts not covered by the deal. There is more work to be done to ensure that the deal is delivered as well as to go further on debt, on aid and on trade justice" (Freinberg, Telegraph, 6/12). Although reaction from most African countries was positive, some countries that do not qualify under the program -- such as Kenya -- were critical of the agreement. "Those faithful in servicing their debt like Kenya are being ignored while (Highly Indebted Poor Countries) who have failed to service the debt are getting more attention," Kenyan Planning and National Development Minister Peter Anyang Nyongo said (Shacinda/Chale, Reuters, 6/11).

Bush To Increase African Aid Efforts
President Bush is increasing U.S. efforts to address HIV/AIDS, war, famine and poverty in Africa by sending two White House officials to the region, the Washington Post reports. In advance of the G8 summit next month, Bush sent domestic policy advisers Michael Gerson and Kristen Silverberg to Africa for 10 days to review the President's Emergency Plan for AIDS Relief and other U.S. programs on the continent. He also is expected to announce additional aid to Africa at the G8 summit (VandeHei/Henderson, Washington Post, 6/11). Bush also is scheduled to meet with the presidents of Botswana, Mozambique, Namibia and Niger on Monday at the White House to discuss democracy, free trade, HIV/AIDS and economic security (Douglas, Philadelphia Inquirer, 6/13).