G8 Debt Deal hailed as positive first step, But more Action Desperately Needed by AFP / The Guardian / BBC News 9:00am 12th Jun, 2005   June 12, 2005. (AFP)    The G8 countries' agreement to cancel the debts of 18 of the world's poorest countries has been hailed as a positive but modest step toward tackling global poverty.    The deal has been approved overnight by the finance ministers of the G8 nations and will first benefit 14 African and four Latin American countries.    About $US40 billion in debts will be cancelled and more countries may also be offered the same deal in time. Among the recipients, Ethiopia has praised the deal but hopes no strings are attached.    Rwanda has promised that the money saved would go towards private sector investments, and Uganda welcomes it as a helpful, albeit long overdue decision.    Extension calls    Aid groups and activists have also welcomed the move. However, they are calling for extending debt cancellation to dozens more poor countries as well as sharply increasing development aid and ensuring poor countries get fair terms for trade with the rest of the world.    "Tomorrow 280 million Africans will wake up for the first time in their lives without owing you or me a penny from the burden of debt that has crippled them and their countries for so long," Bob Geldof, the Irish rocker-turned-activist, said.    But Geldof says he would keep up the pressure for greater efforts to reduce poverty. He is currently organising Live8 concerts to be held in the capitals of the richest countries in the run-up to the G8 summit in Scotland on July 6-8.    "We must be clear that this is the beginning and the end will not be achieved until we have the complete package demanded by the Commission for Africa of debt cancellation, doubling of aid, and trade justice," Geldof said.    South Africa's Archbishop and Nobel Laureate Desmond Tutu welcomed the move as "a splendid start" but said he hoped G8 leaders would extend the debt write-off deal to cover some 62 countries that are heavily indebted.    He also urged rich nations to boost aid and revise trade rules under which wealthy countries received farming subsidies, enabling them to produce cheaper goods that were being dumped in Africa and pricing African produce out of world markets.    "I hope that the heads of these different countries will be sensitive and say we are on the same side, we want to eradicate poverty, we want to ensure that trade conditions are equitable and we want to increase aid," he said.    Development aid    The decision to cancel debt is one component of the "Marshall Plan" for Africa launched this year by Britain, which is the current president of the G8.    But the United States has not signed up to the other component - a call to double annual development aid to $US100 billion by 2015.    The Make Poverty History (MPH) campaign, the British arm of a global anti-poverty movement, says the move is positive but calls for more debt relief.    Leaders of the lobby group have also attacked moves to link aid to water privatisation or economic liberalisation policies.    "The G8 countries have pushed forward a damaging free trade agenda," MPH member John Hilary said.    "If they really want to give developing countries the right to decide their trade policies, it's now up to them to change their aggressive stance at the WTO [World Trade Organisation]."    Anna Thomas, a senior policy adviser at the Christian Aid charity, welcomes a commitment to provide "universal access" to HIV treatment by 2010, but calls for resources to be put in place to achieve the aim. "For this plan to become reality it is essential that G8 leaders come up with the cash," she said.    Romilly Greenhill, of ActionAid, says the debt cancellation deal "is good news but it's not enough."    She says 62 countries need debt cancellation and "we are only talking about 18 countries for the time being and no progress has been made on aid. We wanted $US50 billion dollars more."    The finance ministers have agreed that in addition to the 18 countries, nine others would become eligible for 100 per cent debt relief totalling an extra $US11 billion over the next 12 to 18 months.    Thereafter 11 nations could receive similar debt cancellation bringing the total amount of debt relief to $US55 billion.    June 11, 2005    "G7 package will benefit 18 of world's poorest countries immediately", by Larry Elliott and Ashley Seager. (The Guardian)    Eighteen of the world's poorest countries will have their debts to the World Bank and the International Monetary Fund wiped out as part of a $55bn (£30.4bn) package agreed today by the G7 leading economies.    After weeks of intense negotiations, a deal brokered by the chancellor, Gordon Brown, will save countries such as Mozambique and Ethiopia a total of $15bn in debt payments over the next 10 years.    The Treasury said last night that a further nine countries would qualify for debt relief within 12-18 months, and that the total could rise to almost 40 once countries beset by civil war resolved their conflicts.    "The uniqueness of this deal is that so much would be written off almost immediately - more than $40bn within a few weeks of the agreement", Mr Brown said. "When I started this it was one country that would qualify but now it's 27 and potentially it's 37."    Writing off the multilateral debts of poor countries has been one of Britain's priorities for its presidency of the G8, and today's deal will be seen as a triumph for Mr Brown, who has cajoled sometimes reluctant G7 countries - the G8 minus Russia - to back his plan.    The deal goes further than the agreement between George Bush and Tony Blair earlier this week in Washington, which included debts owed to the World Bank and the African Bank but not the IMF.    Sources said last night that the logjam had been broken when it was found that the IMF had several billion dollars available from gold sales in the late 1990s that it could use to cover the losses it would make from writing off debts.    