Brown pledge on debt relief

A TWO-YEAR worldwide moratorium on debt repayments by Third World countries stricken by Hurricane Mitch was demanded last night by Gordon Brown, the Chancellor, as Britain spearheaded moves to alleviate suffering in the devastated areas of Central America.

The Chancellor's initiative followed a hurried round of talks with Tony Blair, leaders of the International Monetary Fund, and Clare Short, the Secretary of State for International Development, who last weekend had described wiping out the debt problems as "irrelevant" to the areas' present suffering.

Announcing an increase to pounds 10m in its emergency aid to countries such as Honduras and Nicaragua, which were hit by one of the most deadly hurricanes of the century, the Chancellor said he was also proposing to the World Bank "suspension of world debt payments so that countries are given the best chance to rebuild".

But officials denied the Government was performing a U-turn on debt repayment after protests from aid campaigners over Ms Short's remarks. "What Clare said was right but because of the outspoken way she says things, she gets attacked. The way it came out clouded the fact that we support action on debt relief," said a senior Whitehall source.

The Chancellor's private talks with other nations, including France, suggest there is a strong mood in favour of the British proposal.

But the British initiative would not go as far as wiping out the debt, which some activists have demanded. Flanked by Ms Short, Mr Brown said countries hit by the hurricane should be eligible to join an aid programme aimed at assisting debt repayment.

"The needs of the Central American countries are now being heard throughout the world and we want to do what we can and play our full part with the rebuilding of the economies. We are proposing to the World Bank that a new trust fund be set up to help the Central American economies and we are prepared to contribute pounds 10m.

"We also believe a new facility should be created to help rebuild the shattered economies and that what we proposed for post-conflict economies in Africa we want for these economies as well," Mr Brown said.

Britain's proposals were just part of a gathering international relief effort yesterday, as the sheer immensity of the disaster wreaked by Hurricane Mitch became clear.

France, which plans a similar contribution to the World Bank, announced it would cancel all bilateral debt owed it by Honduras, Nicaragua, Guatemala and El Salvador, while the new German Foreign Minister, Joschka Fischer, also urged some debt to be forgiven the affected countries.

Pledges of aid rolled in from the US, which is promising $70m (pounds 42m), and from the European Union, whose members have already committed $122m - a sum that could rise sharply. Both Spain and Sweden are talking of giving more than $100m for immediate aid and future reconstruction.

Oxfam welcomed Mr Brown's proposal, saying a debt moratorium would give a breathing space: "But a breathing space which must be used to pave the way for long-term investment and reconstruction."

Other aid organisations were more outspoken. "We feel the debts should be written off," said Jenny Borden of Christian Aid.