Gordon Brown predicted today that the G8 summit at Gleneagles next month would agree on the "biggest debt settlement the world has ever seen" as well as a range of other initiatives to fight poverty in Africa.

In an interview with BBC Radio 4's Today programme, the Chancellor said a deal to be discussed at a meeting of finance ministers from the Group of Eight nations in London this afternoon would involve $50 billion worth of debt.

A report in the New York Times suggested that the US and Britain had already struck a bilateral deal involving the writing off of $16.7 billion of debt owed by a group of the world's poorest nations.

"I think you’ll find when we are able to give the details of what we’ve been discussing that America, Britain, France, Germany, Japan, Canada and Italy have all come together with one proposal, that it is comprehensive, in other words it involves dozens of countries," Mr Brown said, listing the G7 nations. Russia also participates in the G8 summit.

He added: "It is about dealing with the debt burden that poor countries have to pay over 40 years. It will involve all the major financial institutions. That’s why I say the stakes are so high. It would be the biggest debt settlement the world has ever seen. It would be more than $50 billion debts, and bigger amounts of debt interest payments that have to be dealt with.

Mr Brown said ministers and officials from the rich industrialised nations have been busy weighing up and costing various proposals, to see how the loss of interest payments to world financial institutions could be made up.

The New York Times reported that the US and Britain had reached an agreement to write off the debt of 18 of the world's poorest nations, mostly in Africa. Citing a "senior official involved in the negotiations", it said the plan would allow those countries to start afresh and rebuild their economies without a burden of debt.

The newspaper said that the debt write-off was likely to be the only issue at the G8 summit in Scotland from July 6 to 8 on which the US was in full accord with its G8 partners.

It added: "The debt relief negotiations had been bogged down for months over which of two possible methods should be used to eliminate the debt. One approach, favoured by Britain, was for the rich nations to take over responsibility for repaying the debts. The second method, favoured by the United States, was for the loans to be written off entirely by lenders.

"In the end, Britain agreed to the American approach with a promise from the United States to provide additional lenders to make up for the assets they were writing off."

Another issue was whether to sell off International Monetary Fund gold reserves to pay off loans owed to the fund - a move resisted by the US. As a compromise, the New York Times reported, the IMF will be able to draw on the proceeds of previous gold sales in the 1990s.

The 18 countries named were Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.

Mr Brown sounded a less hopeful note on the prospect of the US agreeing to sign up to his flagship proposal for International Finance Facility that will double the development funds available to poor countries through the sale of bonds on the world market.

"The Americans will make their final decision, I suppose, at Gleneagles itself and we are still debating all these issues," he said. "It is possible for this facility to go ahead with a number of countries but not all countries. But, of course, it would be preferable if the richest countries were able to come together."

News of the deal failed to impress anti-poverty campaigners. Romilly Greenhill, policy officer at ActionAir International, said that only 18 countries qualified for debt relief out of the 62 that desperately needed it.

"If the others want to be included, they will have to accept harmful conditions such as the forced privatisation of water supplies. The agreement helps too few countries and writes off too little money," she said.

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