The United States and its major economic allies struggled yesterday to resolve deep differences over how best to relieve the heavy debt burden for Iraq and the world’s poorest countries.
Debt relief and broader topics of international finance topped the agenda for finance officials attending committee meetings of the International Monetary Fund and the World Bank.
Treasury Secretary John W. Snow made the case for a Bush administration plan that essentially would mean the poorest countries would not have to repay existing loans. New loans, though, would be cut by the amount of increased debt forgiveness those countries received.
A competing proposal from Britain would pay for expanded debt relief by revaluing the IMF’s gold reserves according to world prices and by getting wealthy nations to commit more money.
“There is a growing consensus that multilateral debt relief has to be dealt with as soon as possible,” said Britain’s chancellor of the exchequer, Gordon Brown, chairman of the IMF’s policy-making committee.
In contrast to his strong statement were vague promises in a communique after the committee’s meeting yesterday. The group said it “looks forward to further consideration of outstanding issues in the proposed framework for debt sustainability, before it is made fully operational, and of further debt relief, including its financing.”
When asked about the seeming lack of progress on debt relief, Mr. Brown said after the meeting that he was optimistic about a resolution by year’s end. That view is endorsed by some private groups urging debt relief.
Max Lawson, a policy adviser to Oxfam, an international relief group, said France and Canada were moving toward the British position that more money would be needed and that the United States, Germany, Japan and others were likely to come around.
Debt forgiveness for the poorest nations began with a program in 1996 that was expanded in 1999.
Easing the debt burden for Iraq and poor nations dominated debate Friday among officials of the Group of Seven countries — the United States, Japan, Germany, France, Britain, Italy and Canada. Yet the economic powers failed to settle their differences.
On Iraq, the United States tried to rally support for erasing as much as 95 percent of the country’s $120 billion in foreign debt.
France and Germany, however, say they are only willing to provide 50 percent debt relief for Iraq this year. But they were willing to return to the issue in three years when, they hope, Iraq is more stable.
A senior Treasury official said the Bush administration considers this percentage unworkable. Trying to build momentum for Iraqi assistance, Mr. Snow and Federal Reserve Chairman Alan Greenspan met with Iraq’s Finance Minister Adel Abdul-Mahdi and Central Bank President Sanan al-Shabibi.
Asked by a reporter what could be done to convince France and Germany that Iraq needs more than 50 percent debt relief, Mr. Abdul-Mahdi replied: “I will tell them we must have a sustainable debt position.”
Vocal opponents of the U.S.-led invasion, France and Germany are resisting the administration’s effort to forgive Iraq’s debt because they want such help linked to more generous debt relief terms for poor countries in Africa and elsewhere.
The three days of talks were to wrap up today with the annual meetings of the 184-nation IMF and its sister lending agency, the World Bank.