Global Policy Forum

Emad Mekay

Finance ministers from the world's richest nations have delayed a plan to write off 100 percent of debts owed by the planet's poorest countries, quashing hopes those nations could start spending more on services like health and education and work toward ending their extreme poverty. In a press release after a meeting Friday, officials from the Group of Seven (G7) countries said the issue needs further discussions and that they will report on those talks by the end of the year.

On Saturday, the international monetary and financial committee, the policy making body of the International Monetary Fund (IMF) said it will continue to examine the issue, but gave no timeline for those efforts. "The committee itself has decided that further work on this must be done so that we have a proper framework for debt sustainability," British Chancellor of the Exchequer Gordon Brown told reporters. Brown chairs the committee.

The G7officials, however, acknowledged that debt relief would have to include additional aid to poor countries if they are to meet any of the world's development targets, the Millennium Development Goals (MDGs), which, among others, aim at halving poverty by 2015. The G7 comprises Canada, Germany, France, Italy, Japan, the United Kingdom and the United States, and controls Third World debt by dominating the executive boards of public lenders like the IMF and the World Bank. Its most powerful member, the United States, said publicly Thursday that it was pushing for expanded debt relief for poor countries.

Last weekend Britain said it will write off debts owed by the poorest countries, an announcement that was strongly backed by several international non-governmental organisations (NGOs), who had urged the move for years. But differences remained between G7 countries over how to finance the plan, with some officials -- who are gathering in Washington this weekend on the sidelines of the IMF and World Bank annual meetings -- saying they cannot commit new resources because of budgetary constraints. World Bank President James Wolfensohn had welcomed the UK plan, but advised the rich nations to find alternative funds to replace the excused debt if they want his institution and the IMF to have the resources to be able to continue lending.

The UK's Brown proposed the IMF revalue its huge gold stocks to current world prices in order to finance the cancelled debts and to combine that with new funds for the debt relief from G7 countries. On Saturday, Brown reiterated the British proposal. "Many countries are still being forced to choose between servicing their debts and making investments in health, education and infrastructure," he said. "The UK will lead the way in relieving those countries still under the burden of this debt by paying our share -- 10 percent -- of their payments to the World Bank and the African Development Bank in their stead." Brown again called on other rich countries to follow suit.

Civil society groups have been holding several events here this week to protest the debt issue and the policies of the World Bank and IMF, which they accuse of favouring the rich. Groups lobbying for debt cancellation and a hands-off approach by the two institutions were outraged at the announced delay, saying the world's richest countries had failed a moral test. "It is outrageous that the G7 have failed to answer the moral imperative of debt cancellation in the face of the HIV/AIDS pandemic and especially as progress towards meeting the Millennium Development Goals diminishes each day," said Marie Clarke, national coordinator of Jubilee USA Network. "It is a real shame that the richest nations were divided over how to cover the minimal cost of impoverished country debt to wealthy creditors like the IMF and World Bank, especially when the IMF is sitting on a mountain of unused gold," added Clarke in a statement.

Development groups say that failure to provide full, multilateral debt cancellation for all impoverished nations must now be measured in days, rather than weeks or months. Each day the G7 delays, 8,000 people die due to HIV/AIDS, and 30,000 people die of preventable diseases, according to Jubilee USA. "Full debt cancellation would go a long way to addressing these crises," Clarke said. Another leading development group, Oxfam, warned that poor nations will continue to pay the price for the delays by the rich nations. "The G7 have chosen to delay debt cancellation that could have put 100 million children into school," said Oxfam Policy Advisor Max Lawson in a statement. "Once again, rich countries have turned up with their notebooks not their chequebooks, and the price will be paid by the world's poorest people," he added.

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