Ministers Avert World Bank Crisis
Gordon Brown and Clare Short claimed last night to have safeguarded the future funding of the World Bank after heading off an American plan to convert half the soft loans to poor countries from the international development lender into grants.
Gordon Brown and Clare Short claimed last night to have safeguarded the future funding of the World Bank after heading off an American plan to convert half the soft loans to poor countries from the international development lender into grants.
Following a protracted battle with Washington, Britain and the other leading European nations struck a deal last night ahead of today's meeting of the G7 finance ministers in Halifax.
The compromise agreement will mean that the World Bank will increase the grants from 5% to 20% of its spending - a much smaller percentage than the United States had been seeking.
In addition, rich donor nations have agreed to a $2bn increase in funding for the Bank to cover the losses it will suffer from the increase in grants.
A Treasury source said the deal would help indebted countries in sub-Saharan Africa and protect its long-term spending programme.
Miss Short and Mr Brown were concerned that the White House plan would have left the World Bank $100bn out of pocket in 40 years' time.
Loans from the Bank's soft loans arm, the International Development Association, are highly concessional. Countries have a 10-year grace period before they start repaying and the loans have an interest charge of just 0.75% a year.
American officials had presented the 50% grant proposal as a good deal for poor countries. But aid agencies familiar with Congress's reluctance to fund the World Bank were worried that the real goal of the Republicans was to cripple the lender by depriving it of funds.
"We welcome the increase in grant funding and the fact that the US proposal, which would have cut overall aid, has been rejected," said Justin Forsyth, head of policy at Oxfam.
"If they spent more time mobilising real resources and less time quibbling over absurd details then we might see some real progress in the fight against poverty."
G7 finance ministers are expected to use today's meeting to reaffirm their confidence that the global economy is set to recover from its post-September 11 downturn. They will also discuss the situation in Argentina, which is struggling to agree an economic rescue package with the International Monetary Fund.
Following a protracted battle with Washington, Britain and the other leading European nations struck a deal last night ahead of today's meeting of the G7 finance ministers in Halifax.
The compromise agreement will mean that the World Bank will increase the grants from 5% to 20% of its spending - a much smaller percentage than the United States had been seeking.
In addition, rich donor nations have agreed to a $2bn increase in funding for the Bank to cover the losses it will suffer from the increase in grants.
A Treasury source said the deal would help indebted countries in sub-Saharan Africa and protect its long-term spending programme.
Miss Short and Mr Brown were concerned that the White House plan would have left the World Bank $100bn out of pocket in 40 years' time.
Loans from the Bank's soft loans arm, the International Development Association, are highly concessional. Countries have a 10-year grace period before they start repaying and the loans have an interest charge of just 0.75% a year.
American officials had presented the 50% grant proposal as a good deal for poor countries. But aid agencies familiar with Congress's reluctance to fund the World Bank were worried that the real goal of the Republicans was to cripple the lender by depriving it of funds.
"We welcome the increase in grant funding and the fact that the US proposal, which would have cut overall aid, has been rejected," said Justin Forsyth, head of policy at Oxfam.
"If they spent more time mobilising real resources and less time quibbling over absurd details then we might see some real progress in the fight against poverty."
G7 finance ministers are expected to use today's meeting to reaffirm their confidence that the global economy is set to recover from its post-September 11 downturn. They will also discuss the situation in Argentina, which is struggling to agree an economic rescue package with the International Monetary Fund.
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