The United States is calling on international lending institutions to reform their ways of operating so that they can give more aid to poor nations.
Speaking ahead of a three-day meeting in Washington of the finance ministers of the leading industrial countries, U.S. Treasury Secretary John Snow said Thursday that the Bush administration will propose that the debt burden of the poorest developing countries be significantly reduced.
The Bush administration is pushing the World Bank to make more grants instead of loans to the poorest countries. Treasury Secretary Snow says the poorest countries, most of them in Africa, must be given help so they can be extricated from the trap of unsustainable debt.
"The plain fact is that we're in a bad paradigm of debt, debt forgiveness, more debt, debt forgiveness, which means these countries have unsustainable debt levels and can never get out from under those debt levels," he said. "Thus they can never ever get credit with the private financial markets. And unless they get credit with the private financial markets, their long-term prospects are much diminished."
Mr. Snow says he is seeking consensus from other donor countries on how to achieve broader, more generous debt relief. Britain, like the United States, is pressing for debt relief.
While Washington pushes for more grants, London wants the rich countries to boost their contributions to multi-lateral lenders so they can increase the flow of resources to the poor. Donors like Germany and Japan are less enthusiastic about debt relief. World Bank President James Wolfensohn has endorsed a British proposal to write off 10 percent of the debt owed to the Bank by the poorest countries.
Treasury Secretary Snow on Friday will host a meeting of the finance ministers from the seven richest industrial countries. For the first time, China will take part in a portion of the meeting, recognition that China with the world's fastest growing economy is increasingly important the global economy.