Brown challenges West to write-off poor nation loans

Third World debt: The Government's offer to cancel £640m owed by the poorest countries may shame other lending nations into following suit

Gordon Brown made a strong plea to other countries yesterday to match his pledge to write off debt amounting to hundreds of millions of pounds owed to Britain by the world's poorest countries.

Gordon Brown made a strong plea to other countries yesterday to match his pledge to write off debt amounting to hundreds of millions of pounds owed to Britain by the world's poorest countries.

The Chancellor confirmed that he would wipe the slate clean for 41 of the world's poorest countries by not demanding repayment of money owed. The first four states to receive debt relief under the initiative are Uganda, Mozambique, Mauritania and Bolivia.

The Government stressed that the relief was linked to a conditionality clause ensuring that countries spend the money saved on education, health and reducing poverty. For example, Uganda has promised to use the money to halve the pupil-teacher ratio in primary schools and to improve water purification and sanitation.

The cost of the bilateral initiative will be £640m, although that will be spread over 20 years. It will increase Britain's overall debt relief package for Heavily Indebted Poor Countries (HIPC) to more than £5bn.

The announcement, made from Downing Street, was welcomed by campaigners for the relief of Third World debt.

The Chancellor said: "Britain has played a leading part in securing a multilateral deal on debt relief that will reduce the debts of these countries by two-thirds. The time is now right to take the extra step on our own and to lift the burden of the remaining debt to us. I have therefore taken the decision that we will remove the burden of debt to the British Government of all countries that come through HIPC process."

Mr Brown made clear he hoped other countries that have been hesitant to write off debt would follow suit. "This is a pledge with a purpose, because we want other countries to follow our lead," he said.

The government announcement, which came after contact with other Western nations, is part of an enhanced HIPC programme discussed by the European Union, the Group of Seven leading industrialised nations and the International Monetary Fund.

The offer of complete debt relief for the poorest countries builds on an earlier multilateral agreement by creditor nations to aim for 90 per cent debt relief. The initiative should benefit 10 nations by April and another 25 by the end of next year - if they ensure money saved goes towards reducing poverty by a 2015 target date.

Mr Brown said: "The IMF and World Bank have drawn up a poverty reduction strategy, which all chosen countries must sign. This has timetables and dates which must be stuck to. The countries have promised that for our debt relief they will put their money into health, education and poverty relief. We don't want the money to be spent on arms or corruption."

Justin Forsyth, Oxfam policy director, said the announcement would raise pressure on other industrialised countries. "The challenge now is to convince the debt doubters, like Germany, France and Japan, to do the same."

The global campaign to end Third World debt, led by aid agencies, has attracted broad support. It was the main factor behind the demonstrations at the Seattle trade summit three weeks ago.

A Christian Aid spokesman welcomed Mr Brown's initiative, but called on him to redouble efforts to persuade other countries to do more. "It is the millennium gesture Christian Aid has been pushing for. However, it is not enough. We now urge Gordon Brown to strenuously lobby the G7 finance ministers to follow suit."