IMF Will Excuse Poor Nations' Debt

Billions Of Dollars Forgiven Pending World Bank Approval

(AP)  A landmark agreement to forgive billions of dollars of debt for poor countries sailed toward final approval by finance ministers after the International Monetary Fund agreed how to pay for it.

"Agreement has been reached on all the elements," said Gordon Brown, the British finance minister who is chairman of the IMF policy-setting panel "That means this historic process of completing the debt write-off that started many years ago has ended today."

He said late Saturday the IMF's 24-member executive board would meet soon to formally approve the deal.

The agreement still has to be ratified by the World Bank, a major lender to poor countries. The IMF and World Bank annual meetings continue Sunday and the bank's policy-making Development Committee is expected to follow the IMF move.

Treasury Secretary John Snow predicted the 24-member IMF and World Bank executive boards would formally approve the agreement within a week.

The debt agreement would forgive an estimated $40 billion worth of payments that 18 poor countries, mostly in Africa, owe the World Bank and the IMF. But as many as 20 other countries could qualify if they met certain conditions, bringing the total to $55 billion. The cost would be spread over decades.

Poor countries could use the money for education or drugs to fight HIV/AIDS or malaria, said supporters of debt relief who have been pressing for action. They include, rock stars, church groups and relief agencies.

"We've seen a real breakthrough on debt cancellation by the IMF," said Max Lawson, policy adviser to the international relief agency Oxfam. "The stage is now set for the World Bank shareholders to fulfill their part of the bargain."

The endorsement by the IMF steering committee came a day after the Group of Eight major industrial nations made firm pledges to pay for the plan, a commitment intended to overcome the biggest obstacle to approval by the lending institutions and some European nations not part of the G-8.

Leaders of the G-8 announced a framework for the agreement at their summit last summer in Scotland. The details of how the agreement will work were left to the World Bank and the 184-nation IMF.

But what cleared the way for the breakthrough was a pledge Friday from the G-8 the United States, Britain, Canada, France, Germany, Italy and Japan "to cover the full cost to offset dollar for dollar," the loan payments that would be lost.

The bank uses these repayments to make new loans and provide other development aid. It was concerned its finances would be adversely affected unless the wealthy nations made up the money it would lose.

While the ministers and central bank governors met behind security fences and orange garbage trucks blocked some streets, tens of thousands of protesters demonstrated against the war in Iraq. Their parade route took them past the headquarters of the World Bank two blocks from the White House.