World Bank approves debt-relief programme

The World Bank’s directors approved a £37bn (€53.4bn) debt relief package for poor countries, many of them in Africa, after resolving yesterday how the international lending institution will find money for future loans.

The program starts on July 1, the beginning of the bank’s fiscal year, and extends over a 40-year period.

“This is a historic agreement, combining increased financing with debt relief, which will help poor countries” meet an internationally agreed set of development goals, said Paul Wolfowitz, the bank’s president.

He said he was “particularly pleased that the bank’s shareholders had agreed on a funding package that will help to preserve the International Development Association’s role as a cornerstone in development finance for poor countries of the world.”

The IDA is the bank’s low-interest lending arm. IDA had been financed by loan repayments from borrowing countries. Some countries were concerned that loan forgiveness would deprive IDA in the future of resources to lend.

Wolfowitz urged IDA’s governors to take quick action on the debt-relief package at a meeting next month so the program can go into effect by summer.

Bank officials, who spoke on condition of anonymity because they do not deal with external relations, said donor countries had made firm commitments to cover the IDA costs over the next 40 years.

They said they had pledges to cover 75% of IDA’s lending over the next 10 years and 60% for the following 30 years.

“We are off to a good start, and time will tell what will happen, but we have 60% as of today,” a bank official said. “The board called all donors to build on pledges already made.”

Wolfowitz said the term commitments reflect the reality of parliamentary and legislative procedures in most countries where budget approval is required.

The 17 countries eligible for 100% debt relief are Benin, Bolivia, Burkina Faso, Senegal, Guyana, Tanzania, Mozambique, Nicaragua, Niger, Mali, Rwanda, Ethiopia, Honduras, Ghana, Uganda, Zambia and Madagascar.

Mauritania already has completed its debt relief program but will qualify for more relief after it has completed specified public expenditure management changes.

Last year the leaders of the Group of Eight industrialised nations – Britain, Canada, France, Germany, Italy, Japan, Russia and the US – agreed to a plan that would write off debts that the 18 countries owed to the World Bank, the International Monetary Fund and the African Development Bank.