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Plan to cut debt of poorest countries suffers setback

Plans to start reducing the debt burden on the world's poorest countries, agreed in Washington only six weeks ago, face a severe setback.

A meeting in Paris today between Western governments and Mozambique is expected to result in absolutely no extra debt relief for the country despite pledges made by the West at the annual meeting of the International Monetary Fund.

Officials from the Group of Seven industrial countries said then that the first beneficiaries could have details of their debt reductions agreed by Christmas, and the IMF's managing director, Michel Camdessus, described the initiative as a "done deal".

But it has emerged that today's meeting of the "Paris Club", whose member governments had promised to write off 80 per cent of eligible debt for suitable borrowers, will offer Mozambique, the second-poorest country in the world, exactly the same deal as before.

Along with Uganda, Mozambique was expected to be one of the first countries to benefit from greater debt relief because of its rigour in applying an economic austerity programme.

Its government had estimated that the more generous terms supposedly agreed in Washington at the beginning of last month would save it about $20m a year in interest payments to the West.

The setback will anger charities which have campaigned vigorously for debt reduction, and seen the principle gradually accepted by the governments of the rich countries. They have praised Kenneth Clarke, the Chancellor of the Exchequer, for his efforts to move the issue to the top of the international policy agenda.

A joint statement by George Carey, Archbishop of Canterbury, and Walter Paul Khotso Makhulu, Archbishop of Central Africa, said Mozambique should not be allowed to enter the new millennium with any debt which it could not repay.