Hopes raised of Africa debt deal

British officials said they were confident the world's most powerful financial ministers would reach a historic deal at their meeting in London this weekend -- although some differences remain between the Group of Eight (G8) major industrialized nations.

With the deadline of the G8 summit in Gleneagles, Scotland, just a month away, finance ministers meeting in London on Friday and Saturday were trying to find common ground.

In addition to the United States and Britain, the G8 nations include France, Germany, Italy, Canada, Japan and Russia.

UK Prime Minister Tony Blair -- current G8 president -- has demanded that poor countries' debts be cancelled and their aid doubled. He and U.S. President George W. Bush agreed this week in Washington that help on debt should be given only to countries ready to tackle corruption.

The New York Times reported that the United States and Britain had reached an agreement on freeing 18 countries, mostly in Africa, from any obligation to pay $16.7 billion in debt.

The countries are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.

A significant omission from the list is Nigeria, whose external debt is put at $36 billion. Nigerian President Olusegun Obasanjo was in London this week for talks with Blair.

The number of countries to be helped is a sticking point. Blair's spokesman said earlier this week that about 25 countries would benefit, while charities say 62 countries need urgent debt relief.

France, Germany and Japan have their own proposal that would mean debt relief for only five countries.

The New York Times Friday quoted a senior official as saying that U.S. Treasury Secretary John Snow and his British counterpart, Chancellor of the Exchequer Gordon Brown, would present their proposal to a meeting of the finance ministers of seven of the G8 nations on Friday in London.

The debts would be written off by the lenders in an effort to allow the debtor countries to start fresh, get their books in order and eventually be able to borrow again for economic development, health, education and social programs, rather than simply to repay existing loans.

Bush had signaled his willingness to go along with writing off the debts in principle, but the United States and Britain had very different approaches to how such a plan would work, the newspaper said.

Britain wanted the rich nations to take over responsibility for repaying the debts. but Washington wants the loans to be written off entirely by the lenders, the Times said.

In the end, said the paper, Britain agreed to the U.S. approach with a promise from Washington to provide additional money to the lenders to make up for the assets they were writing off.

Sub-Saharan Africa has $230 billion in external debt and pays $12 billion a year on servicing the loans, according to the most recent figures from the World Bank, Reuters reported.

A third of the debt is owed to multilateral lenders like the International Monetary Fund. Britain has said that without 100 percent multilateral debt relief, the poorest countries would pay up to $27.5 billion in principal and interest payments to international organizations between now and 2015.

"President Bush and Prime Minister Blair made great progress and Gordon Brown and John Snow agreed on an excellent proposal for debt cancellation for many of the poorest countries," Jamie Drummond of DATA, a lobbying group founded by rock star Bono, told The New York Times.

Bono joined European Commission President Jose Manuel Barroso Thursday in an appeal to government leaders to double development aid to Africa and other poor regions over the next 10 years. (Full story)

"It is no substitute for an overall plan on aid and trade at the G8 summit, but this degree of cooperation should make a historic breakthrough more likely," Drummond said.

All of the countries eligible for debt relief have had to show that they have acted to improve governing,