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World Bank backs debt cancellation scheme

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Sept 26, 2005 (WASHINGTON) — The World Bank’s policymaking committee on Sunday approved a plan to accord multilateral debt cancellation to some of the world’s poorest countries, committee chairman and South African finance minister Trevor Manuel said here.

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World Bank

The action follows a similar move on Saturday by the International Monetary Fund.

"The (debt) agreement now carries the full weight of support of all member states of the IMF and the World Bank and sets the basis for the next moment. These agreements are premised firstly on 100 percent debt relief," Manuel said.

The decisions of policymakers from the World Bank and IMF now go to the executive boards of the two institutions, where rejection is considered highly unlikely.

World Bank president Paul Wolfowitz said he would "move swiftly" to get the issue before the board, "a process that can be completed within weeks."

In an initial phase the project would provide debt cancellation worth about 40 bln usd to 18 of the world’s most impoverished nations, all but four of them in Africa.

About 70 pct of the debt is due the World Bank, with the remainder owed the IMF and the African Development Bank.

In the face of concern that cancelling the repayments would cripple the World Bank’s ability to continue lending to poor countries, the Group of Eight industrialized nations — which drafted the proposal — on Friday issued a written pledge to cover the full cost of the scheme.

The 18 countries targeted in an initial phase have met specific economic and structural conditions mandated by the Bank and the Fund in exchange for debt relief.

The 18 are: Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.

A further 20 countries could also become eligible, which would take the total value of the debt cancellation to 55 bln usd dollars, according to British Chancellor of the Exchequer Gordon Brown.

Speaking here Sunday, Canadian Finance Minister Ralph Goodale said that "with their debts gone, these countries will be able to redirect more of their precious financial resources to productive investments in better health care, education, social development and economic growth for their people."

Oxfam International has estimated that poor countries spend 100 mln usd a day on debt repayments.

Debt relief campaigners on Saturday gave a cautious welcome to the project.

(AFX)

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