Britain to drop debt payments

Britain is to renounce its right to interest payments on £1bn owed by developing countries, in a last-ditch attempt to secure financial help for 41 of the world's poorest states before an end-of-year deadline set by anti-poverty campaigners.

The chancellor, Gordon Brown, will unveil the government's initiative today at a farewell rally organised by Jubilee 2000, the umbrella group that has masterminded a four-year global debt protest.

With only 20 of 41 heavily-indebted countries on the International Monetary Fund and World Bank list likely to have been granted debt relief by the end of this month, Mr Brown and Claire Short, the international development secretary, have decided to put a moratorium on payments from the other 21.

"Neither you nor I will want the richest countries to benefit any more from the debts of those poorest countries," the chancellor will tell today's rally.

"From this day the British government will renounce our right to benefit from the historic debt owed by all 41 countries."

Payments will instead be placed in a special trust fund until the countries have put in place poverty reduction plans. Eleven of the 21 countries that stand to benefit are still involved in armed conflicts, and Mr Brown said yesterday that the only condition of the deal was that the money be used to tackle poverty rather than be squandered on armaments.

"Because of the conflicts there is no chance at the moment for some of these countries that debt relief would lead to poverty reduction. Had it not been for these conflicts we would have been able to move much more quickly."

Mr Brown and Ms Short have already started to lobby other members of the G7 industrialised countries in the hope that they will follow Britain's example. The government is hopeful that Bill Clinton will use the last days of his presidency to make a generous gesture on debt.

"The barrier now to debt relief and debt reduction is not money from us or other countries but the nations themselves getting out of conflicts and putting together a poverty reduction strategy," Mr Brown said.

Britain has already agreed to write off £600m of bilateral debts owed by the 20 countries that will get relief under the IMF and World Bank's Heavily Indebted Poor Country initiative. The chancellor said that the stock of debt owed by the remaining 21 countries was £1bn.

Mr Brown and Ms Short are optimistic that the move will speed up attempts to put together anti-poverty strategies and that five countries will be in a position to benefit in the first few months of next year. These may include Madagascar, Niger and Ethiopia.

Britain's move follows intense pressure by Jubilee 2000 for the rich western countries to speed up the debt relief process. The campaign officially winds up on December 31, although the reins will be taken up by a new group, Drop The Debt.

Mr Brown will tell the rally today that Britain wants debt relief to be used to start a cycle of poverty reduction and development, with the aim of meeting the UN target of halving world poverty by 2015, ensuring that every child has a primary school place and cutting infant mortality by two-thirds.

Jubilee 2000 welcomed the government's initiative but pointed out that Britain was only one creditor.


Jubilee 2000