The 18 countries named in today's announcement are those which have had their bilateral debts to rich countries written off under the World Bank's heavily indebted poor country initiative, but despite the success of the Jubilee 2000 campaign, many countries were still left spending more on servicing debts to the Bank and the IMF than they were spending on health and education.    The Treasury said that today's proposal would wipe out debts worth $40bn in total for the 18 countries and would come into effect immediately. Once the next nine countries qualify, the write-off will amount to $51bn, and if the full 38 countries became eligible the package would total $55bn.    Interviewed by Sky News, the chancellor said: "There is potential for 60, 70 or even 80 countries to benefit from this. We are trying to make further progress in this area."    Today's agreement will be rubber-stamped at the Gleneagles G8 summit next month, when the leaders of the G7 countries will be joined by President Vladimir Putin of Russia.    The chancellor said the deal would not have been possible without the pressure that has been put on finance ministers by churches, campaign groups and the public.    Last night the Treasury released a letter to G7 finance ministers from Nelson Mandela, which said: "I hope you will do everything within your power to ensure your meetings today and tomorrow will finally conclude in a truly historic agreement for 100% debt cancellation. So let us not delay any longer when the need is urgent, but let us send a message of hope triumphing over despair."    Max Lawson, policy adviser at Oxfam, said the debt package was "a seriously positive step. It's great for the countries that are included but there are many other good performing countries - such as Vietnam and Sri Lanka - that are not included and who are getting nothing out of this deal".    He added that the deal would provide $1.5bn of the $50bn a year in extra financial help that the Make Poverty History campaign was seeking from rich countries. "They now have the three weeks until Gleneagles to come up with the other $48.5bn."    With a deal on debt relief now done, the UK intends to step up its campaign for increased aid flows from rich countries and fairer trade rules for developing nations.    Mr Brown acknowledged last night that there was "still work to be done" to get approval for his International Finance Facility, a scheme under which rich countries would raise money for development by selling bonds on the world's financial markets.    The new president of the World Bank, Paul Wolfowitz, yesterday threw his weight behind the UK's G8 agenda. "I certainly hope that I can use my position at the Bank to encourage increased resource commitments from all the donors and certainly the US," he said.    The beneficiaries    18 countries have completed the heavily indebted poor countries initiative: Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.    Nine countries are due to reach completion point within 18 months: Cameroon, Chad, Democratic Republic of Congo, Gambia, Guinea, Guinea Bissau, Malawi, Sao Tome and Principe, and Sierra Leone.    11th June, 2005    "The limits of the debt deal", by Steve Schifferes. (BBC News)    The deal to relieve 100% of poor country debts is historic - but it only sets the scene for a much bigger battle at Gleneagles over trade and aid.    UK Chancellor Gordon Brown was suitably enthusiastic about the deal reached with the finance ministers of the world's richest countries. "We are presenting the most comprehensive statement that finance ministers have ever made on the issues of debt, development, health and poverty," he said as the deal was announced.    And it is a historic breakthrough - or at least the final resolution of part of the debt issue that has proved contentious for almost a decade.    Debt relief was in fact first agreed in 1996, and it was the subject of demonstrations at the last G8 summit in the UK in Birmingham eight years ago.    The debt issue explored    The fact that is has taken so long to get agreement on the multi-lateral deal is a reflection of the deep disagreements among the major industrial countries - and the slow pace at which such relief has been administered.    Japan and Germany have always been reluctant to agree a complete write-off of debts, preferring to have greater leverage over the behaviour of the highly-indebted countries by offering to pay off their debt service instead.    More funds?    And the US has been reluctant to put up additional funds to pay for the World Bank's share of any debt relief. Talks between Mr Bush and Mr Blair unlocked the deal. It took high-level negotiations between Tony Blair and US President George W Bush to change this position - and open the way to a deal.    It probably helped that sums involved in debt relief are relatively modest - with the US, for example, expected to put in just $175m a year over 10 years.    And it is by no means clear that either the US, or other governments, will not fund their additional contributions by reducing money that would otherwise be spent on their aid budgets.    The amount is also modest because of a fudge over how to fund the debt relief to be offered by the International Monetary Fund (IMF), which is expected to use its own internal resources.    But Gordon Brown said that more money would be made available on "a fair burden share basis" if the IMF found it didn't have enough, or if more countries qualified for debt relief.    And the amount is also modest because so few poor countries - just 18, perhaps 27 in a few years - qualify for HIPC relief.    As the development lobby argues, many of the poorest but biggest countries in the world, like Nigeria, Indonesia, and Bangladesh, have always been excluded from the debt relief initiative.    Nigeria alone is renegotiating debts worth $25bn at the moment with its creditors - half the total debt held by the 27 countries being offered help.    Aid flows    The debt deal is worth around $1.5bn - critical money to some very poor countries - but only 3% of total aid flows of $50bn per year.    The UN has suggested that the amount of aid needs to double to $100bn per year if the Millennium Development Goals to cut poverty in half by 2015 are to be met.    