Aid and debt campaign groups joined the Chancellor yesterday in hailing a breakthrough deal on debt relief by finance ministers from the Group of Seven leading economies, plus Russia, (the G8) meeting in London.

But while debt agreement, clinched after months of G8 wrangling, will write off $40 billion (£22 billion) of debts owed by 18 of the world’s poorest countries — and ultimately up to $55 billion owed by 38 states — the true cash benefits remain a fraction of the extra resources for Africa which the Prime Minister and Mr Brown insist are required to end the continent’s poverty.

In today’s money, the value of the weekend write-off of “multilateral” debt owed to the World Bank, African Development Bank, and International Monetary Fund is about $17 billion for the 18 countries that will have immediate relief.

But crucially, the amount which the affected countries will save in debt repayments which can now be used for food, education and health is a relatively small annual sum of about $1.5 billion. This is a fraction of the $50 billion a year needed to double annual aid flows, which Britain says is essential to bring relief to Africa.

The cost to Britain’s taxpayers of the weekend deal is an average of $100 million (£55 million) a year over ten years: up to $960 million over the period to 2015. The US will pay up to $175 million a year. Germany’s commitment in the first three years comes to about $50 million a year and France’s some $33 million.

The Prime Minister and the Chancellor now face an uphill struggle to persuade fellow G8 leaders that they should do much more to increase drastically their financial commitments to aid if Britain is to reach the goals Mr Blair set for its presidency of the G8 at next month’s summit in Gleneagles.

The G8 finance ministers agreed at the weekend that further work should be done to assess Mr Brown’s flagship scheme for doubling aid flows, the controversial International Finance Facility. But with entrenched US opposition to the IFF, most observers doubt that the scheme, which would raise billions by issuing bonds backed by future aid commitments, will proceed.

Asked about Mr Brown’s proposals, a senior European G8 official speaking in London during the weekend’s meetings said: “I think on the IFF he is going to have a hard time.”

The official said it was doubtful that Britain could secure the extra aid resources it is demanding in time for a Gleneagles deal. “In the next few weeks, I don’t think so,” he said.

Mr Brown made clear at the weekend that he is determined to keep up the fight for more money. “This is not a time for timidity but a time for boldness, and not a time for second best, but for aiming high,” he said. He insisted that there was “plenty of scope” for progress before Gleneagles.

Campaign groups welcomed the new debt write-off but said that much more was needed and highlighted a series of questionmarks over the weekend’s agreement.

Romilly Greenhill, of ActionAid, said: “The debt deal is very good news for people in the 18 countries that will immediately benefit. But it will do little to immediately help millions in at least 40 other countries that also need 100 per cent debt relief. What is disappointing is the lack of any substantial, concrete commitments on aid.”

Nine more countries are expected to become eligible for the multilateral debt write-off within eighteen months, once they have met good governance criteria. Eleven more could eventually benefit.

But there was also concern over the financing of the new debt relief, and particularly that some of the G7 nations, such as Germany, will pay for the cost of the write-off from existing aid pots.

While the World Bank will receive top-up funds to offset the loss of the debt repayments, the US, the biggest contributor, has only put up immediate cash for three years and made a commitment to fund the shortfall to 2015. But the term of the outstanding World Bank debt is much longer.

The write-off of IMF debt will also have to be funded from existing IMF resources, with potential top-up cash only as a back-up, something critics say may weaken the fund’s balance sheet and its ability to bail out countries in future economic crises.

The Treasury said last night that substantial progress had been made at the meetings over other key parts of Britain’s Africa agenda. Officials highlighted an agreement to commit to measures allowing universal access to HIV and Aids treatments worldwide by 2010.

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