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Business News of Sunday, 26 September 2004

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U.K. Proposes Debt Relief for Ghana & Poor Nations

BRIGHTON, England - Britain will provide more debt relief for some of the world's poorest countries and challenge other rich governments to do the same, Prime Minister Tony Blair's government said Sunday.

The list of countries proposed for debt relief include Ghana.

Treasury chief Gordon Brown said many developing countries were crippled by servicing their debt and could not invest in their infrastructure.

"We will pay our share of the multilateral debt repayments of reforming low-income countries," Brown said in a statement, released by the Department of International Development.

"We will make payments in their stead to the World Bank and African Development Bank for the portion that relates to Britain's share of this debt. We do this alone today but I urge other countries to follow so that over-indebted countries are relieved of the burden of servicing all unpayable multilateral debt."

Britain holds about 10 percent of the total debt owed to the World Bank and other development banks, or about 7 percent of all the debt of the world's poorest nations.

Britain's Treasury said it had earmarked 100 million pounds ($180 million) per year until 2015 to pay for the initiative.

In a speech to a "Vote for Trade Justice" event at a church in Brighton, the coastal town where the governing Labour Party is holding its annual conference, Brown said it was vital to remove damaging trade barriers, and invest in poor countries so they had the capacity to trade.

He stressed the need to reform the European Union common agricultural policy which distorts the global market for farm goods, saying "we can and must do more to urgently tackle the scandal and waste" of the subsidies.

Brown told the audience he would urge other countries to back his proposal for an International Finance Facility through which donors from richer nations would raise funds on the international markets, when he attends the annual meetings of the International Monetary Fund and World Bank.

He also called for debt payments owed to the IMF to be funded through the more efficient use of IMF gold reserves.

Britain's Development Secretary Hilary Benn said poor countries needed "significant additional resources" to "lift people out of poverty, get children into primary schools and improve basic health."

"Debt relief is an efficient way of transferring these resources to countries that can use them most effectively," he said in the statement. "We call on other governments, especially our G-8 partners, to join us so that no country is held back by the burden of unsustainable debt."

To be eligible for the debt relief, countries must be able to show the savings will be used to meet the goals of the 2000 Millennium Summit. Those goals include halving the number of people living in dire poverty from 2000 levels; ensuring that all children have an elementary school education; ensuring that all families have clean water; and halting the AIDS epidemic _ all by 2015.

The list of countries will include those that have been through the Heavily Indebted Poor Countries Initiative: Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Mali, Mauritania, Mozambique, Nicaragua, Niger, Senegal, Tanzania, Uganda, as well as a number of other countries such as Vietnam and Armenia, where the World Bank has assessed the countries are capable of absorbing direct budget support, the statement said.

Fair trade campaigners praised Brown's initiative.

"It is an incredibly bold step," said Brendan Cox of Oxfam. "This really piles pressure on the United States, France, Japan, Germany, Canada and other countries. If he can get the other countries to follow suit this really is the end of the debt crisis as we know it."