Finance Chiefs Cancel Debt of 18 Nations

The world’s wealthiest nations formally agreed Saturday to cancel at least $40 billion of debt owed to international agencies by the world’s poorest lands, most of them in Africa.

After late-night talks in London, the finance ministers of the Group of 8 industrialized nations announced that the deal, long in negotiation, had been intended to avoid damaging the ability of international lenders like the World Bank, the African Development Bank and the International Monetary Fund to continue helping other poor countries.

The deal on Saturday was expected to ease the 18 poorest countries’ annual debt burden by $1.5 billion. They are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia. All must take anticorruption measures.

The agreement came after months of negotiations in which the United States had been pressing the other Group of 8 countries - Britain, Germany, France, Italy, Canada, Japan and Russia - to agree that the solution to poor countries’ indebtedness was to cancel their debt burden completely rather than seek simply to ease it by taking over interest repayments.

“It is my hope today that this reform will conclusively end the destabilizing lend-and-forgive approach to development assistance in low-income countries,” Mr. Snow said. In the future, he said, “grants would be used to ensure that countries do not quickly reaccumulate unsustainable debts.”

Advocacy groups and charities have pressed for a deal on debt relief for years and some welcomed the agreement on Saturday, saying it cleared the way for a broader announcement on combating African poverty at Gleneagles.

“We want a comprehensive breakthrough on more, better development assistance as well as trade reform at Gleneagles and with debt mostly taken care of we can keep up the pressure for a large package,” said Seth Amgott, a spokesman for a coalition of American charities and advocacy groups called ONE.

Significantly, a statement by the Group of 8 finance ministers did not formally exclude other initiatives to fight poverty, including a tax on airline tickets proposed by France and Germany and a British proposal to raise money for poverty relief on international financial markets.

Both of those ideas are opposed by the United States, but their inclusion seemed to be part of a trade-off to secure agreement on the cancellation of debt. Asked about American opposition to an aviation tax on Saturday, Mr. Snow said, “Our position is the same.”

Mr. Brown said Group of 8 countries had agreed to compensate the World Bank and the African Development Bank in particular for forfeiting interest payments on poor countries’ debt, so those groups would have the income to make new loans to other countries. “We could not contemplate a situation,” he said, where debt cancellation for some poor countries was made at the expense of other poor countries.

The United States agreed to pay up to $1.75 billion in compensation to international lenders over the next 10 years, while Britain agreed to pay up to $960 million. Other Group of 8 countries made their own, undisclosed pledges; more pledges are expected from other members of the World Bank and the International Monetary Fund this year.

Over all, international lenders are owed some $55.6 billion, Mr. Brown said. The finance ministers said Group of 8 members would compensate the World Bank and the African Development Bank for their losses. But the International Monetary Fund would be able to use “existing resources” of its own to cancel the $6 billion it is owed by poor countries. Mr. Snow said this would require “no use of gold” - rebutting proposals by Mr. Brown for the I.M.F. to sell or revalue gold reserves to finance debt cancellation.