Debt disappointment in wake of G7 meeting; outcome unclear

6 February 2005

The February G7 meeting produced talk of providing “as much as 100% multilateral debt relief,” but no consensus was reached on concrete actions moving forward.

updated February 6, 2005

IFI Debt cancellation plan to be resolved at G8 summit in July

The February G7 meeting produced talk of providing “as much as 100% multilateral debt relief,” but no consensus was reached on concrete actions moving forward. Disagreements over whether grants are preferable to loans continue to delay the debt relief process. Present proposals involve macroeconomic contingencies that do not imply straightforward debt cancellation. More proposals for financing debt relief will be discussed at the April meetings of the IMF and World Bank in Washington,DC, with a formal agreement to be drafted at the G8 summit in Scotland in July 2005. It remains to be seen whether this meeting will result in full multilateral debt cancellation, or only partial debt relief for the world’s poorest countries.

Read more

• Divisions on How to Agree Debt Relief, Andrew Balls, Financial Times, February 16, 2005 (FT website)
• G7 Promise Debt Relief, Norwegian Church Aid, February 8, 2005 (NCA website)
• G7 Agreement on Need for 100% Cancellation Encouraging, but Plan Must Come without Harmful Conditions, Apply to All Impoverished Nations: G7 Response to Tsunami-Affected Countries’ Debts ‘Completely Inadequate’, Jubilee USA Network, February 5, 2005 (Jubilee USA Network website)

Disputes continue over financing debt relief

Opinions remain divided over how to finance the costs of multilateral debt relief, with UK Chancellor Gordon Brown proposing that the IMF revalue its gold supplies to free up to 34 billion US dollars. This would be sufficient to cancel debts owed to the IMF by the world’s poorest countries. Along with excess funds from gold sales, creditor nations would also provide new funds for debt relief and increased development aid. In contrast, the US suggests the World Bank cancel all outstanding debts and replace future loans with grants tied to human rights records and needs-based financing. IMF Managing Director Roberto Rato is expected to report by April on proposals for using IMF gold reserves to excuse debts.

Read more

• G7 Truce on Debt Relief Eclipses Currencies, China (Update 1), Bloomberg, February 7, 2005 (Bloomberg website)
• Lawmakers Oppose Sale of IMF Gold Stocks, Lesley Wroughton, Reuters, February 10, 2005 (Yahoo! News website)
• IMF Statement Contradicts Sales Drive by Chancellor Brown, Julian Phillips, Gold Authentic Money, February 5, 2005 (UKWarrants website)

G7 support sought for Africa ‘Marshall Plan’

UK Chancellor Gordon Brown has suggested a United Nations-sponsored plan to cancel debts owed by poor nations to the IMF, World Bank, and African Development Bank. Dubbed a new “Marshall Plan” for Africa, this plan commits Britain to paying 10% of the foreign debt bill of the entire developing world. His plan also reiterates proposals to revalue and sell IMF gold reserves. The plan stipulates that developing countries must promise to spend the money they save on education, health and welfare, while increasing transparency and decreasing corruption. Backed by Germany, France and Italy, Britain also suggested the implementation of an International Financial Facility (IFF). The IFF would involve selling bonds from donor countries on the international market, backed by future aid budgets. While the US has been non-committal, the chancellor says he hopes other G8 and European countries will follow the UK's lead at the summer G8 meeting.

Read more

• Brown Boasts of G7 Backing for African Poverty Plan, David Smith, Times Online, February 6, 2005 (Times Online website)
• Zambia: UK’s Marshall Plan Brings Debt Relief, More Aid, UN Integrated Regional Information Networks, February 9, 2005 (allAfrica website)
• G7 Backs Africa Debt Relief Plan, BBC News, February 5, 2005 (BBC UK website)

Resources

Official Resources

• World Bank Debt Sustainability Framework September 2004 (WB website)
• Debt Sustainability and Financing Terms in IDA 14: Technical Analysis of Issues and Options IDA, September 2004 (WB website)
• Debt Sustainability and Financing Terms in IDA 14: Further Considerations on Issues and Options IDA, November 2004 (WB website)
• World Bank debt web page (www.worldbank.org/debt)

Civil Society Analysis

• The World Bank (IBRD) Resources and Debt Cancellation Sony Kapoor, January 2005 (Acrobat pdf 268 KB) (Jubilee USA website)
• Multilateral Debt Cancellation: A briefing, Sony Kapoor, Jubilee Research at the New Economics Foundation for Debt and Development Coalition Ireland, December, 2004 (Debt and Development Coalition Ireland website)
• The IMF, Gold Sales, and Multilateral Debt Cancellation Sony Kapoor, September 2004 (Acrobat pdf 203 KB) (Debt and Dev't Coalition Ireland website)

Press

• Charities urge G7 to cancel poor countries' debts February 2, 2005, by Yara Bayoumy (Reuters website)
• Canada Proposes 100% Debt Relief for World's Poorest Countries, February 2, 2005 (Gov't of Canada news website)

Useful civil society websites

• Jubilee Debt Campaign (www.jubileedebtcampaign.org.uk)
• Jubilee USA (www.jubileeusa.org)
• Jubilee UK (www.jubileeuk.org)
• Eurodad (www.eurodad.org)
• Committee for the Abolition of the Third World Debt (www.cadtm.org)
• Bretton Woods Project (www.brettonwoodsproject.org) (Finance and Debt: page: http://www.brettonwoodsproject.org/topic/financial/index.shtml)
• Jubilee South (www.jubileesouth.org)
• 50 Years Is Enough (www.50years.org) (Debt page: http://www.50years.org/issues/debt.html)
• World Development Movement (www.wdm.org.uk) (Debt page: http://www.wdm.org.uk/campaign/debt.htm)
• Debt Relief International (www.debtrelief.org.uk) (OECD-funded non-profit)