They also decided to reduce Overseas Development Agency loans by a further $20bn, in the face of mounting pressure from debt campaigners to alleviate the burden on the Third World, according to British Treasury sources.
Gordon Brown, the British Chancellor, who took proposals for a generous package of debt reduction to the G7 finance ministers meeting in Frankfurt, welcomed the deal as the first step on the road to tackling "one of the great injustices of our time". It will be formally announced later this week at the summit for heads of state.
The finance ministers pledged to contribute to a Millennium Trust Fund, announced by Mr Brown earlier this month, with an initial contribution of $100m. And they agreed in principle that International Monetary Fund gold should be sold off to help pay for the reduction in debt.
The number of countries eligible for debt relief is also going to be expanded by seven more than the existing 36, to take in nations including Ghana, Honduras and Senegal. This is half the number of new poor countries which aid agencies argue should be included in future.
The agreement will reassure aid agencies, including the powerful Jubilee 2000 lobby, which have run an increasingly vociferous campaign in the past three years. Yesterday more than 10,000 people from Scotland and the North of England joined hands in a human chain around Edinburgh Castle in a plea for the world's richest nations to cancel Third World debt.
Organised by Jubilee 2000, it is part of a series of events in Edinburgh, Cardiff and London. Organisers expect up to 30,000 people to turn up to a similar event on the banks of the River Thames in London today.
MPs on the Commons Development Committee warned last week that the official debt-reduction programme was close to failure. Andrew Simms, a spokesman for Christian Aid, said that the deal would be "an improvement on the existing package" but stressed that more needed to be done to tackle a burden worth $227bn in sub-Saharan Africa alone.Reuse content