G-8 finance ministers gather to discuss deal on debt relief for poor countries

Finance ministers from the Group of Eight industrialized nations will try to reach agreement Friday on a British-American proposal to cancel billions of dollars in debt owed by the world's poorest countries.

Britain and the United States want the G-8 nations to cancel 100 percent of the debt that poor countries owe to multilateral institutions such as the World Bank, the International Monetary Fund and the African Development Bank.

British officials said Friday the deal, negotiated earlier this week in Washington by British Prime Minister Tony Blair and U.S. President George W. Bush, would cover 18 nations eligible for debt relief under the Heavily Indebted Poor Countries initiative, including Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana and Mali.

It could also be extended to a further seven nations involved in the HIPC initiative.

"Eighteen of those countries under the current efforts to do debt relief are immediately eligible right now," a G-8 official close to the negotiations said in London on Friday. He spoke on condition of anonymity.

Officials said the deal would cancel about US$15 billion (Ђ12.3 billion) in debts. Aid organizations estimate it could free up a total of US$1 billion (Ђ820 million) a year for the benefiting countries.

The HIPC initiative, launched by the World Bank and IMF in 1996, sets strict targets for developing countries to tackle corruption and insists the money saved on debt repayments must be plowed into education, health care and infrastructure projects.

The G-8 official said the proposal would be put to finance ministers who were to meet in London for dinner Friday and hold further talks Saturday.

Britain has made tackling poverty in Africa and the developing world a priority for its G-8 presidency and says the United Nations' Millennium Development Goals of reducing poverty, hunger and disease affecting billions of people will not be met by 2015 without urgent action.

Blair's approach is three pronged: increasing aid; eliminating debt; and removing export subsidies and other trade barriers that make it difficult for developing nations to compete.

With only four weeks before Blair is joined at the G-8 summit by leaders from the United States, Japan, Russia, France, Germany, Italy and Canada, only a breakthrough on debt relief appeared within reach.

Washington's support is vital. Flanked by Blair at a White House news conference Tuesday, Bush said poor countries should "not be burdened by mountains of debt."

In a significant concession, Bush agreed that money used to cancel debts must not come out of future aid. Disagreements remain over how to fund the debt relief, however.

Britain has proposed that the IMF re-value or sell some of its massive gold reserves to raise cash for the debt write off. Washington, worried about the impact on the gold bullion market, opposes that plan.

Aid agencies believe 62 countries need a 100 percent write-off, if the Millennium Development Goals are to be met.

Prospects of an agreement on Blair's plan to double international aid remain remote, however, as G-8 countries remain sharply divided over how to deliver cash to the stricken continent.

ED JOHNSON, Associated Press Writer