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IMF Group Fails to Reach Concensus on Debt Relief Program - 2004-10-03

The 24 member policy making group of the International Monetary Fund met Saturday in Washington and failed to reach consensus on implementing a more generous debt relief program for the world's poorest countries. The finance ministers who comprise the group say they hope to reach agreement by the end of the year.

British finance minister Gordon Brown, who chaired the meeting, said that while more generous debt relief is widely endorsed more time is needed to work out the arrangements.

U.S. Treasury Secretary John Snow proposed a complete write off of the poorest country loans and a switch by the World Bank away from loans to grants for the poorest. Britain, however, had an alternate plan that had more support than the American plan.

Worried that the flow of development funds would diminish under the American plan, Mr. Brown wants rich countries to boost their contributions to multi-lateral lenders.

German finance minister Hans Eichel said he expects a consensus to be reached by the end of the year.

The IMF's current debt reduction strategy has been in effect for nearly a decade. The IMF policy making group is comprised of rich and poor countries and includes China, India, Saudi Arabia, Russia, South Africa and Brazil.

Also unresolved at the IMF meeting is a method for reducing Iraq's 120 billion debt burden. The United States favors a 95 percent write down while Germany and France-which opposed the war in Iraq and hold much of Iraq's debt-favor no more than a 50 percent reduction. Earlier this week the IMF approved its first loan to Iraq in over a decade. The emergency loan is for $437 million.

Mr. Brown, the meeting chairman, says action is needed to address risks to the world recovery, which he says is threatened by the doubling of oil prices over the past 12 months. The British chancellor of the exchequer says oil price stability is required to maintain the strong economic recovery that is underway in most parts of the world.

The IMF meeting concludes on Sunday.