Wolfensohn defends scheme to give poor countries debt relief

James Wolfensohn, President of the World Bank, challenged critics, who claim the year-old initiative to lighten the debt burden on poor countries is faltering, to put their money where their mouth is by voting for increased aid spending. Diane Coyle, Economics Editor, reports from Hong Kong on the annual meeting of the World Bank and International Monetary Fund.
Click to follow
The Independent Online
"Debt forgiveness is an issue of morality, but it is also an issue of money," Mr Wolfensohn said yesterday. He was responding to the charge that the World Bank-IMF plan to reduce debt interest payments by developing countries, announced with much fanfare this time last year, had lost crucial momentum.

Gordon Brown, Chancellor of the Exchequer, aligned himself with the Bank's critics earlier this week, announcing a seven-point plan to restore the impetus by ensuring that three-quarters of the world's poorest countries had started down the debt relief path by 2000.

Mr Wolfensohn said yesterday: "If Gordon Brown would like to make a very large donation, I would be very happy to accept it." He added: "Where does the money come from? It comes back to the governments, and to you as voters and taxpayers. In the end it gets back to you."

But the World Bank president predicted the campaign for debt forgiveness by the end of the millennium would become a more prominent public issue during the next two years. In the UK the Jubilee 2000 campaign, organised by churches and unions, has already been building up a new head of steam.

Aid organisations attending the meetings in Hong Kong this week said the amount of money required to keep the present World Bank-IMF plan - known as the HIPC initiative because it concentrates on the highly indebted poor countries - was minimal.

"The question of money is a red herring because the sums involved in the HIPC initiative are so minimal," said Ian Bray, an Oxfam spokesman.

The expected cost of planned debt relief for 19 countries over more than a decade is only $7bn-$8.5bn (pounds 4.4bn to pounds 5.3bn) in total, or about half the UK government's likely budget deficit this year.

However, the charities welcomed Mr Wolfensohn's commitment to the initiative. "He's got a complicated game to play and his heart is definitely in the right place," said Andrew Simms of Christian Aid. "He has staked his personal reputation on it."

Mr Bray said: "He's right to say it is a question of political commitment." One of the reasons for slow progress on debt relief has been the unwillingness of some of the richest countries, notably Germany and Japan, to finance it.

The IMF has also moved more slowly than the World Bank on the plan, reflecting its traditional fiscal caution. Yesterday 56 aid and environmental organisations sent Michel Camdessus, managing director of the IMF, an open letter protesting at the slow progress it was making on offering debt relief.

Henry Northover, policy officer for the Catholic relief agency, Cafod, said: "The British government is throwing down the gauntlet to those governments which have repeatedly placed obstacles in the way of speedy debt relief for the world's poorest countries."

Mr Wolfensohn said yesterday: "I think the initiative is moving, although there are some differences of view as to the pace." He denied suggestions that the process was too slow and the hurdles too high, saying that three countries - Uganda, Bolivia and Burkina Faso - had their debt reduction packages agreed with three more in the pipeline. "I feel very comfortable in my skin that we have taken all practical steps," he said.

Comments