G-8 Vows to Cover Costs of Poorest Nations’ Loans

In a victory for some of the groups that formerly took to the streets to protest economic globalization, the eight major industrial nations Friday directed the World Bank to forgive about $30 billion it is owed by 18 of the world’s poorest countries.

The so-called Group of 8 -- the seven biggest industrial democracies plus Russia -- pledged to cover the costs of writing off the loans.

“We will make available immediately additional funds to cover the full cost,” the eight nations’ finance ministers said in a letter to World Bank President Paul D. Wolfowitz. U.S. Treasury Secretary John W. Snow said he expected the bank to comply within a week.

Some rich nations not among the Group of 8 -- particularly the Netherlands and Belgium -- had warned that writing off the loans would come at the expense of future aid to poor countries.

On the day before the annual meetings of the World Bank and the International Monetary Fund are to begin today, nongovernmental organizations such as Africa Action and Jubilee USA Network had insisted that the rich nations follow through on a debt-relief pledge made in Scotland in July.

Jonathan Hepburn, a policy advisor to Oxfam International, welcomed the letter to Wolfowitz, saying it “conveys a sense of urgency that has been missing.” Oxfam said all the world’s poor countries paid $100 million a day in debt service.

The World Bank is the largest financer of projects in developing countries, distributing about $20 billion in aid in the last fiscal year. The International Development Assn. is the division that assists the poorest countries by providing interest-free loans and grants for projects that promote economic growth.

The G-8 nations are the U.S., Britain, France, Italy, Germany, Japan, Russia and Canada.

Debt relief is a test for the administrations of British Prime Minister Tony Blair and President Bush, who used the July pledge to head off criticisms from musician Bono and others who say debt relief is essential to alleviating poverty in Africa. Bush last week called upon the IMF and World Bank to “finalize this historic agreement as soon as possible.”

Bloomberg News was used in compiling this report.