Debt forgiveness plan gains more international support, Snow says
Regional-USA, Economics, 4/18/2005

A U.S. plan to forgive debt of the poorest countries to multilateral institutions is gaining more support among leading industrialized nations, U.S. Treasury Secretary John Snow says.

Snow said he is pleased that so many countries now share the U.S. view that the next step in efforts to extend the benefits of growth to the most indebted poor nations is to offer them 100 percent debt reduction and grant development assistance thereafter.

"We believe that the tide is shifting in favor of such a cancellation approach," he said in an April 16 statement issued after the conclusion of the April 16 meeting of finance ministers and central bank governors from the Group of Seven (G7) countries.

The G7 comprises Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.

All G7 countries support some form of debt relief. But according to news reports, the United Kingdom has been most reluctant to accept the U.S. plan as long as there is no guarantee that development assistance will be replenished once debt repayments from nations elegible for 100 percent debt reduction stop.

Speaking to reporters after the G7 meeting, Snow said, however, that the positions of the two countries are getting closer.

"There is good convergance," he said without going into details.

Snow said that the global economic outlook "continues to be favorable" for 2005, despite "unwelcome" high oil prices. Nevertheless, he said, improving growth, particularly in regions and countries where it has been sluggish, must be top priority for G7 leaders. He said that at the meeting they set an "action plan" for policy measures necessary to boost economic growth and deal with global current account imbalances as well as a "clock" for implementing those policies.

Snow said that financial officials also discussed how to deal with burdens imposed on national budgets by aging populations in industrialized countries. While each country needs to have its own plan, he said, G7 countries intend to address in conjunction with each other problems stemming from unfounded pension and health care obligations. He said that those plans are going to be compared and discussed at the G7 finance officials' meeting in fall 2005.

"We've put an audit process on ourselves," he said.

On another issue, Snow said that China, with reforms of its financial infrastructure largely completed, can now adopt a more flexible exchange rate.

"It's time to take the next step," he said.

His remarks echoed views of other U.S. officials, including President Bush, who in recent days have called on China to start floating its currency.

Snow also remarked on high energy prices, International Monetary Fund and World Bank reforms, and other issues.

Meantime, better coordinated financial and technical assistance and more reforms to strengthen investment environments are needed to help achieve sustainable economic growth, according to the International Monetary and Financial Committee (IMFC). Global prosperity also depends on more investments in oil production and refining capacity, efforts to promote energy efficiency and greater transparency in oil market data, said Gordon Brown, the committee's chairman.

Meantime, the leading industrial countries say they have made progress on debt forgiveness for the most impoverished nations and a number of other issues. Finance ministers and central bank heads from the Group of Seven (G7) said they advanced discussions on particular nations covered by the Highly Indebted Poor Countries (HIPC) program with a view to canceling up to 100 percent of their debt to multilateral institutions.

Debt forgiveness, however, should not reduce resources available to the poorest countries through these institutions, G7 officials said in an April 16 statement issued after the conclusion of their meeting in Washington.

Officials said they support a proposal that would allow the International Monetary Fund (IMF) to assess the economic policies of countries that do not need the fund's resources and signal its approval or disapproval of those policies to their governments.

Previous Stories:
  Reforms likely to change International Monetary Fund, U.S. says   (4/15/2005)
  Washington: The Arab states are committed to the reduce oil prices   (10/11/2004)
  The practice of lending to developing and underdeveloped governments should end   (5/25/2002)

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