UK pushing for Africa debt plan
The UK Chancellor Gordon Brown has put forward a
bold plan to tackle poverty in Africa ahead of
the G8 Summit of rich countries in Scotland next
He called for a doubling of European aid by 2010
and 100% debt relief, as well as an end to many
But the plan is facing opposition in the US - and
particularly from President George W Bush.
Mr Bush's stance sets up a possible clash with UK
Prime Minister Tony Blair, due in Washington next
Mr Bush said on Wednesday that a key part of the
plan did not fit with the US budget process.
The UK is pushing hard for major debt relief and
a doubling of aid to Africa, and Chancellor
Gordon Brown laid out a set of ambitious plans on
The UK has said that 2005 is a vital year for
Africa, and argues that without significantly
more money the United Nations' Millennium Goal of
halving world poverty by 2015 will be impossible
The UK is one of six European nations who have
pledged to increase their aid target to 0.7% of
GDP by that year, a figure which only five
countries have managed to reach so far.
However the US has said that the target is not a
realistic one for it to work towards.
US Treasury spokesman Tony Fratto told BBC's
Newsnight programme: "The problem at looking at
targets of 0.7% of GDP is that when people focus
on numbers like that they don't know what they
are talking about in nominal terms.
"They don't know how much money is available and
how much money is in the pipeline."
Speaking in Edinburgh, Mr Brown said he would
present the new British proposals to the leaders
of the G8 summit next month, to the European
Union, and the UN.
As well as 100% debt relief, Mr Brown wants to
set up an International Finance Facility (IFF) to
double development aid to Africa in order to pay
for education and medical programmes like mass
BROWN'S FOUR-POINT PLAN FOR AFRICA
100% debt relief to pay for education and health
Launch International Finance Facility for Immunisation
Large increase in direct development aid,
doubling of aid from European countries
Removal of export subsidies and all
trade-distorting support to agriculture, which
work against producers in the developing world
Source: Chancellor Gordon Brown, 3 June speech
He also said that the EU would double its own aid to $80bn a year by 2010.
But the US remains concerned that the UK is
proposing that the debt plans should be financed
in part by selling gold reserves held by the
International Monetary Fund (IMF).
A surge in the price of gold has boosted the
value of the reserve, and the UK wants to use
that extra cash.
The US - along with some other countries
including Japan, Germany and Italy - has never
been keen on the idea of selling IMF gold.
Washington has also raised questions over the
IFF, which would allow developing countries to
borrow against future aid pledges.
Mr Bush said on Wednesday that the IFF for
Africa "doesn't fit our budgetary process".
The US has already pledged to increase
development aid through its own Millennium
Challenge Account, but little of the money has
been spent so far.
Analysts say the war in Iraq and its related
costs have pushed Africa off the US agenda, and
think a change in priorities is unlikely.
"What the UK is proposing is not a cost-free
policy," said Marina Ottoway, a senior associate
at Carnegie Endowment in Washington. "Africa has
not really had much of a constituency in the US."
According to Reuters, UK government sources have
been talking about pressing ahead even without US
Even that may prove difficult, Ms Ottoway
explained, since agreements with the World Bank
and International Monetary Fund are multilateral
and any changes would therefore require US
Similar strictures apply to the trade
agreements, and the European Union is unlikely to
drop subsidies unless the US does the same, she
Mr Brown played down reports of a rift or stand-off between the UK and the US.
"In my talks over the last few months, but
particularly over the last day or two, with the
US Treasury Secretary, we believe that there is
common ground on securing that debt relief," he
"We believe it is going to be possible to reach an agreement on debt relief."
"This is not a time for timidity nor a time to fear reaching too high."
European Union to double aid to Africa by 2010
The East African - 2005-06-02
NAIROBI: British Prime Minister Tony Blair got
the agreement he wanted on a massive new European
Union aid package for sub Saharan Africa last
week but questions still remain as to whether the
United States and Japan will back the proposals.
Six weeks ahead of the critical G8 summit at
Gleneagles, the EU as a whole has committed
itself to double its aid programme to Africa by
2010 with an additional promise to reach the UN
goal of 0.7 per cent of GNP being spent on aid by
2015. Total aid to developing countries,
including Africa, will rise from $40 billion this
year to $80 billion by 2010.
It is undoubtedly a coup for Mr Blair, who has
worked tirelessly since being re-elected to get
Africa back at the centre of international
attention. However, problems remain particularly
with regard to the other G8 members.
