G8 Finance Ministers Clear Debt for 18 Poor Nations

LONDON, UK, June 13, 2005 (ENS) - Finance ministers of the world's richest nations formally agreed on Saturday to cancel at least US$40 billion of debt owed to multilateral banks by the world's poorest nations, all but one of them in Africa.

In a statement Saturday following a meeting in London to prepare for July's Group of Eight (G8) Summit in Scotland, the G8 finance ministers said they had agreed to a proposal canceling 100 percent of debt obligations owed to the World Bank, African Development Bank, and International Monetary Fund by 18 countries.

They said the debt relief could be accomplished without destabilizing the financial institutions.

UK Chancellor of the Exchequer Gordon Brown (Photo courtesy UK Government)

The debt relief proposal was developed over months of negotiations and was finalized by UK Prime Minister Tony Blair and U.S. President George W. Bush during their meeting last week at the White House.

UK Chancellor of the Exchequer Gordon Brown said, "We have been driven forward by the urgent need to act. This is a time for boldness - not a time for settling for second best but for aiming high."

The 18 countries covered by the agreement will receive immediate debt relief. They are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.

Brown said other countries could be eligible for similar help if they met strict targets for good governance and tackling corruption.

Speaking Saturday in London, U.S. Treasury Secretary John Snow called it a "very successful and even historic meeting."

U.S. Treasury Secretary John Snow has also served as administrator of the National Highway Traffic Safety Administration, and as chairman and CEO of transportation giant CSX Corporation. (Photo courtesy U.S. Treasury Dept.)

Snow said other countries would be eligible for debt forgiveness as they improve governance, reduce corruption, and work with the IMF to develop "sound economic policies."

The finance ministers said the debt relief "will provide significant support for countries' efforts to reach the goals of the Millennium Declaration."

By the year 2015, all the 191 United Nations member states pledged to meet eight goals - among them to achieve environmental sustainablility, reverse the loss of environmental resources, and reduce by half the proportion of people without sustainable access to safe drinking water.

IMF Managing Director Rodrigo de Rato said Saturday that he welcomes the G8 finance ministers' conclusion. "This proposal goes a long way toward helping Heavily Indebted Poor Countries (HIPCs) escape a heavy burden. It does so without compromising the commitment of the IMF to assist its poorest members and meet existing and projected obligations."

Snow said, "IMF debt relief would be financed by existing IMF resources and would require no use of gold."

The finance ministers agreed to invite voluntary contributions, including from the oil-producing states, to a new trust fund to support poor countries facing commodity price and other unexpected financial shocks.

The ministers left no doubt that all indebted countries must eliminate corruption to be eligible for financial help. "We ask the World Bank and IMF to report to us on improvements on transparency on all sides and on the drive against corruption so as to ensure that all resources are used for poverty reduction," they said.

Fishers embark near Porto Novo, Benin's capital city. (Photo courtesy The Ramsar Convention)

New World Bank chief Paul Wolfowitz praised the historic deal to cancel the foreign debt of some of the world’s poorest nations and said he is hopeful debt relief is also on the way for Africa’s biggest debtor, Nigeria.

Wolfowitz spoke to reporters soon after arriving Sunday in the Nigerian capital, Abuja, on the first leg of a four-nation Africa tour, his first since taking over as head of the 184 nation development bank earlier this month.

Members of a women’s cooperative in Nigeria sift through soybeans which they sell as part of USAID’s Farmer to Farmer program. (Photo by Julie Albrecht courtesy University of Nebraska)

“I think this may be an extraordinary moment in history where Africa can become a continent of hope and the Bank can play a role in that. So in terms of substantive priorities, it’s number one,” he said.

The finance ministers said in their declaration that Nigeria is "key to the prosperity of the whole continent of Africa, and they welcomed Nigeria's "progress in economic reform," and promised to relieve Nigeria's debt problems if the country continues to reform.

Wolfowitz said many African leaders are ready to use for poverty relief the money they now will keep instead of paying back his bank and the others.

Head of the World Bank, Paul Wolfowitz was formerly U.S. Deputy Secretary of Defense under President George W. Bush. (Photo courtesy The Pentagon)

“I feel African leaders are talking in a very different way – on critical issues like corruption and inclusion – to what was said 10 years ago," Wolfowitz said, "and that is why I believe we face an historic opportunity to help.”

African Development Bank President Omar Kabbaj said that “the idea of canceling 100 percent of debts owed by poor counties which the G8 is expected to implement in July would have been “unthinkable” 20 years ago.

The UK holds the rotating G8 Presidency this year, and minimizing the environmental impact of presidency activity and offsetting carbon emissions are important priorities for the presidency Environment Secretary Margaret Beckett and Foreign Office Minister Ian Pearson said last week.

The summit's key themes are Africa and climate change.

A project based in Africa will benefit from the offsetting of carbon dioxide emissions associated with the G8 Presidency, and will also ensure the G8 Summit and other events during the UK's G8 Presidency are environmentally sustainable, Beckett and Pearson said.

Carbon dioxide, the major greenhouse gas, is to be offset from all of this year's G8 associated meetings, including the G8 Summit, official G8 conferences, and associated meetings.

Carbon dioxide (CO2) emitted by air travel, local transport and accommodation at meetings will also be calculated and offset.

Assessments show that the total carbon dioxide emissions associated with the G8 Presidency will amount to 4,000 tons of CO2, which is roughly equivalent to the emissions generated by the electricity and gas used in 800 average homes over a year.

The total cost of offsetting all of the G8 events will be around £50,000 (US$90,200), which the government will invest in small-scale Clean Development Mechanism projects, with strong sustainable development benefits located in Africa.

One current CDM projct is the Kuyasa low cost urban housing energy upgrade project, based in Cape Town, South Africa. This involves installing solar water heaters, ceiling insulation and compact fluorescent lightbulbs in a low income housing area. In addition to offsetting 5,600 metric tons of carbon dioxide per year, this Gold Standard accredited project will contribute to health, employment and energy cost benefits.

Pearson said, "We are working closely with our partners and contractors to ensure we minimise the environmental impacts of the Summit and make the G8 Summit as environmentally sustainable as possible. We hope that the work we are taking forward on sustainability as part of our G8 Presidency will be used as a benchmark for future events."