G-8 will cancel $40b in debt owed by poorest nations

LONDON -- The world's wealthiest countries reached a landmark agreement yesterday to cancel at least $40 billion in debt that the poorest nations owe to international financial institutions.

Aimed at alleviating global poverty, the accord followed years of negotiations and a night of fine-tuning by finance ministers at a meeting of the Group of Eight, which comprises the United States, Britain, France, Germany, Italy, Canada, Japan, and Russia.

The action provided much-needed relief for indebted nations, particularly in sub-Saharan Africa, which has been ravaged by military conflict, political corruption, famine, and AIDS. The plan, drawn up by Britain, received the backing of the United States on Friday, after talks in Washington between President Bush and Prime Minister Tony Blair of Britain.

John Snow, the US treasury secretary, told reporters in London yesterday: ''This is a historic moment. A real milestone has been reached."

The agreement was reached just four weeks before G-8 heads of state are scheduled to meet in Scotland for the group's annual gathering. This year the meeting has been billed as an unprecedented effort by the leading industrialized nations to fight poverty in the poorest pockets of the globe.

Under the terms of the accord, the World Bank, the International Monetary Fund, and the African Development Fund will immediately write off 100 percent of the money owed to them by 18 of the poorest countries -- 14 in Africa and four in Latin America. That would mean the debt burden of those countries would be reduced by more than $1.5 billion per year.

In return for erasing the debt, those countries agreed to implement anti-corruption measures and responsible, transparent fiscal policies that would funnel savings directly to education and health services.

The 18 countries are: Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda, and Zambia.

Blair's top financial minister, Gordon Brown, the chancellor of the Exchequer, said that an additional 20 countries could be eligible under the terms of this agreement if they meet targets for good governance and tackling corruption. If they did so, the total package, which would require approval by the lending institutions, could exceed $55 billion.

''We are presenting the most comprehensive statement that finance ministers have ever made on the issues of debt, development, health and poverty," Brown said.

He added that the sweeping plan set the stage for an ambitious agenda at the July 6-8 meeting of the G-8 in Gleneagles, Scotland.

Blair holds the rotating chairmanship of the G-8, and his government has placed the relief of African poverty and global warming at the head of the list of issues. Some observers are predicting disagreements within the Bush administration, which is considered not likely to go as far in tackling poverty and global warming.

Advocacy groups and charities, which have lobbied for years for extensive relief in the developing world, were encouraged by yesterday's agreement and expressed hope that it might clear the way for broader measures to be agreed upon in Scotland.

The statistics of poverty and death in sub-Saharan Africa are staggering: nearly half live in extreme poverty, one-third endure hunger, and one-sixth of children die before age 5, according to the United Nations.

Bheki Khumalo, a spokesman for South African President Thabo Mbeki, told the BBC: ''We are really encouraged by this decision. . . . It will go a long way to enriching the African continent."

Some African analysts were more cautious in their assessment. Greg Mills, director of the South African Institute of International Affairs in Johannesburg, said: ''One doesn't want to be too cynical but . . . they [the G-8] are searching for successes, and Africa would do well to not see any such deals as panaceas for development."

Other analysts said the plan did not go far enough, and that the actual contribution of the wealthiest countries, such as the United States and Britain, was relatively small, particularly when compared to the amount those countries spend on their respective military forces.

Under the terms of yesterday's agreement, the United States agreed to contribute up to $1.75 billion over the next 10 years, and Britain up to $960 million over the same period.

Germany will pay up to $1.2 billion to offset future lost repayments to the World Bank and the African Development Bank.

Henry Northover, a policy analyst for CAFOD, a Roman Catholic aid organization with programs to fight poverty and AIDS in Africa, told the BBC that the debt-relief negotiations have 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," he said. ''OK, we've got a deal here as far as the debt relief for those eligible countries, but we need much more."

The criticism from some corners of the agreement also fits in with broader criticism of the G-8 itself. The group has no headquarters, no budget or permanent staff, and it is simply an informal but exclusive body whose members have sought to tackle global challenges.

Critics of the G-8 say its efforts must be seen in the context of an elite group of industrialized nations that is representing the interests of those nations and often doing so by promoting globalization to the detriment of the needs of the wider world.

Material from wire services was included. Charles M. Sennott can be reached at sennott@globe.com.