Australia to forgive $10 million a year in debt

Australia is set to commit millions of dollars to debt relief for 18 of the world's poorest countries, with the Federal Government giving its in-principle support to a Group of Eight proposal to forgive billions of dollars owed by African and Latin American nations.

The Herald understands that cabinet agreed last month to follow the lead of the G8 finance ministers before this week's meeting of G8 leaders in Scotland and forgive debts of $72 billion owed by the most heavily indebted countries.

World poverty, particularly in Africa, has been a key theme of the G8 summit. The push has been largely driven by the British Prime Minister, Tony Blair, who pledged to continue with his ambitious agenda despite having to abandon the meeting temporarily on Thursday because of the bombings in London.

The move would cost Australia more than $10 million a year over a number of years.

It would mean forgiving 100 per cent of the debts of the 18 countries that have qualified for debt forgiveness under the Heavily Indebted Poor Countries initiative, which helps 38 nations.


The 18 nations that will have their debts cancelled are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.

However, the Government is awaiting a firm submission on the issue before its plans can be finalised. This will come out of the forthcoming meeting of the World Bank and the International Monetary Fund, which the Treasurer, Peter Costello, is due to attend in September.

Cabinet's decision comes in spite of the Government's reluctance to use debt relief as a way to assist poor countries.

This week the Foreign Minister, Alexander Downer, compared trying to tackle poverty in Africa just by cancelling debt to staging a rock concert with only a drum kit.

He said it was an ineffective means of tackling poverty in the developing world if used on its own, particularly if it was not tied to good governance practices. This week the Government has been pushing agricultural trade reforms as a better way to help impoverished nations.

Mr Downer said abolishing subsidies provided by the European Union and the US to their farmers would be the single most important thing wealthy nations could do for those poorer countries.

The Government said at the time of the Boxing Day tsunami disaster that it did not think debt relief was the appropriate way to respond to the desperate plight of the affected countries, in particular Indonesia and Sri Lanka.

Despite this, Australia has forgiven hundreds of millions in debt in the past couple of years.

It has pledged $24.8 million to the Heavily Indebted Poor Countries initiative, which is run by the World Bank, in the current financial year.

In addition, it has forgiven bilaterally $14 million in debt owed by Ethiopia and Nicaragua, as well as $850 million owed by Iraq, and this year it agreed to a moratorium on debts owed by Indonesia and Sri Lanka.


By Cynthia Banham Foreign Affairs Reporter
July 9, 2005

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