NEW YORK — The much-vaunted British initiative to wipe out the debts of the world’s poorest countries, approved by the Group of Eight club of wealthy nations in Scotland in July, has come under threat ahead of next weekend’s World Bank annual meeting.
Prime Minister Tony Blair, President Bush and their delegations were forced to lobby hard during meetings at the United Nations last week in an effort to prevent the deal being watered down.
Tony Fratto, a senior U.S. Treasury official, said: “It’s not a done deal by any means. There are people who want this rewritten.”
The plan to cancel all debts owed by the 18 poorest — mostly African — nations to international lenders such as the World Bank was heralded as a breakthrough for the British G-8 presidency at the Gleneagles summit, held in Perthshire, Scotland. Gordon Brown, Britain’s chancellor of the exchequer, was one of its strongest backers.
But an internal World Bank briefing paper has concluded that its International Development Association (IDA) will be hampered in making loans to low-income countries if the debts are written off, as the bank itself would no longer receive interest payments.
In a second attack on the deal, the Netherlands and Belgium, apparently frustrated that they were not consulted over the G-8 deal, have questioned some of the conditions of the debt write-off.
British and American officials are exasperated that the critical internal World Bank report overlooks provisions made at Gleneagles for the G-8 countries to compensate for the lost interest payments, ensuring that the IDA can keep lending money.
One American delegate said last week that he thought the prospects for success at the Washington meeting were “not much better than 50-50.”
British officials struck a more positive note, acknowledging that some of the issues raised in the World Bank report were “not helpful,” but insisting that the deal would be passed.
London believes that the deal will receive the required “yes” vote, as the G-8 countries make up the most powerful voting bloc on the World Bank board.
But Bob Geldof, the former rock star who organized the Live 8 concerts to put pressure on G-8 leaders, signaled his own fears at a press conference at the United Nations, alongside Mr. Blair.
“The great leap forward [at Gleneagles] must be implemented at the coming meeting of the World Bank and International Monetary Fund,” he said. “If it is not implemented, we are looking at a disaster.”