LONDON, June 11, 2005 (IslamOnline.net & News Agencies) – The Group of Eight rich nations hammered out on Saturday, June 11, a historic deal to immediately write off 40 billions of dollars owed by the world’s poorest countries to multilateral lenders.

“I can confirm that the G8 finance ministers have agreed a 100 percent debt cancellation for the Heavily Indebted Poor Countries (HIPC),” British Chancellor of the Exchequer Gordon Brown told a news conference in London, reported Agence France-Presse (AFP).

Wrapping up a two-day meeting, Brown said the G8 countries "are presenting the most comprehensive statement that finance ministers have ever made on the issues of debt, development, health and poverty".

Under the British-brokered deal, 18 of the world's poorest countries will have a total of 40-billion-dollar debts to the World Bank (WB) and the International Monetary Fund (IMF) and the African Development Bank immediately wiped out.

The 18 beneficiaries are: Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.

They are the first to qualify for eligibility for a debt relief joint initiative backed by the three financial institutions.

The HIPC initiative offers debt relief to the world's most impoverished nations that agree to undertake economic reform.

Britain has given the debt issue a priority for its presidency of the G8, which comprises Britain, Canada, France, Germany, Italy, Japan, Russia and the US.

The British Treasury Ministry said once the next nine countries on the list qualify, the write-off will amount to $51bn, and if the full 38 countries became eligible the package would total $55bn, the Guardian newspaper reported Saturday.

The other nine countries due to benefit from the deal are Cameroon, Chad, Democratic Republic of Congo, Gambia, Guinea, Guinea Bissau, Malawi, Sao Tome and Principe, and Sierra Leone.

“When I started this it was one country that would qualify but now it's 27 and potentially it's 37,” the daily quoted Brown as saying.

The chancellor said the deal would not have been possible without the pressure that has been put on finance ministers by churches, campaign groups and the public.

Saturday’s deal goes further than the agreement between US President George Bush and British Prime Minister Tony Blair last week in Washington, which included debts owed to the WB and the African Bank but not the IMF.

Well-placed sources told the Guardian that the logjam had been broken when it was found that the IMF had several billion dollars available from gold sales in the late 1990s that it could use to cover the losses it would incur from writing off debts.

Officials told Reuters that there was tension between France and the United States over how to offer relief on debts owed to the IMF without weakening the lending agency.

They further said that the G8 nations were divided on matters of principle on how to decide who should be helped.

Germany argued for debt relief on a case-by-case basis and said countries should have to show they deserved help by clamping down on corruption.

Japan argued that blanket forgiveness could create a moral hazard.

The second of Britain's ambitious proposal for Africa hardly got discussed, officials told Reuters, leaving much needed aid to poorest countries on the backburner until the Gleneagles summit.

Brown had sought backing for an International Finance Facility (IFF) that would double aid to the poorest countries to $100 billion by issuing bonds using rich nations' development budgets as collateral.

But Washington opposed the plan so Brown is likely to launch a pilot IFF instead that would provide funds for vaccination programs in Africa without US or Japanese support.

Brown acknowledged Friday, June 10, that there was “still work to be done” to get approval for the IFF.

The new president of the World Bank, American Paul Wolfowitz, threw his weight behind the UK's G8 agenda.

“I certainly hope that I can use my position at the Bank to encourage increased resource commitments from all the donors and certainly the US,” he said in statements carried by the Guardian.