G7 ministers to focus on oil, debt relief for poor

WASHINGTON, Friday (AFP) With currency tensions easing, top finance officials from the Group of Seven industrialized powers have a chance at weekend talks here to close ranks in the fight against world poverty and to assess the impact of stubbornly high oil prices.

But lingering differences among members of the G7 on how to lighten a crippling debt burden carried by some of the world's most impoverished countries once again threaten to delay concerted, concrete action.

At the same time, the group, for all its political and financial clout, is in effect powerless to influence the oil market, economists argue, and the discussions here may yield little more than expressions of deep concern.

Worrisome exchange rate imbalances traditionally dominate G7 financial talks but are not expected to be a major issue before ministers and central bankers from Britain, Canada, France, Germany, Italy, Japan and the United States when they gather for dinner on Friday and for formal discussions on Saturday.

The euro and the yen are now well below the recent high levels that alarmed financial markets and, more importantly, China will not be sitting in on the sessions.

While not a G7 member, China was nonetheless invited to attend G7 finance meetings in September and February, mainly to hear complaints from the group about its reluctance to allow the dollar-pegged yuan to float. US and European officials maintain that the yuan is undervalued, thereby giving Chinese exports an unfair advantage while making imported goods more expensive and less attractive.

But US-European agreement on the yuan does not extend to debt relief initiatives for struggling developing countries that owe an estimated 80 billion dollars to multilateral bodies such as the World Bank and the International Monetary Fund.

The world's poorest nations, according to Oxfam, spend 100 million dollars a day on debt repayments, eclipsing expenditures on health and education.

Oxfam is calling on the G7 to back a British proposal under which the IMF would sell some of its gold reserves, which have a market value of about 45 billion dollars, to help it finance debt relief.

In addition to Britain, the idea has the backing of France and Germany but faces resistance from the United States.

France however is throwing most of its weight behind its call for an international tax on air travel, noting that some three billion airline tickets are issued each year around the world, to finance development assistance. Treasury sources in Paris have said French Finance Minister Michel Barnier would probably argue for some form of international tax at talks here this weekend.

The United States is meanwhile promoting its own initiatives to ease debt burdens and poverty, notably the transformation of World Bank loans into grants and President George Bush's Millennium Challenge Account, which ties assistance to good governance, anti-graft measures and transparency in beneficiary countries.

World Bank President James Wolfensohn, speaking here Thursday amid reports of an absence of consensus within the G7, predicted that the weekend deliberations would sustain momentum toward a major announcement on debt relief at a summit of the Group of Eight - the G7 plus Russia - in Scotland in July.