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G7 aid proposal for Africa in jeopardy as US says no
(Agencies)
Updated: 2005-02-05 10:51

The United States rejected British proposals for a multi-billion-dollar aid plan for Africa as finance ministers of the G7 powers converged in London Friday to discuss the economy and Third World poverty.

Britain has the backing of Europe for the creation of an International Finance Facility that would double aid to $100 billion year. But John Taylor, U.S. Treasury Under Secretary, said bluntly the plan did not fit the bill.

Britain's Chancellor of the Exchequer Gordon Brown arrives at the Advancing Enterprise Conference 2005 ahead of the G7 finance meeting in London, February 4, 2005. The U.S. crushed hopes of a deal this weekend to pull Africa out of poverty, even before the Group of Seven economic powers started their meeting in London Friday. Brown, the meeting's host, has made a string of proposals to reduce Third World debt and has already secured the support of his European G7 partners.[Reuters]

"Not only does the IFF not work for the United States, we don't need the IFF," Taylor said as he headed to the Group of Seven meeting, which was also to be addressed by South Africa's Nelson Mandela.

Taylor also said Washington was not convinced of the need to revalue the gold reserves of the International Monetary Fund, raising money by off-market sales to help fund a write-off of Africa's foreign debts.

British officials responded fast to what looked like a potentially devastating blow to their plan for Africa.

South Africa's former President Nelson Mandela addresses members of the G7 finance committee at Lancaster House in London, February 4, 2005. [Reuters]

A British Treasury official told Reuters, "There is nothing new in John Taylor's position. But we are committed to continue working with the U.S. administration to consider how the IFF could be adapted to their needs."

Charity group ActionAid took the U.S. comments in its stride: "I think it is not entirely surprising. This is what we expected from the U.S.," Romilly Greenhill, policy officer, said.

Mandela, invited by Brown, told thousands of supporters in London's Trafalgar square Thursday that poverty and disease were intolerable and had to be eradicated. "Massive poverty and obscene inequality are such terrible scourges of our times ... that they have to rank alongside slavery and apartheid as social evils," said the 86-year-old former political prisoner.

The G7 includes the United States, Japan, Germany, Britain, France, Italy and Canada.

BACK SEAT FOR OTHER ISSUES

G7 meetings are usually devoted to tackling issues such as currency volatility and how to improve the economic growth prospects of the world's richer economies but G7 president Britain has put debt relief at the top of the agenda at this meeting.

U.S. Treasury Secretary John Snow, suffering from a cold, sent Taylor to London in his place and this has reduced the chances of any agreement on how to better manage currencies to redress global imbalances.

Taylor highlighted one of Washington's principal concerns -- China's currency peg to the dollar, which the United States and others believe should be relaxed so that the yuan can rise and take pressure off others to keep currencies low versus the dollar.

Taylor said he expected a candid discussion with China on its foreign exchange rate regime and wants the Asian nation "to move as quickly as possible to a flexible exchange rate."

The G7 ministers have invited counterparts from China, India, Brazil and South Africa to the talks in an attempt to give the forum wider reach and legitimacy.

The dollar has been sliding for several years and hit a low versus the euro in December but it has since recovered a bit, easing the sense of urgency and taking pressure off the G7 ministers to take action.

Regarding currencies generally, the ministers are expected to repeat a statement issued a year ago in Boca Raton, Florida, saying they do not want excessive volatility in currency markets and that they do want more flexible currency regimes.

NO MOVE FROM CHINA YET

The latter point is aimed principally at China but Beijing is not expected to budge just yet.

Governor Zhou Xiaochuan from the People's Bank of China delivers his keynote speech at the G7 finance ministers and central bank govenors meeting in the Queen Elizabeth II centre Friday in London. [AFP]

"We cannot just consider our bilateral trade surplus with the U.S.; we have to consider our trade surplus with the rest of the world," Zhou Xiaochuan, Governor of the People's Bank of China told reporters in London Friday.

There did seem to be momentum building in China for action, as highlighted by comments in a state newspaper Friday.

"Experts have reached a consensus that the market environment and policy environment for "fine-tuning" the yuan exchange rate are basically mature," the China Securities Journal said in a commentary.

"A complete float is unlikely in the near term, but a gradual widening of its floating band to return to the pre-1998 "managed float" that is based on supply and demand may happen any time."

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