- The Washington Times - Saturday, September 24, 2005

A deal to erase billions of dollars of debt for poor countries cleared an important hurdle yesterday, winning the endorsement of the International Monetary Fund’s steering committee.

Gordon Brown, Britain’s chancellor of the exchequer and chairman of the IMF’s policy-setting panel, announced the breakthrough. Negotiators had reached agreement on “all elements” of the debt-cancellation proposals, he said, and the IMF’s 24-member executive board will meet soon to formally approve the plan.

“We worked very hard over the last few days, as well as over the last few months, to try to bring people to agreement on the proposals,” Mr. Brown said at a press conference late yesterday.

The agreement would forgive an estimated $40 billion in debt for at least 18 poor countries — most of them in Africa — owed to the IMF, the World Bank and the African Development Bank.

As many as 20 other countries could be eligible if they meet certain conditions and would push the total amount of debt cancellation to more than $55 billion. The cost would be spread over decades.

The IMF steering committee endorsed the debt cancellation one day after the Group of Eight major industrial powers made firm pledges to underwrite the plan, a commitment intended to overcome the biggest obstacle to approval by the lending institutions.

Leaders of the world’s eight major industrial powers endorsed a general framework for the proposal at an economic meeting in July in Scotland, but largely left the details of the forgiveness plan to the World Bank and the 184-nation IMF to settle.

The World Bank, a major lender to poor countries, still must consider the proposal. The annual meetings of the World Bank and the IMF continue today, and U.S. officials predicted swift approval of the debt cancellation.

The World Bank and IMF did not want the debt plan to impair their ability to provide aid. The institutions, joined by Belgium, the Netherlands and some other countries, sought assurances that the rich nations would put up the money to cover the loan repayments lost when the debts are written off.

Treasury Secretary John W. Snow said he hoped the executive boards of the IMF and World Bank would approve the deal within a week. “It will be an historic milestone, and we have done it in such a way to ensure that there will be no diminution of resources for these great institutions,” Mr. Snow said.

Finance officials from the Group of Eight countries — the United States, Japan, Germany, France, Britain, Italy, Canada and Russia — pledged on Friday to “cover the full cost to offset dollar for dollar” the loan repayments that would be lost.

Poor countries could use the money for education or drugs to fight HIV/AIDS or malaria, supporters of debt forgiveness said.

Oliver Buston, European director for Debt AIDS Trade Africa (DATA), a debt-relief group started by Irish rock star Bono, hailed the fresh commitment from the G-8 countries.

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