Redhotcurry - News. 100% debt relief for Sri Lanka proposed

British Chancellor of the Exchequer Gordon Brown today set out the proposals the UK is making on how the G7 and the international financial institutions can provide further financial assistance to countries affected by the tsunami disaster. Gordon Brown said: "Our proposal is that, with immediate effect, the Paris Club should expect no debt repayment from afflicted countries. That would then lead to an analysis of the needs of these countries, with the possibility of some debt relief, at the same time ensuring that the money goes to the people and areas in greatest need. Sri Lanka and Indonesia would be among the first countries to benefit.

"Britain has put this on the agenda for the G7 Finance Ministers meeting at the beginning of February. That will be backed up by two other proposals: the International Monetary Fund will offer emergency assistance; and the World Bank, which has made an initial contribution for emergency relief, will add to that substantially with money for reconstruction." Mr Brown continued.

"Therefore, the $2 billion figure which has been quoted as the world's contribution to deal with both the problems of first aid and reconstruction will rise very substantially, and Britain is going to play its part in making its contribution to that enhanced figure.

"What my discussions with the IMF, the World Bank, the US Treasury Secretary and other financial leaders over the last few days have shown to me is that we never want to be in a position again where we have to choose between emergency aid and tackling the underlying causes of poverty. The world ought to be able to do both.

"That is why I will also be putting forward proposals for a new 'Marshall Plan' for aid, trade and debt relief for the developing world to release sufficient resources through debt relief and through additional money to be provided by the richest countries and for trade justice so that we can deal with the underlying causes of poverty in Africa and elsewhere as well as providing the aid for reconstruction - that is why 2005 will be a critical year for development under the UK's presidency.

"What people are realising as a result of this terrible tragedy is that what happens to the poorest citizen in the poorest country affects the richest citizen in the richest country - we are an interdependent world, one moral universe, and I think just as we see the power of nature to destroy, we have seen the power of human compassion to build, and it is on that - people's moral sense that something has got to be done - that we build the next stage of our efforts to achieve social justice on a global scale."

All G7 countries have already committed substantial finance to help affected countries with the immediate humanitarian crisis. But their needs, both humanitarian and for reconstruction, are enormous. As President of the G7 in 2005, the UK has proposed to other G7 countries a coordinated response to help meet the needs of those countries affected by the disaster. The UK is proposing:

* that the IMF, the World Bank and other multilateral institutions make the strongest efforts possible to provide financial assistance, including through emergency post-disaster facilities;

* that, until the World Bank and IMF have completed a full needs assessment of their reconstruction and financing requirements, that Paris Club countries should expect no debt payments from affected countries that request it, with Indonesia and Sri Lanka potentially among the first countries to benefit; and

* that, depending on the conclusions of the needs assessments, the G7 should also stand ready to consider all options for further assistance, including debt relief where necessary.

The UK will seek agreement from creditors at the next Paris Club meeting on January 12 2005 to positively consider any request from affected countries, and has asked the World Bank and IMF to complete their initial needs assessment by the end of this month, so that G7 Finance Ministers can consider what further steps are necessary at their meeting in London on February 4 and 5.

The UK is also asking the IMF and World Bank to consider what further multilateral emergency assistance they can provide to support the bilateral aid so far provided and pledged by donor countries.

The UK is also proposing that Sri Lanka be added to the list of countries for whom it is proposing 100% relief of debt owed to multilateral institutions such as the World Bank and International Monetary Fund.

The Paris Club was formed in 1956. It is an informal group of creditor governments from major industrialised countries, including all of the G8. It meets on a monthly basis in Paris with debtor countries in order to agree with them on restructuring their debts.

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