WASHINGTON – A deal to erase billions of dollars of debt for poor countries cleared an important hurdle Saturday, winning the endorsement of the International Monetary Fund’s steering committee.
The breakthrough was announced by Gordon Brown, Britain’s chancellor of the exchequer, who is the chairman of the IMF’s policy-setting panel.
Brown said negotiators had reached agreement on “all elements” of the debt cancellation deal. He said the IMF’s 24-member executive board would meet soon to formally approve the deal.
“We worked very hard over the last few days, as well as over the last few months, to try to bring people to agreement on the proposals,” Brown told a news conference late Saturday.
The agreement would forgive an estimated $40 billion worth of debt for at least 18 poor countries – most of them in Africa – owed to the IMF, the World Bank and the African Development Bank.
As many as 20 other countries could be eligible if they meet certain conditions. That would push the total amount of debt cancellation to more than $55 billion. The cost would be spread over decades.
The endorsement by the IMF steering committee came one day after the Group of Eight major industrial powers made firm pledges to underwrite the plan, a commitment intended to overcome the biggest obstacle to approval by the lending institutions.
A general framework for the deal was endorsed by leaders of the world’s eight major industrial powers at an economic meeting in July in Scotland. The details of putting the deal in place were left largely to the World Bank and the 184-nation IMF to settle.
The deal still needs to be approved by the World Bank – a major lender to poor countries. The World Bank’s and IMF’s annual meetings continue today, and U.S. officials are predicting swift approval of the debt cancellation deal.
Treasury Secretary John Snow predicted the executive boards of the IMF and World Bank would formally approve the deal within a week.
“We’ve seen a real breakthrough on debt cancellation by the IMF,” said Max Lawson, policy adviser to the charity Oxfam International. “The stage is now set for the World Bank shareholders to fulfill their part of the bargain.”
By canceling their debts, poor countries could use the money for education or drugs to fight HIV/AIDS or malaria, supporters of debt forgiveness say.