U.S., U.K. Seek Accord on African Debt Relief
MELISSA BLOCK, host:
As we mentioned, Prime Minister Blair and President Bush said they're making progress on a debt-relief plan for Africa. The two leaders are hoping to resolve differences, so a deal can be presented to other countries before the G8 conference begins next month. NPR's Kathleen Schalch has that story.
KATHLEEN SCHALCH reporting:
Both sides say they're ready to do something dramatic to rescue countries still mired in debt. In the past decade the so-called heavily-indebted poor countries have gotten two-thirds of what they owe written off. The question is what to do about the rest, the roughly $20 billion still owed to the World Bank, regional development banks and the International Monetary Fund. President Bush and Prime Minister Blair both want to lift that burden. But as Steven Radelet of the Center for Global Development explains, they've taken different approaches.
Mr. STEVEN RADELET (Center for Global Development): The Bush administration's approach starts by actually forgiving 100 percent of the debts owed by some of the poorest countries in the world, but with a catch. The countries would not receive as much funding from the World Bank and other creditors that they owe money to.
SCHALCH: Though British and other Europeans have been wary of this approaching, fearing the poor countries wouldn't get enough fresh funds to spend on priorities, like health and education. John Williamson of the Institute for International Economics and others also oppose any plan that drains funds from the World Bank without replenishing them.
Mr. JOHN WILLIAMSON (Institute for International Economics): Then, essentially, the countries that are paying are the ones who otherwise would be borrowing from the World Bank, and that's the poor countries.
SCHALCH: Prime Minister Blair had opposed outright cancellation of the debt. Instead, he suggested the wealthy countries could write the checks to cover what the poor countries owed. Steven Radelet says the Bush administration saw problems with that plan as well.
Mr. RADELET: The problem is that it doesn't actually fully clean the books, and the donors would have to keep up this commitment for 10, 20, 30, in some cases 40 years into the future until the debts that are on the books are fully repaid.
SCHALCH: After a while, he says, they might get tired of it. Now President Bush and Prime Minister Blair say they're moving closer to a compromise. The Americans would get 100 percent debt cancellation, and the Europeans would get more money to fund the World Bank and help impoverished nations. President Bush says both leaders believe that developing countries that are on the path to reform should not be burdened with mountains of debt.
President GEORGE W. BUSH: Our countries are developing a proposal for the G8 that will eliminate 100 percent of that debt and that, by providing additional resources, will preserve the financial integrity of the World Bank and the African Development Bank.
SCHALCH: Prime Minister Blair says he's encouraged by the commitment to provide more funding to the international lenders, so they won't be penalized for providing the funds to relieve the debt.
Prime Minister TONY BLAIR (Britain): And if that substantial funding is added also to the debt cancellation, I think it will make a real difference to those African countries.
SCHALCH: Additional hurdles remain. There's no plan yet for erasing the debt owed to the IMF. The British say the IMF could cover the cost by selling some of its gold. This idea has been controversial in the past, and it still is with the mining industry. Doug Hock is a spokesman for Denver-based Newmont Mining.
Mr. DOUG HOCK (Spokesman, Newmont Mining): Recent history suggests that even the mere threat of open-market gold sales has a negative impact on the value of the commodity. In 1999, the threat of IMF gold sales and then the UK's actual open-market sale of a portion of their gold reserves contributed to the price of the commodity reaching a 20-year low.
SCHALCH: But Nancy Birdsall, president of the Center for Global Development, argues that the gold could be sold slowly and central banks could compensate by selling less of their gold, so the price of gold need not fall.
Ms. NANCY BIRDSALL (President, Center for Global Development): There's a good chance, if the US agreed, that this deal would go through. Many of the countries like South Africa that are themselves gold-producing and several years ago were concerned about putting more gold on the market have now agreed that it would be acceptable.
SCHALCH: She says there may still be time to reach an agreement before the leaders of the G8 meet in July. Kathleen Schalch, NPR News, Washington. Transcript provided by NPR, Copyright NPR.