U.S. balks at proposal by Britain for debt relief

Bush administration says it cannot commit to long-term G-7 plan

February 06, 2005|By Janet Stobart | Janet Stobart,LOS ANGELES TIMES

LONDON - British Chancellor Gordon Brown said he had won the support of finance ministers from the world's wealthiest nations yesterday for his plan to offer debt relief for the world's poorest countries, but the United States balked at some elements of the package.

"I believe this summit will be remembered as the summit for 100 percent debt relief," Brown told reporters at a news conference ending a two-day conference of government officials and business leaders from the Group of 7 countries - the United States, Canada, Japan, Germany, France, Britain and Italy.

U.S. Treasury Undersecretary John Taylor, however, said that Brown's International Financial Facility plan, which would forgive all debt from heavily indebted countries and double aid to African countries, "would not work for the U.S."

Taylor said the United States supported the issue of debt relief. "The United States is completely committed to poverty reduction," he said, adding that the United States had nearly doubled its contribution to development aid to Africa and AIDS projects in the developing world between 2000 and 2004.

But he said the particular mechanism of Brown's plan is not acceptable to the United States. "It works for other countries," he said, "and that's fine." Bush administration officials have said that Congress appropriates funds annually and cannot commit to a long-term plan such as Brown's.

Rather than debating alternative ways to raise money, Taylor said the United States "wanted to make people's lives better by contributing directly to specific projects."

American plans, he said, are focused on reducing debt to zero now and proceeding to help emerging nations with a system of grants to heavily indebted countries, rather than further loans.

The main issue, he stressed, was "that we are all interested in debt relief ... and the ultimate goal is poverty reduction."

A day earlier, former South Africa President Nelson Mandela had made a strong appeal to the finance ministers to help the world's poorest countries. Yesterday, Brown reminded those gathered of Mandela's words, saying he had "urged us to take urgent action against poverty in Africa and across the world. It is the richest countries hearing the voices of the poor."

Although he said the G-7 participants had agreed to debt relief and the financing of development, he added that the terms and methods of payment have yet to be discussed with International Monetary Fund and World Bank officials. Guarantees by World Bank shareholders and IMF gold reserves would fund the debts, Brown said.

"This is the first time that the governments of the G-7 have come together to talk of debt relief as much as 100 percent," Brown said.

Countries hit by the tsunami would also receive debt relief. Nations requesting help would have debts deferred to the end of this year without payment of interest, and reconstruction needs would be addressed after a preliminary assessment by the IMF and the World Bank.

The conference's final communique said monetary exchange rates should reflect economic fundamentals, a clear call to the Chinese to move to a more flexible exchange rate.

The Los Angeles Times is a Tribune Publishing newspaper.

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