G8 agrees to cancel debts

While Germany and Japan worried that a G8 plan to provide debt relief to certain poor countries would be perceived as a reward for reckless borrowing, their concerns did not stop the finance minister of the G8 from agreeing to cancel the debts of 18 “poor but well-governed” countries over the weekend.

Concerns were raised, however, that the amount of money involved is really very small - $40 billion in debts belonging to 18 heavily indebted poor countries (HIPC) - and that there is much more to be done for poor nations around the world.

Those pushing for debt relief maintained that this step should be accompanied by extra aid to the countries involved. One organization mentioned a figure of $25 billion per year in extra aid.

It is unclear whether extra payments pledged by rich countries would cover the full amount of payments that would have been made to the World Bank, the International Monetary Fund, and the African Development Bank over the term of the deal.

The nations whose debt was cancelled include Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda, and Zambia. In addition, nine other countries are likely to qualify for debt cancellation under the plan soon.

The guidelines for relief eligibility are those set up by the World Bank and International Monetary Fund in the HIPC Initiative of 1996.

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