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Rich nations bicker over how to help the poor

Talks on how to improve the lives of billions of the world's poorest people degenerated into bickering this weekend as the United States insisted it had an "honest" plan and Britain denounced it as "crazy."

The world's richest nations have long agreed that they want to halve the number of people living in poverty by 2015. But with the world economy now probably heading for recession after the September 11 attacks on the United States, most agree that some new action is needed to ensure that goal does not slide.

But how the world's richest nations should help the poor remains a bone of contention, and even the head of the International Monetary Fund said the rich were being selfish.

"There is a major problem in the fight against poverty and this is the selfishness of the advanced countries," said IMF Managing Director Horst Koehler.

The World Bank, charged with battling poverty, wants countries to double donations for development. But while rhetoric was plentiful at IMF and World Bank meetings in Ottawa, there were no concrete pledges for money.

"We didn't expect people to bring check books to this meeting. I wish they had but they didn't," said World Bank President James Wolfensohn.

The closing statement from the bank's policy-setting committee noted that a number of ministers had spoken of the need to boost overseas development aid. But Wolfensohn said there had been no consensus.

Last year, official aid from the world's rich nations plumbed its lowest level ever at a miserable 0.22 per cent of economic output, according to the charity, Oxfam.

That falls well shy of a 0.7 per cent level recommended by the United Nations. Most of the richest countries, including the United States, contribute much less that the target.

Bono, lead singer with the Irish band, U2, and an advocate of debt relief called it a "scandal" that the United States, the world's richest country, fails to meet the development goal.

In a telephone interview from Los Angeles, Bono warned there could be "plenty more Afghanistans" in Africa if poverty is not tackled now.

MORE MONEY?

At the heart of the debate between rich countries is a US proposal to increase to 50 per cent the amount of money provided in grants instead of loans from World Bank's soft lending arm, the International Development Association.

"With his call for money instead of loans, the president is calling on the world to be honest about these things," US Treasury Secretary Paul O'Neill said.

The Bush administration believes the World Bank should give money in grants instead of loans because most poor countries are already saddled with unmanageable mountains of debt, meaning new loans are not likely to be repaid.

The proposal has met with fierce opposition from around the world, particularly from Europe where some are totally opposed to the idea and others say 50 per cent is just too high.

"This is a crazy idea," Clare Short, Britain's development minister said. "It's a very bad idea."

Under the proposal, grant money would come from the IDA fund, which could be topped up by about $13 billion under a proposal from contributors. A final negotiating meeting is set for Switzerland at the beginning of December.

But there is growing concern that the grant debate could derail or delay an agreement unless a compromise can be found.

OTHER BONES OF CONTENTION

Outside the debate on IDA, there are plenty of other difficult subjects.

British finance minister Gordon Brown last week proposed a $50 billion-a-year fund to help poor countries. O'Neill said he was "not surprised" by the suggestion and had discussed it with Brown. But he gave no indication of whether he is in favour. Bono praised the proposal as a "brave move" and said the UK is making real headway in the field of development.

Funding for debt relief is another thorny issue. The bank and the IMF agree that deteriorating global economic conditions mean there may be a case for additional debt relief under their Heavily Indebted Poor Countries initiative. But they say this is only possible if rich country donors provide extra cash.

"We say that advanced economies must also be prepared to meet the responsibility in providing increased development assistance and debt relief to tackle the increased challenges of poverty reduction," said Brown, who is the chairman of the IMF's policy-setting committee.

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