09.12.05 Debt relief (World Bank source)

Relief requires consent from 43 other countries, covering the share World Bank is not willing to take upon.

Source: 9.12.05, noticias.info (from http://www.worldbank.org)

IMF Approves $4.8 Billion Debt Relief Package The International Monetary Fund (IMF) on Thursday approved a $4.8 billion package to cancel the debts of 20 of the world’s poorest countries early next year under a plan launched in June by the Group of Eight (G8) major industrialized nations, reports Reuters.

The IMF’s portion of the highly touted multilateral debt relief initiative will be funded in part by profits from 1999 off-market gold sales, as well as existing contributions by 43 countries to the IMF’s lending facility for poor countries. To meet legal requirements, consent from all 43 countries is still needed to transfer funds to a special trust for the debt relief, which in some countries needs parliamentary approval. The IMF has asked for that approval before the holiday break. The IMF also said it had commitments from donors to fill a $285 million financing gap in the package. The agreement will write off 100 percent of debts owed to the Fund at the end of 2004.

No provision has been made for debt issued after January 1, 2005. The Associated Press writes that the IMF identified 20 countries — many in Africa — that initially will be eligible to have their debts forgiven under its program. Those countries are: Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda, Zambia, Cambodia and Tajikistan. The 20 countries initially eligible should be able to start having their debts erased next year as long as a group of 43 countries, including the US, give their consent and the poor countries pass qualification spot checks, officials said. Another 23 or 24 poor countries also could be eligible to have their debts erased by the IMF if they meet certain conditions, officials said.

Reuters further notes that all of the countries, except Cambodia and Tajikistan, have already undergone IMF-supported economic programs to qualify for a 1996 Heavily Indebted Poor Countries (HIPC) initiative that entailed reforms and anti-corruption efforts. Mark Allen, the IMF’s Director for Policy Development said the HIPC initiative had already lowered the debts of some of the countries “to the average sort of level for low-income countries.” He said it was important that the countries did not accumulate debt again. To satisfy some donor concerns about whether the debt relief will be well used, Allen said the IMF will conduct a “spot check” to ensure recipients’ economic performances, budget systems and poverty reduction strategies are in order.

Where performances have deteriorated, Allen said the IMF will propose corrective measures. “Once the countries have taken those remedial measures, then the relief will be given,” he said, adding, “We would hope those actions could be done quickly. We’re not trying to hold this relief up.” Agence France Presse further writes Allen said the IMF was not attaching strings to its debt relief money. At their annual meetings in September, the IMF and World Bank gave the green light to implement a debt-relief deal covering 38 impoverished nations. The African lender aligned itself with the decision.

About $38 billion of the total promised as debt relief by the G8 powers — which now stands at $56 billion — is owed to the World Bank. World Bank directors will meet next week to discuss how the multinational lender will proceed on its front of the debt cancellation scheme. The BBC notes that the aim of the debt relief initiative is to free poor nations from debt repayments and enable them to spend more money on improving living conditions and reducing poverty. It is seen as a crucial step towards meeting the United Nations’ Millennium Development Goals of halving the number of people living in extreme poverty by 2015.

In other news, Agence France Presse reports that the French parliament on Thursday approved a plan to tax airline passengers from 2006 to help pay for health programs in poor countries in a scheme which President Jacques Chirac wants to be adopted worldwide. Despite opposition from the air industry, French deputies, in a lively debate, agreed the proposal which divided Chirac’s ruling UMP party but won the support of the left. The levy, ranging from one to 40 euros depending on the distance traveled and type of ticket, would be applied on every passenger boarding a flight in France, regardless of the airline. The plan has so far won the public support of only Britain, Brazil, Chile and Algeria. The measure is expected to raise 200 million euros a year for health programs that will largely be directed at African states. The scheme will be reviewed in France two years after it takes effect.

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