Energy in Africa


Bush fights Blair over upping Africa's financial aid

Published: 07-JUN-05

British Prime Minister Tony Blair's Commission for Africa has endorsed the idea and at the Group of Eight (G-8) meeting next month will be asked to back it.The facility aims to disburse $550 million in grants to African governments over seven years.

After its launch in October this year, African governments that have signed up for the New Partnership for Africa's Development (Nepad) peer review, will be given grants to study and implement improvements in government regulations and procedures affecting business.

But a fierce opponent is US President George Bush who refuses to support Blair's plan for African financial aid. Bush has dug in his heels ahead of Tony Blair's visit to Washington next week. The UK prime minister will attempt to convince the US to double American aid

Bush told the South African president, Thabo Mbeki, he would not drop his opposition to a UK plan to mobilise more foreign aid for Africa.The US also opposes Blair's idea that some of the International Monetary Fund's gold reserves should be sold to help pay off African IMF obligations.

The US President said the G8 group of industrialized countries was moving in the right direction on African aid, and the policy did not need overhauling at July's Gleneagles summit.

US officials say African aid has already tripled under Bush, and that his Millennium Challenge Account will increase the level of US foreign aid, now one of the G8's lowest at 0.16 percent of GDP.

The Nepad secretariat, South African President Thabo Mbeki and Nigerian President Olusegun Obasanjo have also backed the concept. Chris Darroll, one of the creators says the 'investment climate facility' will be led by the private sector, which will be asked to give $ 50m via the G-8 and other donors.

G-8 donors and agencies such as the World Bank will be asked for $500 million. The plan is to ask 20 private-sector firms with substantial investments in Africa for $ 2.5 million each, and for 10 donor governments to give $ 50 million each.

African governments have been urged to improve the enforceability of contracts and increase the use of land, as collateral to improve the investment climate.

The fund could sell more gold to cancel debts owed the World Bank and other banks. The UK's Prime Minister Tony Blair wants the G-8 summit to give a number of measures to help Africa, that range from money to measures to fight corruption and force transparency on transactions, between African governments and Western resource companies.

Blair wants to double international development aid to $50 billion a year, eliminate debt interest payments for the poorest countries, and rich countries to pay subsidies to their exporters.

The US claims that a real solution to debt relief has been postponed, because the wealthy countries can't agree on how to finance it.

But Blair offered a good answer: have the IMF sell about $12 billion of its gold reserves, which have a total market value of about $43 billion. That would cover debt owed the fund, which accounts for 30 percent of the interest payments owed over the next 5 to 10 years by the affected countries.

But the US has veto power over gold decisions in the monetary fund, so this idea needs approval from Congress - and the mining industry has blocked a vote. US President Bush should spend the political capital to push this good idea through the Republican-controlled Congress before the July summit.

Initially Japan reaffirmed that it would join Britain in increasing its aid to Africa.The Japanese prime minister, Junichiro Koizumi promised " that Japan will double assistance to Africa in three years time," Hatsuhisa Takashima a Japanese Foreign Ministry spokesman said.

But later Japanese Foreign Ministry officials said the government had not decided if Japan would double its aid to Africa, currently about $800 million, or only its aid to sub-Sahara Africa about $530 million.

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