A solution to the crippling debt burden of poor countries eluded finance ministers and central bankers from around the world, but there are expectations an agreement could be reached later this year.
Officials at the weekend meetings said they were making progress on debt relief. International aid groups derided the claim, saying the major industrialized nations were dragging their feet and worsening the plight of the poor.
The spring meetings of the World Bank and its sister institution, the International Monetary Fund, were preceded by a session Saturday of the Group of Seven major industrialized nations.
There was little sign of protesters on Sunday but several hundred gathered outside the bank Saturday to urge debt forgiveness. Security was tight around the headquarters of the World Bank and the IMF, two blocks from the White House with streets closed to traffic.
The G-7 — the United States, Japan, Germany, France, Britain, Italy and Canada — said the global economy would continue to grow. They also endorsed debt relief.
Conflicting remedies
The United States and Britain have competing plans, but officials have failed to settle differences.
Under the U.S. approach, the poorest countries would not have to repay loans to the World Bank, the IMF and the African Development Bank. The Bush administration also wants future aid delivered as grants, which do not have to be repaid, rather than loans.
“Our proposal not only drops the debt of yesterday, but prevents debt from burdening countries again well into the future,” Treasury Secretary John Snow said Sunday.
Critics say that deprives the lending institutions of additional money to compensate for loan repayments no longer required and they eventually will have less money to lend.
Britain has proposed an international finance facility to increase development aid by $50 billion a year until 2015 through the use of off-balance-sheet financial instruments
The United States has said its budget laws would not allow it to support Britain’s plan because it would bind future governments to providing money.
Some outside advocates want the IMF to sell part of its massive gold reserves to pay for the debt relief. The United States does not favor that. Britain, the current chairman of the G-7, insists the idea is still on the table.
U.S. and British officials sought to play down their differences and said they were encouraged by developments.
“I believe we are making considerable progress now on these issues,” said Gordon Brown, Britain’s chancellor of the exchequer. “I think for the first time as a result of these meetings, that more money will have to be available.”
A more pessimistic view came from groups demanding the forgiveness of billions of dollars of debt for poor nations.
Deal at world summit in July?
“Progress has stalled, not because of disagreement over the principle of debt cancellation, but over the mechanics of how to finance such cancellation,” said Debayani Kar, communications and advocacy coordinator for Jubilee USA Network.
But finance officials believed their work this weekend would make a deal possible at meetings of world leaders in July and September.
If poor countries were free of debt, they could use the money they spend on servicing it for education, health and infrastructure projects
“The time for delay and posture is over. The table is set for George Bush and (British Prime Minister) Tony Blair to deliver a historic deal” at the world leaders’ summit, said Jamie Drummond, executive director of DATA. It is a group founded by Irish rock star Bono to combat poverty and the AIDS disease in Africa, home to most of the impoverished countries.
The World Bank’s outgoing president, James Wolfensohn, an accomplished cello player, compared the situation to an opera where the themes are introduced in the overture but the flourish comes in the arias sung later by the stars.
That was a reference to President Bush, Blair and the other heads of state at a summit of the Group of Eight nations in July; the G-8 is made up of the seven richest countries, plus Russia.
Wolfensohn suggested that a final agreement could come at that summit or at a United Nations meeting in September.
