G8 near deal on debt relief

Britain, chairing the club of rich nations this year, has declared 2005 the year of Africa and is determined to seal an accord on debt relief and aid for the impoverished continent by the time G8 leaders meet in Gleneagles, Scotland, next month.

The White House said that the United States and Britain have agreed on the details of a proposal to wipe out the debts owed by 18 of the world’s poorest countries.

Consensus was growing as the finance ministers met in London but officials said more details needed to be ironed out before Germany and Japan could be completely convinced.

British finance minister Gordon Brown was optimistic.

“The uniqueness of this deal is that so much would be written off almost immediately — more than 40 billion within a few weeks of the agreement,” Mr Brown said.

Even German finance minister Hans Eichel who said before the meeting that there would be no agreement said that differences were narrowing. Canada’s finance minister Ralph Goodale said if there was no agreement now, there would be at Gleneagles.

Charities said the deal would not cover all the 62 countries they say need their debts cancelled for any hope of achieving United Nations targets of halving world poverty.

“We certainly see it as a step forward but according to our analysis it still would provide 10 per cent of the debt relief that is needed to significantly reduce poverty by 2015,” said Romilly Greenhill of ActionAid.

The finance ministers are also taking stock of their own economic problems, such as slow growth in Europe and Japan, record deficits in the United States and tension over China’s currency policy.

Africa, however, was the main focus at the meeting of finance ministers from the United States, Canada, Japan, Russia, France, Germany, Italy and Britain as the UK finance minister has personally championed the African cause.

“Our intention is that Africa is enabled and empowered to break free from the cycle of debt relief, poverty and economic under-development that has cost so many lives for so long,” Mr Brown said.

Of the 18 countries benefiting from quick relief from any deal concluded at Gleneagles, 14 will be from sub-Saharan Africa, where millions die each year from disease and poverty.

British Treasury officials said a further nine impoverished countries could qualify for assistance within 12 to 18 months and there were potentially 38, mostly African, nations that might benefit, for total debt relief of $55 billion.

But Britain’s other main proposal — doubling aid to Africa — looked unlikely to make any progress at this meeting and would probably be pushed back to Gleneagles.

Pop star Bob Geldof and others are urging a million people to turn up in Scotland next month to demand a deal on debt relief and aid for Africa.

Charity Oxfam said the United States spends 25 times as much on defence as on aid while Britons spend as much on wine as on aid.

Other finance ministers are keen to promote a range of different issues, including keeping up pressure on China, now the world’s seventh-largest economy, to ease its grip on the yuan currency.

Trade tensions are rising as Chinese clothes exports to the rest of the world surge and Beijing is under pressure to relax state controls that keep the yuan’s value low and exports cheap.

US Treasury Secretary John Snow urged his Chinese counterpart Jin Renqing to scrap the yuan’s exchange rate peg to the dollar. He met Jin on Friday but the appeal is unlikely to spark any rapid action.

“China’s economy is growing bigger. It is necessary for China to move toward a flexible foreign exchange policy… But when to move or what to do, it is up to China to make a responsible decision,” Japanese Finance Minister Sadakazu Tanigaki told reporters.