Agreement on that sum will be a bigger prize for poor countries - but there was little sign of agreement on Mr Brown's ambitious plan for an International Financing Facility to double aid flows by borrowing money on international bond markets.    Instead, each country seems to be going its own way, with France and Germany investigating the use of a tax on international airline travel to finance more aid, and Britain teaming up with the Gates Foundation in the US to launch a pilot project to increase spending on vaccines and medicines to $4bn per year.    And although the EU countries have pledged to double aid by 2010, the development lobby wants quicker action to put more resources into world poverty.    Romilly, Greenhill, of the charity ActionAid, said: "What is very disappointing is the lack of any substantial concrete commitments on aid. "G8 leaders should announce an increase in aid to 0.7% of national income by 2010, and commit to stop forcing poor countries into failed policies such as privatisation. "G8 countries must work with Africa, not against it"    It is not clear whether any further movement on this issue is possible in time for the Gleneagles Summit, with the US seemingly reluctant to increase its aid flows further - or reduce the strict conditions it has put on any disbursement of funds.    Trade not aid    An even bigger prize would be the opening up of the markets for agricultural exports for developing countries, currently the subject of tortuous negotiations in the World Trade Organization.    Africa's share of world trade and world investment has steadily declined over the last two decades, and is worth far more than aid flows.    But there is tremendous political resistance, both in the United States and the EU, to sharp cutbacks in the agricultural subsidies enjoyed by their farmers.    And there is still no agreement on how fast the poor countries would have to open up their markets even further, exposing their farmers to potentially devastating competition from subsidised Western farmers.    Steve Tibbett, of the Make Poverty History campaign, told the BBC News website: "Trade is the biggest issue, where there is the deepest unfairness- it is the root of the problem."    The G8 finance ministers communique was suitably vague on the details, although it called for a "timetable to eliminate all trade-distorting export subsidies in agriculture" and "special and differential treatment for developing countries."    This issue will not be resolved at Gleneagles, and prospects are now fading for a final deal in December when the Hong Kong meeting of world trade ministers take place.    However, the debt deal has produced some momentum, which will encourage both the development lobby and the UK government as they prepare for the more difficult debates that lie ahead.    11 June, 2005    In quotes: Reaction to G8 deal. (BBC)    African politicians, aid agencies and other groups react to the agreement reached by the eight richest countries to write off the debts of some of the poorest nations.    Ugandan Information Minister James Nsaba Buturo: " We greatly appreciate the initiative. It is a challenge for us to use the money we have been paying on debts to be now used to better the lives of our people".    Tanzania's central bank governor, Daudi Balali: "We are receiving the news with a lot of hope for our people. We can expand health and education services with this relief. We will also be able to expand our infrastructure".    Ethiopia's Finance and Economic Development Minister, Sofian Ahmed : "Initially, I am very happy and encouraged by this decision as Ethiopia is going to be one of the beneficiaries. If it is going to be without pre-conditions and an immediate cancellation as (British Chancellor of the Exchequer) Gordon Brown is advocating, it is really encouraging.    Mozambique's Prime Minister, Luisa Diogo: " This is an important decision that means we can have more money saved from debt servicing being directed to education, health, infrastructure and social sectors".    Zambian Finance Minister Ng'Andu Magande: " Debt cancellation will provide us with relief on the budget. It will give us enough money to spend in education, health and other social sectors.    Rwandan Finance Ministry's Secretary-General, Claver Gatete :"This money that is now being relieved will go towards private sector investments".    Malawi's Treasury Secretary, Milton Kutengule:" A decision to cancel debt would help us reduce poverty".    South African President Thabo Mbeki's spokesman, Bheki Khumalo : "We are really encouraged by this decision and want to thank all the countries involved in this agreement. It will go a long way to enriching the African continent".    Rock star and debt relief campaigner Bono: "There are only 18 countries benefiting at this stage because they have gone through a strict process of conditionality. If the other countries are prepared to do the same, they will also benefit. I've been working on this for seven years and it's very exciting".    South African Institute of International Affairs director, Greg Mills : "One doesn't want to be too cynical but ... they [the G8] are searching for successes and Africa would do well to not see any such deals as panaceas for development".    Action Aid UK spokeswoman Romilly Greenhill: "This is very good news for the 18 poor countries that are immediately getting debt relief, but there are many poor countries that won't be eligible and of course it's done nothing to commit additional aid".    Cafod policy analyst Henry Northover : "This has been like pulling teeth. This is a small amount of additional money for the world's poorest countries from the world's richest, and it's been an enormous political and campaigning effort to get this far. OK, we've got deal here as far as the debt relief for those eligible countries, but we need much more".    Commonwealth Secretary-General Don McKinnon: "We are looking for similar outcomes on trade justice and aid for developing countries in order to truly make poverty history". Visit the related web page
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