Gordon Brown may be emerging as the new, and long-awaited, champion of the debt crisis. The initiative does, however, have a few innovative features. For the first time all creditors will contribute. Brown has challenged the multinational companies to match the commitment of G7 governments pound for pound. Moreover, the goal is not limited to reducing debt but is to offer an exit from the whole process of debt rescheduling.
Serious flaws remain.
To receive debt relief, poor countries have to jump through several hoops. They also have to demonstrate that their debt is unsustainable - for example, that interest payments exceed certain ratios to government and export revenues. Some 43 countries are now considered to be eligible for debt relief. This is less than half the number that most pressure groups would like to see in the scheme. Cancellation of third world debt is not high on the agenda of the G7 summit in Cologne.