Although Germany and Italy have signed up to the
aid pledge, they have warned they may not be able
to deliver. Both the German and Italian
governments say that their priorities are more in
eastern and central Europe and warn they do not
have the budget, with a stagnating GDP, to commit
The United States only spends 0.16 per cent of
its GNP on aid although Washington insists it
bears its share of international burdens in other
But Republican hardliners are said to be set
against any proposals to massively increase the
aid budget arguing that development should come
more from the private sector.
The Americans are also sceptical about the
effectiveness of aid and, like the Germans and
Japanese, will want concrete realistic proposals
in place to tackle the issue of corruption within
African governments to ensure that any new aid is
Some UK aid agencies were delighted with the
news last week with Oxfam saying the EU pledge
was "a very generous deal that lays down the
gauntlet to the United States and Japan. Others
The issue was big news in the UK and some other
EU countries but hardly figured at all on the US
networks or in Japan. Even within sub Saharan
Africa, the news coverage was muted.
Christian Aid believes strongly that development
assistance alone will not be enough.
"If Gordon Brown thinks doubling aid will end
poverty, he has been reading the wrong
literature," a spokesman said.
A deal on debt is also possible but there is
still concern in a number of western countries at
who is eligible and the consequences for African
countries on future loans.
Japan, in particular, is sceptical about the
merits of debt cancellation. Moreover, while the
US is likely to agree a write-off of debts to the
World Bank and the African Development Bank, it
has not pledged to support the same for the IMF.
Washington wants the money used to write off
debt to come off new aid pledges while Britain is
pushing for this to be in addition. The biggest
arguments at Gleneagles are likely to be over
trade with the US and France still blocking
progress on proposals to end subsidies on cotton
and sugar production along with other trade
There is also exasperation in London at
Washington's strategy of bypassing the World
Trade Organisation (WTO) and agreeing bilateral
deals with developing countries.
The US has little sympathy with Britain's view
that poor countries should not be forced to open
their markets in return for maintaining their
existing preferential access to the EU and in
some cases the US markets.
The British government remains bullish about the
prospects of a good G8 summit with Development
Secretary Hilary Benn saying the EU deal "sends a
powerful message to the world," and was "a major
breakthrough in the fight against international
Debt relief must be better tailored - IMF chief economist
Reuters, 25 May 2005
WASHINGTON (Reuters) - The International Monetary
Fund's top economist on Wednesday criticized debt
relief proposals for poor countries as being "one
size fits all" and said they should be tailored
to the situations of individual countries.
In commentary in the IMF's Finance and
Development publication, Raghuram Rajan said
outright debt relief proposed by some Group of
Seven rich countries were not suitable for all
countries and should be better crafted.
"One-size-fits-all proposals, while politically
more convenient, are unlikely to benefit
recipient countries as much as proposals that tie
debt relief and additional aid to a country's
specific situation," he said.
His comments come as G7 members Britain, the
United States, Italy, Germany, Canada, France and
Japan focus on reaching a deal to free the
world's poorest countries of their excessive debt
The United States, France and Britain have
presented different proposals for providing 100
percent debt relief for poor countries, but are
haggling over the best way to do it.
The U.S. has proposed increasing grant handouts,
Britain has called for an International Finance
Facility that would double cash for developing
countries and the sale of some of the IMF's gold
stocks, while France has made a case for a tax on
air travel to finance more aid.
Rajan said the "one size fits all flavor" of the
debt relief proposals would avoid politicking by
recipient countries but would not necessarily
resolve the problems.
Without naming any countries he may have in
mind, Rajan argues that debt relief makes sense
if it encourages lending from private foreign
creditors and there are incentives for
governments to use the resources well.
"Private investors may be unwilling to lend to a
highly indebted country for fear that the country
will be unable to lend, because even the worst
debtor can be trusted to service small amounts of
debt," Rajan said.
"Thus, official creditors may be able to expand
a country's access to private resources through
debt relief," he added.
But if countries are irresponsible, they could
build up debt again and "game" the system to get
further debt relief leading to donor "forgiveness
fatigue", he added.
Rajan suggested that some limits on borrowing after debt relief may be needed.
If countries are corrupt, Rajan said no debt
forgiveness and no additional aid is best, and
aid should be distributed directly to
© Reuters 2005. All rights reserved.