By Sanjay Suri
LONDON, Feb 5 2005 (IPS)

In response to a massive civil society campaign spearheaded by Nelson Mandela to make poverty history, G7 finance ministers agreed Saturday to examine debt relief for the poorest countries on a ”case-by-case” basis.

”We are agreed on a case-by-case analysis of HIPC (heavily indebted poor countries), based on our willingness to provide as much as 100 per cent multilateral debt relief,” the finance ministers said in a declaration at the end of a two-day meet in London.

This means in effect that institutions such as the World Bank and the International Monetary Fund (IMF) will consider the debt by each of 37 HIPC countries with a view to allowing for cancellation. There is no such announcement of intent for the larger number of 61 low-income countries designated by the World Bank.

The ”case-by-case” commitment could include a big ‘if’. The IMF has tied earlier moves to reduce the debt of these countries to what it considers to be reforms. The G7 (comprising the United States, Canada, Britain, France, Germany, Italy and Japan) declaration Saturday leaves enough room for earlier IMF reservations to continue.

”This declaration is short of debt cancellation,” Romilly Greenhill from the charity ActionAid told IPS. ”We need to hold G7 to account on what exactly they mean by case-by-case analysis.”

But the declaration means nevertheless an acknowledgement at G7 level that total debt cancellation is needed for some, Greenhill said. ”It sets a pathway and does commit G7 to act further at donor meetings later this year.”

The declaration speaks of the need for better aid, but it is in line with IMF insistence so far on tying aid to ‘reforms’.

”In order to make progress on social and economic development, we believe it is essential that developing countries put in place the policies for sustainable development,” the G7 finance ministers declaration says. ”Sound, accountable and transparent institutions and policies are the basis for sustained economic growth and poverty reduction.”

The declaration goes on to specify the kind of reforms the G7 wants. ”Increasing fiscal transparency is essential and a priority for developing countries is to tackle corruption, which is a significant barrier to growth, private sector development, investment and poverty reduction.”

The statement of intention on debt relief does not come without a renewed insistence on the promotion of privatisation. Nor does the declaration include any commitment on movement towards the target of setting aside 0.7 percent of gross national income on development aid.

The meeting also failed to reach an agreement on the International Finance Facility (IFF) proposed by Britain’s Chancellor of the Exchequer (finance minister) Gordon Brown. Under that facility Brown proposes raising 50 billion dollars from the market with government backing, and for governments to spend some of their future development budget in time for the Millennium Development Goals, a set of eight goals with poverty reduction at the heart of them.

The United States remained firmly opposed to the IFF proposal. ”This particular mechanism does not work for the United States,” U.S. treasury under-secretary John Taylor said. ”It works for other countries, and that is fine.”

The declaration said only that the finance ministers ”agree a work programme” on the IFF, other proposals by Germany and France, and the Millennium Challenge Account set up by the United States to finance development. The ‘work programme’ would be set up ”so that decisions can be made on the constitution of and participation in a financing package to achieve the Millennium Development Goals.”

Brown insisted that the declaration was a major breakthrough. ”We could be at the beginning of the final stage of the process where the debts that were owed by the poorest countries, built up over 20 or 30 years, debts that are simply unpayable in the real world, are finally taken care of,” he said.

Greenhill said the declaration was only the beginning of a process towards the G8 (G7 and Russia) summit in Scotland in July. There will be further meetings in April and June where debt cancellation and better development aid will be debated, she said. Civil society groups expect the case for development and debt cancellation now to ”get stronger and stronger”.

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