Britain Offering to Pay Off 10%


Alan Cowell

New York Times
September 26, 2004

Britain is planning a new effort to help poor countries reduce their huge debts by offering to pay off 10 percent of the total owed to international agencies and challenging other nations to follow suit, said Gordon Brown, the chancellor of the Exchequer. In an address on Sunday to an advocacy group called the Trade Justice Movement, Mr. Brown also plans to repeat an earlier proposal that the International Monetary Fund should revalue its vast gold reserves, currently priced at a tenth of their market value, and use the proceeds to cancel some third world debt, according to a text of his remarks published Saturday in The Guardian and later confirmed by the Treasury.

The issue is rising once more on the international agenda because a previous mechanism for debt relief, set up in 1996 by the World Bank and the International Monetary Fund, is to be renewed in December for two years. James D. Wolfensohn, the president of the World Bank, said Friday in Washington that the White House had devised a plan to cancel some third world debt, Reuters reported. Senator John Kerry, the Democratic presidential challenger, has also promised to lead efforts to cancel the debts of impoverished countries if he is elected.

Mr. Brown's proposal is significant because it comes just days before the annual meetings of the World Bank and the International Monetary Fund in Washington. The finance ministers of the Group of 7 major industrial nations, including Mr. Brown, are also to meet just before those gatherings. "What we hope is that this will break the logjam that has been there for some time," said Brendan Cox, a spokesman for Oxfam, a nonprofit group that has urged accelerated moves to cancel third world debt. "If others follow suit it will be a massive turning point in efforts to end the burden of international debt."

Mr. Brown plans to tell the meeting of anti-debt campaigners on Sunday that Britain will set aside the equivalent of $180 million a year to pay off 10 percent of the money owed by 32 countries to international lenders, notably the World Bank and the African Development Bank. Poor nations contend that they often must choose between paying these debts and meeting urgent needs of their people, or making expenditures that would strengthen their economies.

"Because the poor cannot wait, we intend to lead by example by paying our share of their payments to the World Bank and the African Development Bank," Mr. Brown is planning to say. "We do this alone today, but we urge you to use your moral authority to urge other countries to follow suit so that poor countries can look forward to a future free from the shackles of debt."

Mr. Brown will also argue that the debt owed to the International Monetary Fund could be cut by a revaluation of the fund's gold stocks, currently worth $8.5 billion when valued at $40 per ounce. The market price for gold is now over $400 an ounce. "Because we cannot bury the hopes of half of humanity in the lifeless vaults of gold, the cancellation of debt owed to the I.M.F. should be paid for by the better use of I.M.F. gold," Mr. Brown plans to say. His speech will be given as part of the preparations for the annual conference of the governing Labor Party in Brighton, in southern England.

Hilary Benn, the minister responsible for British overseas aid, said the British move "throws down a challenge to the rest of the world." Some estimates put the total debt owed by the poorest countries at around $200 billion. Romilly Greenhill, a spokeswoman for the Action Aid debt relief advocacy group, said the sum of $180 million mentioned by Mr. Brown was apparently part of Britain's annual budget for development, currently totaling about $7 billion. "It is not strictly new money in the sense that it has already been included in the aid budget," she said.

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