Conflicting strategies to help the poorest could split G7 summit
Nick Mathiason and Heather Stewart Sunday September 26, 2004 The Observer
George Bush and Gordon Brown are heading for a dramatic showdown at the G7 summit in Washington this week over plans to write off developing countries' debt.
The American president, desperate for policies to emphasise his 'caring conservative' credentials before November's presidential election, is advancing a plan to cancel billions of dollars in debt owed by some of the world's poorest countries.
The plan, disclosed by members of aid groups, would increase previous debt relief programmes for at least 27 poor nations such as Uganda, Bolivia, and Ethiopia. The US Treasury Department, which is putting the plan forward, says the current approach has been too slow and piecemeal to free developing countries from the burden of repaying money borrowed from the World Bank, International Monetary Fund and other global lenders.
The US Treasury is also proposing that, for very poor countries, all future IMF and World Bank assistance come in the form of grants rather than loans.
But Brown is strongly against the plans because it would mean debt cancellation paid out of World Bank and IMF funds. This would mean the World Bank, in particular, would have less scope for poverty alleviation.
Brown's plan, to be outlined tonight at a Trade Justice Movement fringe meeting in Brighton tonight, is for all G7 countries to put up extra funds directly for debt cancellation. He is prepared for the UK to contribute an extra £100 million every year.
A UK Treasury spokesman was worried that Bush's proposals 'would rob Peter to pay Paul'. He added: 'We want to see [Brown's plan] happen. What we need to be clear about is that it needs to be fully financed.'
The rival plans will be decided by other G7 nations. Canada is expected to back Brown's plan. France is thought also to be sympathetic. Germany is not in a position to put extra money on the table because of its fiscal situation. Japan and Italy are thought to be undecided.
Campaigners are divided over which plan to back. Some are delighted that Brown is promising extra cash for debt cancellation, but others believe that Bush's plan could have greater impact, particularly if other countries fail to follow Britain's lead.
Peter Hardstaff, head of policy at the World Development Movement, said: 'Whatever plan gets accepted, we are concerned about the conditions attached to any debt cancellation, which could see poor countries forced to privatise and deregulate their markets.'