Financial Leaders to Keep Poor Nations Waiting On Debt Relief
Published on Friday, April 15, 2005 by the Agence France Presse
Financial Leaders to Keep Poor Nations Waiting On Debt Relief

WASHINGTON -- The world's poorest nations will have to wait a few months yet before learning whether their debt burden will be eased, top officials said as global financial leaders prepared to meet here.

International Monetary Fund chief Rodrigo Rato and World Bank president James Wolfensohn said the debate was reaching fruition but played down the prospects of an early breakthrough at the weekend meetings.

Their comments, which angered campaigners, came ahead of talks Friday and Saturday of Group of Seven (G7) finance ministers from Britain, Canada, France, Germany, Italy, Japan and the United States.

The G7 meeting was coinciding with the annual spring meetings of the IMF and World Bank over the weekend where some of the impoverished nations that stand to benefit were to get their say.

The G7 is trying to find ways of canceling the 80 billion dollars in debt owed by poor nations to multilateral institutions such as the IMF and World Bank.

To help finance the scheme, one idea doing the rounds is for the IMF to sell its 8.5 billion dollars' worth of gold reserves. Another is a global tax on financial transactions.

The United States, while agreeing with the goal of debt relief, objects to both proposals as being destabilizing to world markets.

Rato acknowledged that selling the gold reserves was one option but said the IMF holds only 20 percent of the debt owed by developing nations.

"So we would need a much broader approach, also ... underlining more aid and additional resources to finance development," he told a news conference.

"I don't want to anticipate what governments will decide at these meetings," he said, while adding: "The new proposals to raise more money for development, we believe they are serious and should be taken seriously."

Wolfensohn said this weekend's deliberations would likely feed into an announcement on debt relief by the Group of Eight nations -- the G7 plus Russia -- in Scotland in July, and at the UN summit in September.

"In all my years I've never sensed a greater seriousness about the need to come to action," said the outgoing World Bank boss, who will be replaced on June 1 by US Deputy Defense Secretary Paul Wolfowitz.

"This (weekend) is like an overture ... but the actual arias are likely be sung by the stars at another time," Wolfensohn said.

He called on the rich world to stump up more aid, so as to hasten progress towards a flagging goal for developed nations to contribute 0.7 percent of their gross domestic product (GDP) in official assistance.

The developed world spends 1,000 billion dollars a year on military expenditure, but only 50-60 billion dollars on development.

"Anything more nonsensical is hard to imagine," Wolfensohn said. "It's not that we lack the resources, it's that we lack the commitment."

The debt relief plans are focused on the 38 poorest nations, or "Heavily Indebted Poor Countries (HIPC)" in official parlance.

As part of the HIPC initiative, the G7 nations agreed in February to erase the multilateral debt, and also to look at clearing bilateral debts owed by the 38 countries. But they remain divided over how to foot the bill.

Activists launched a scathing attack on the G7 nations for continuing to debate the matter while, in their words, millions are dying or starving from the consequences of the debt burden.

"The G7 countries have dragged their feet for too long, sacrificing the health and well-being of millions of people around the world," Njoki Njoroge Njehu of the 50 Years is Enough Network told reporters.

"The glacial pace of the G7 countries when it comes to debt cancellation is both incomprehensible and immoral in the face of the human cost of the debt burden," she said.

Copyright © 2005 Agence France Presse