Plea for cash to ease third-world debt crisis

Date: 23/09/1999

By Simon Taylor

DEVELOPMENT Commissioner Poul Nielson has asked Union governments to dig deeper into their pockets to find more money for reducing poor countries' international debts.

Nielson wants to use a combination of EU money and higher donations from member states to help cancel the debts of some of the world's poorest countries such as Zambia, Uganda and Niger, where more than half the population live on less than 1-euro-a-day.

Some Union diplomats claim up to €850 million could be raised to ease the debt burden of poverty-stricken states, with most of the money going to help African, Caribbean and Pacific (ACP) countries.

However, European Commission officials say the final figure will probably be lower than that and even the highest amounts suggested by diplomats would be lower than the €1 billion which UK Finance Minister Gordon Brown believes the EU could raise from unused parts of its development budget.

Debt relief campaigners have given the Commission's move a cautious welcome, but called on member states to go further. Anna Collins, of the European Network on Debt and Development, said the Union should cancel repayments on special loans made to ACP countries. She also voiced concern that European Development Fund (EDF) money already allocated to projects could be diverted into debt relief instead of governments providing extra cash.

Campaigners say the amount of money the international community is considering raising would only scratch the surface, as the total cost of ending the debt burden on the world's poorest countries is estimated at €68 billion.

A Commission discussion paper presented to Union ambassadors this week stated that the money from EU and member state coffers would help 36 of the world's poorest countries, while targeting aid at the most debt-stricken states in the Union's ACP cooperation programme.

Diplomats said the EU would take a three-pronged approach to easing the poorest countries' debt burden.

The biggest contribution would be the provision of €500 million to cancel repayments on loans made to ACP countries by the Union. A further €300 million would be paid by the EU into the World Bank's trust fund for cancelling the debt of the world's most heavily indebted poor countries (HIPC) and it would provide another €150 million in grants to help countries meet loan repayments which are due imminently. The trust fund contribution would come from unused funds in the EDF budget and from the Union's coffers.

But EU governments are insisting that the trust fund money must be earmarked for ACP countries, with France calling for the cash to go directly to the African Development Bank. Targeting the aid on the region is necessary because the ACP bloc has the power to veto changes in the way EDF money is spent.

The French have been resisting the British bid to use €1 billion from the EU's development budget for debt relief because Paris contributes a disproportionate share of the funds, at around 25%.

Development Commissioner Poul Nielsen has asked European Union governments to dig deeper into their pockets to find more money for reducing poor countries' international debts.