As the World Bank & IMF meet this weekend we look at what issues remain unresolved in implementing the G8 debt deal...

The World’s Finance Ministers meet in Washington this week for the annual meetings of the World Bank and International Monetary Fund (IMF), where they will decide the fate of the unprecedented proposal set forth by the G8 in July on debt cancellation.

In July the G8 agreed to cancel the debt of 18 of the world’s poorest countries, owed to the World Bank, IMF and the African Development Bank. The proposal will be debated at the meetings, which will determine whether it will be implemented or not. So far the chances are about ‘50-50’ according to a US Treasury spokesman making a comment after the dismal UN summit on the Millennium Development Goals (MDGs).

LEADERS LOSING FOCUS ON POVERTY
Whereas the UN summit was supposed to consolidate and improve the G8 debt deal, the outcomes clearly showed that the world’s leaders have taken their eye off the ball regarding world poverty. The failure in New York has put all the pressure of delivering on debt onto the World Bank and IMF meetings this week. But with only a few days to go before the finance ministers meet, major differences between the G8 and the international financial institutions remain.

LEAKED DOCUMENTS & LEAKY FINANCE
According to an internal World Bank report leaked last week, debt cancellation proposed by the G8 could severely reduce the resources of the International Development Association (IDA), the World Bank agency that lends to poor countries. This warning by the World Bank is in response to what it sees as a lack of funding put up front by the G8 for the debt proposal. An earlier World Bank document highlighted that the G8 had so far only committed to cover the deal for the next three years.

MORE CONDITIONS?
The second serious concern is that World Bank member countries like Belgium, Norway, Switzerland and the Netherlands oppose full debt cancellation without conditions, and want sterner conditions to be attached to any future debt relief proposals. This is in spite of the countries having already faced years of imposed conditions such as market liberalisation and privatisation to receive previous debt relief. Despite this, the World Bank seems to be reaching agreement that post completion point countries (i.e. the first 18 beneficiary countries) will be subject to one further conditionality “test” in exchange for a one-off debt cancellation.

OTHER ISSUES...
While many people around the world see the benefits of the undiluted G8 debt deal, most are only too aware of its shortcomings. Adding to the concerns stated above being debated at the meetings this week, there remains the issue that will not be discussed, that this whole deal remains tied heavily to the highly controversial Heavily Indebted Poor Country (HIPC) debt initiative. An initiative that has been admitted by the World Bank and IMF as failing “to reduce to sustainable levels the external debt burdens of the most heavily indebted poor countries". HIPC is also derided by people all over the world as exasperating poverty by enforcing prerequisite economic conditions and making the whole process of debt cancellation painfully slow for those who desperately need it.

In light of this, unconditional debt cancellation that is funded accordingly is a must for the finance ministers at the World Bank and IMF meetings this week. With an undiluted deal the international community can begin the process of regaining focus on world poverty and make up the lost ground needed to tackle the deeper questions surrounding HIPC and its relation to poverty in the poor world.

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