Brown acts to ease Third World debts

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The Independent Online
Gordon Brown will tomorrow launch an international initiative to lift the burden of debt payments from the world's poorest nations by the start of the new millennium.

In a speech he is to give to the annual meeting of finance ministers from Commonwealth countries, the Chancellor of the Exchequer will also announce that Britain is to stop granting official export credits for "unproductive" spending on items such as military equipment and presidential jets by Third World countries. He will call for other countries to take the same action, which would choke off sales of these items to developing nations if they all followed Britain's lead.

The Chancellor will also challenge other rich nations to follow Britain in cancelling loans made to poor countries through its aid programme.

Mr Brown's bid to give new impetus to an international programme of debt reduction for extremely poor countries in Africa and Latin America will delight the "Jubilee 2000" campaign run by churches, unions and other organisations, which has been calling for the developed world to write off completely the overhang of loans that poor countries owe to rich governments and organisations like the World Bank and International Monetary Fund.

Although the Chancellor does not go that far, he will praise the churches for recognising that the millennium offers a means of taking forward the debt-relief programme. In an echo of the other campaign, the working title for the Government's new initiative is "Debt 2000".

The UK has long taken the lead in pushing for extra help for a group of very poor countries which can never hope to earn enough from exports to pay their interest bills, no matter how well they run their economies. Mr Brown's Conservative predecessor, Kenneth Clarke, won heartfelt praise from Commonwealth finance ministers this time last year for the role he had played in getting agreement to the existing IMF-World Bank debt-relief initiative.

Launched with much fanfare in Washington last autumn, it has been strongly criticised by aid charities for being slow and inflexible.

Mr Brown's new proposals call on the international community to revive the impetus by making sure that all the countries which could qualify for debt relief - about 19 of them - have at least started by 2000 on the six-year process of assessment and economic reforms that lead to reduced payments. The Chancellor will say that it is a "demanding but realistic" target.

The proposals would not necessarily require developed country governments to provide more funds on top of the modest $7.4bn that the existing plan is likely to cost them. A call for extra money would go do badly as the lenders are still arguing over the financing already needed.

However, Mr Brown wants to ensure that the plan does not run into the sand. His first visit to the IMF's annual meetings, which start in Hong Kong after the Commonwealth meeting in Mauritius this week, offers the chance to set a firm timetable.

He will present his plan as a challenge to the borrowers as well as the lenders. The indebted countries which make the fastest progress on economic reform, and introduce the most open and accountable policies, should be rewarded with faster debt relief, he will say.

The speech will set out a seven-point plan to bring heavily-indebted countries to a position from which they can export goods and improve prosperity without seeing all their overseas earnings swallowed up in interest payments to the richest nations on earth.

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