World Bank Approves Debt-Relief Plan
STEVE INSKEEP, host:
The business news starts with debt forgiveness for the developing world. There was a breakthrough over the weekend in Washington. World financial leaders signed off on a deal to erase most of the remaining debts owed by 18 of the world's poorest nations. NPR's Kathleen Schalch reports.
KATHLEEN SCHALCH reporting:
The deal came at the annual meetings of the World Bank and International Monetary Fund. Leaders of the wealthy group of eight nations had lined up behind the idea at a summit in July in Gleneagles, Scotland, but since the money belongs to the World Bank, the IMF and other international lenders, other shareholder countries needed to sign off as well. For a while, it looked like the deal could collapse, according to Max Lawson, policy adviser for Oxfam International.
Mr. MAX LAWSON (Policy Adviser, Oxfam International): It was very much a last-minute nail-biting finish to get this deal on debt cancelation done.
SCHALCH: The hitch was over who would pay for the write-off. Some European countries suspected the US and other wealthy nations might not kick in the extra funds needed to make the international lenders whole. They feared that could shrink funding available for new loans to poor countries in the future, but shareholders firmed up their commitment. On Saturday, the IMF steering committee signed off on the deal. On Sunday, World Bank shareholders did the same. Oxfam's Max Lawson says this is a huge step forward.
Mr. LAWSON: What we've seen before with debt cancelation is some of the debt canceled down to a certain level which was said to be sustainable. That's become very clear over the recent years that that's just not the case and that these countries are still desperately poor and repaying far too much money that they should be spending on schools and hospitals. So this is a new decision to go for 100 percent cancelation, setting a new standard.
SCHALCH: Initially, the agreement will free 18 poor countries, mostly in Africa, of a total of $40 billion in debt. Another 20 countries could have their debts erased, too, if they meet certain conditions. Some may have to push through financial reforms or show that they've cracked down on government corruption. This deal zeros out the last big chunk of what had been a crippling debt burden for many countries. Most loans from wealthy governments and commercials banks had already been written off. Activists who've lobbied for total debt forgiveness for years say they're relieved it's finally happening. Kathleen Schalch, NPR News, Washington.