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International lenders promise to expand debt forgiveness


WASHINGTON - In an era of unprecedented prosperity for rich nations, their financial leaders are promising a high-profile campaign to double the number of poor nations granted debt relief by year's end. The commitment would mean easing the conditions usually imposed on countries that want their debt forgiven, international financial officials said.

The pledge, to be announced at the annual meeting of international lending agencies in Prague, Czech Republic, this week, is intended to defuse one of the most potent arguments of the anti-globalization protesters who have disrupted nearly every recent gathering of finance and trade ministers: In a time of dramatically increasing wealth, many of the poorest nations have become more deeply indebted to the rich.

The drive to relieve more debt by year's end, pushed primarily by officials from Europe, where debt relief has become a major political issue, indicates how finance ministers and the heads of lending agencies are shifting their priorities.

Last year financial officials were still scrambling to prevent a panic that had engulfed many emerging markets from setting off a global recession.

This year they plan to endorse an array of new anti-poverty programs, allocating funds to fight AIDS and foster education, as well as expunge debts incurred by the poorest nations in Africa and Latin America.

The focus on poverty is possible, in part, because the world has rarely enjoyed better economic health.

The International Monetary Fund, which will release its yearly global economic survey this week, predicts that the world economy will grow by 4.7 percent this year, faster than at any time since at least the late 1980s, and by some measures since the 1960s, when half the world still had closed economies.

Unless world leaders had agreed to ease some conditions, they might have fallen well short of their own pledge - first made at a global summit meeting last year in Cologne, Germany, - to forgive the debts of at least 20 nations by this year.

"We agreed that we have to take this to the limit," said James D. Wolfensohn, president of the World Bank. "If we wait to have all the i's dotted and t's crossed, we would not make the goal. This has assumed extraordinary proportions as a political matter, and we just have to get it done."

Wolfensohn and other officials said global lenders would continue to insist that nations that want their debts forgiven must first come up with a strategy for using the liberated funds effectively - ideally for education, health and the fight against poverty.

Under heavy U.S. pressure, lending agencies have required that debt-relief candidates produce anti-poverty blueprints that include plans for schools, health programs and rural development. They must also detail roles for the private sector and charity groups, as well as the government.

The requirement was envisioned as a way to ensure that money is not diverted to useless or corrupt purposes. But drafting the plans could take months or years, and applicants often find the cost of the process burdensome. A few nations have withdrawn or have threatened to withdraw their applications in frustration.

Now, the lending agencies say, they will start granting at least some debt relief when a nation produces a far less rigorous interim strategy, with full relief granted later when the more comprehensive plan is finished.

Officials believe that the changes will make it possible to finish work on at least 10 of 14 outstanding applications for debt relief in just three months, a much faster pace than the lending agencies have maintained to date. Ten nations have already received debt relief under the longer, more rigorous procedures in place.

Among those in a new batch considered likely to have some debt forgiven by year's end are Cameroon, Chad, Gambia, Guinea, Guyana, Guinea-Bissau, Malawi, Nicaragua, Rwanda and Zambia.

The World Bank also plans to announce in Prague that it will establish a multibillion-dollar fund that will provide low-interest loans to nations to help them put anti-poverty strategies into practice, bank officials said. The idea is that some of the strings attached to debt relief in the past could be fastened instead to new loans, giving the lending agencies a continued oversight role.

The renewed commitment to debt relief is a significant victory for a coalition of religious, charity and pressure groups worldwide that helped put debt relief on the world agenda several years ago.

About 20,000 demonstrators are expected to turn out in Prague for the annual meeting of the World Bank and the International Monetary Fund, which begins with low-key meetings this week and formally kicks off its session next weekend.

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