IMF writes off poor countries’ debt

Eighteen of the poorest nations will have their debts to the International Monetary Fund wiped out after rich countries bridged differences on Saturday that threatened a pact first signed this summer.

Leaders of the Group of Eight nations pledged at a July meeting in Gleneagles, Scotland, to cancel all debt owed to the international institutions by the world’s poorest states, an agreement roughed out by their finance ministers the month before.

But some smaller European countries like the Netherlands were worried the G8 would not stump up the extra cash needed and that the commitment would undermine the existing resources of the World Bank and IMF.

Faced with the possible collapse of the deal at this weekend’s annual meetings of the two institutions in Washington, the G8 on Friday promised additional money would be available, overcoming the smaller countries’ objections.

“The world has come together,” said British finance minister Gordon Brown who has personally championed the debt write-off and chairs the IMF’s steering group, the International Monetary and Financial Committee.

“Agreement has now been reached on all the elements of the debt deal,” he said, adding that the plan would be in operation by the end of the year.

World bank shareholders are expected to follow the IMF’s lead on Sunday and also cancel the 18 countries’ -- most of them African -- debts to it.

Under the plan, $40 billion of debt to the international institutions will now be written. A further nine countries could become eligible in the future and total relief could rise to $55 billion.

Aid campaigners were relieved that the plans that have been floated for years finally appeared to be turning into reality but urged speedy action.

“We heard the overture in June, the fanfare in July -- and now we really do hope we have heard part of the final chord,” said Stephen Rand of the Jubilee Debt Campaign.

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“After all the brinkmanship this is good news. It’s good news because it will make a real difference to some of the world’s poorest people.”

African countries welcome deal
African nations welcomed the deal but wanted to ensure that there would be no extra strings attached to receiving the money, and called for more nations to become eligible.

“The devil is clearly in the implementation details,” said Cosme Sehlin, Benin’s finance minister.

The World Bank said the debt deal could boost receipients’ annual economic growth by half a percentage point.

“The deal that has been sealed by the Fund this weekend will provide urgently needed money for education and health care,” said Max Lawson, policy adviser at Oxfam.

“We’ve seen a real breakthrough on debt cancellation by the IMF. The stage is now set for World Bank shareholders to fulfil their part of the bargain tomorrow.”