Analysis
By Alex Kleiderman
BBC News Online business reporter |
  Vietnam could find itself benefiting from the UK plan |
The UK is challenging fellow G7 nations to follow its example and write off debts owed by the world's poorest countries, but there are still hurdles to overcome to ensure the pledge will lead to widespread benefits. Anti-debt campaign groups have hailed Chancellor Gordon Brown's proposal as an "audacious move" for the rest of the world to follow. Finance ministers from the G7 rich nations will meet in Washington this weekend, and Mr Brown is hoping he can win converts to his plans which will see the UK unilaterally write off its share of debts owed to institutions like the World Bank and the International Monetary Fund (IMF). The UK says it hopes to "free" the world's poorest countries from unsustainable debt so they can spend more of their money on health, education and economic development. Alternative plans France and Canada are reportedly close to making similar announcements to Mr Brown's. The US government, though, has been pushing an alternative plan to cancel Third World debts. It proposes to use the resources of the World Bank and International Monetary Fund to pay off the debt. However, debt campaign groups argue that this could eat into other funding. The British debt relief plan comes as the World Bank and the IMF's Heavily Indebted Poor Countries (HIPC) initiative comes up for renewal. HIPC has already seen 27 nations qualify for $70bn (�38.75bn) in debt relief since 1996. Under the UK proposal countries that have not benefited from the HIPC initiative so far, such as Vietnam, Afghanistan and Armenia, will also able to receive support. No end game "The G7 countries are becoming increasingly aware that the current debt reduction programmes are flawed," says Kevin Watkins, Director of the UN's Human Development Report Office (HDRO). "The real debate is how to act on the broadly accepted principle that more needs to be done," he adds. "This is the start of a process but I do not think the end game will come [this] weekend." Campaign group Action Aid says the UK and US have been broadly moving in the same direction and the "challenge is to get other G7 countries on board". Patrick Watt, senior policy officer with Action Aid, says Japan and Germany may prove to be "stumbling blocks". After the United States they hold the highest total debt owed by poor countries, but domestic politics may hold back debt relief. The UK is now setting aside �100m ($180m) a year until 2015 in order to clear its 10% share of debts. But Action Aid points out that the money is actually part of larger sum that has already been earmarked for debt relief. "This is welcome as a way of breaking the log-jam," adds Mr Watt. "But there should also be extra, new money additional to net resources going to the poorer countries." Gold reserves The fact that the UK scheme fails to offset IMF debts and still does not cover every poor nation has led many feeling there is still more to be done. At the G7 meeting, Mr Brown will continue his policy of calling for debt payments owed to the IMF to be funded through the more efficient use of IMF gold reserves.  Africa's development goals are not being met |
"Such a move would instantly raise around $32bn, which could make massive inroads into unsustainable levels of debt owed to the IMF by the world's poorest countries," says Oxfam's Campaigns Director, Adrian Lovett. The World Development Movement is calling for the Chancellor to cancel the UK share of IMF debt if gold sales can not be agreed in the next few weeks. "The UK is often at the forefront of trying to pursue international debt relief and it has to be congratulated on the fact it has again taken a lead," adds Peter Hardstaff, head of policy at the WDM. But Mr Hardstaff worries that the developing countries getting debt relief under the UK plan must also agree to free market measures. "These conditions not only delay debt relief for months or even years, but have been show to actually hurt developing countries and increase poverty," he claims. Shareholders' views The World Bank for its part welcomes the UK proposal, because it would boost funding for the International Development Association, a World Bank subsidiary which supports poor nations. But a spokeswoman said the World Bank was still waiting to hear the views of more of its shareholders. "This proposal is very timely given the current focus on enhancing resources to help meet the Millennium Development Goals," she told BBC News Online. "The UK proposal could be an important adjunct in that it holds out the prospect of further progress on debt relief for the poor countries."
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