At last, we can slash the Third World's burden of crippling debts

If we are successful, it will be just weeks before the first country will benefit from debt relief'

THIS SUNDAY will see the International Monetary Fund's interim committee and the World Bank's development committee meet in joint session for the first time, and for one purpose only: to deliver the world's poorest countries from the burden of unsustainable debt.

By taking decisive action to deliver faster, wider and deeper debt relief and to link debt relief to poverty reduction, we can not only secure debt relief and do so by the end of the millennium year, but also ensure that resources are reallocated in order to help the sick, teach the young and relieve the suffering of the poor.

So, on Sunday our duty is to the neediest in the world - the 30,000 small children who die every day of preventable diseases and the 200 million men and women existing in avoidable poverty whose lives today are ruined by hunger and the constant struggle to survive.

Debt reduction is an economic issue because a mountain of inherited and hitherto immovable debt is a burden imposed from the past on the present, which is depriving millions of their chance of a future. But it is also a moral issue, when some of the poorest countries in the world are being forced to spend more in their debt interest payments than they are able to invest in the young, the sick, the undernourished and the poor. So, as we approach the millennium, it is time to help these countries break out of the vicious cycle of debt, poverty and underdevelopment.

The worldwide movement campaigning for debt relief won its first round at the G7 meeting in Cologne earlier this year. The second round is now upon us, with the annual meetings of the IMF and World Bank taking place later this week.

The current debt initiative, which was agreed in the mid-Nineties, has been delivering too little debt relief, too late, and to too few countries. In 1997, not one country had completed the process. Today, despite renewed efforts, only four of nearly 40 poor countries (Uganda, Bolivia, Guyana and Mozambique) have done so, and only five have completed the first stage and been assessed for debt relief (Cote d'Ivoire, Benin, Mali, Senegal and Burkina Faso).

As a result, countries are left shackled to unsustainable debts and, as a consequence, suffer slower economic growth and slower development, and are unable to deliver poverty reduction. Even those, such as Uganda, with debt reduction programmes have seen their position worsen - its debt- export ratio is now higher than when it completed the debt relief process.

Now, with the enhanced framework being agreed by the IMF and World Bank, we can make rapid progress out of the worst of debt. Our new and challenging target is to get three-quarters of eligible countries through the process and the remainder on the path to debt relief by the end of 2000.

The scale of the package is such that, if implemented, two-thirds of the official debts of the poorest countries can be cancelled. The total amount of debt relief is worth $100bn. There is an extra $50bn of debt reduction under the new enhanced Heavily Indebted Poor Countries (HIPC) initiative on top of that; debt relief will offer another $30bn; and cancellation of overseas development loans a further $20bn.

On Sunday, we must agree the financing of the reforms. In particular, we must back the sterling efforts of Michel Camdessus and James Wolfensson and ensure that multilateral institutions are able to finance their debt relief. At the heart of the new financing is a $2bn plan to release the value of IMF gold reserves; and a new $2bn Millennium Trust Fund to back the World Bank and the Regional Development Banks. The UK has already pledged $171m to the trust fund. And Clare Short and I are urging our European colleagues to contribute up to a billion euros from the European Development Fund.

Over the coming weeks and months Clare Short and I will also play our part in an international drive for contributions to the fund from both the public and private sector. I believe the private sector - especially the many large companies based in developing countries - has a part to play and has much to gain if debt reduction can promote economic growth.

With these steps the World Bank and IMF will be able to reshape the world's approach to debt relief and poverty reduction.

But debt relief, however rapid, is only the first step. Our true measure of success is not how much debt is cancelled, but how many people are lifted out of poverty, and how much we pave the way for long-term economic development. Therefore the next critical step is to ensure that not only is there debt relief, but that debt relief leads to poverty relief.

We want to see plans drawn up by the HIPC detailing how they propose to use the proceeds of debt relief to alleviate poverty. It is essential that investment is made in health, education and poverty reduction, rather than being lost in bureaucracy or spent on military arms. And we must ensure that the macroeconomic policies pursued by the HIPC countries are consistent with meeting minimum international standards - for levels of health care, education and social protection - to ensure that the poor and must vulnerable do not bear the burdens in times of crisis.

The bank and the fund have already begun to work closely on this new approach that links debt relief and poverty relief. The introduction of new principles of social policy backed by a social data code will also make it easier for the IMF and World Bank to assess the impact of their programmes in the countries concerned and how they are progressing towards the International Development Targets. Policies for poverty reduction, macroeconomic reform and sustainable growth must reinforce each other.

On Sunday, for the first time, we have it within our grasp to slash the burden of unpayable debt. If we are successful, it will be a matter not of years or months but weeks before the first country will benefit from debt relief. The test will be how we can convert debt relief into poverty relief. And so, as we leave behind the 20th century, we can leave behind much of the burden of unpayable debt and the worst of avoidable poverty with it.

The writer is Chancellor of the Exchequer and the new chairman of the Interim Committee of the International Monetary Fund