Africa, the G8, and the Blair Initiative

Publication Date: July 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: International relations

Type:

Coverage: Africa

Abstract:

Prior to the July 2005 G8 summit, Britain's Prime Minister Tony Blair launched a major diplomatic effort to marshal the resources he sees as needed to eradicate extreme poverty in sub-Saharan Africa. As summit chair, he focused the meeting, held at Gleneagles Hotel in Scotland, July 6-8, on this initiative. Blair pushed for a substantial aid increase for Africa beginning in 2006, through an "International Finance Facility" (IFF), and for 100% forgiveness of poor country debt to the international financial institutions. The IFF would have issued bonds to finance an additional $25 billion in annual aid to Africa for three to five years, followed by another $25 billion boost if African governments improved their managerial and administrative capabilities. IFF bonds would have been backed by a promise from the G7 leading economic powers to repay them after 2015. Poor country debts to the World Bank and the African Development Bank would have been repaid by the G7, while debts to the International Monetary Fund (IMF) would have been paid by revaluing or selling IMF gold. Finally, Blair sought the removal of barriers to Africa's exports.

Blair has long championed a "Marshall Plan" for Africa as part of a "deal" to help the region achieve the Millennium Development Goals (MDGs), U.N.-endorsed targets for 2015 that include universal primary education and sharp cuts in poverty. In exchange, he expects further governance and free-market economic reforms in Africa. On March 11, 2005 a high-level Commission for Africa appointed by Blair issued a comprehensive report elaborating the initiative, which won support from President Chirac of France and Germany's Chancellor Schroeder.

The Bush Administration reacted cooly to the proposed IFF on grounds that it lacks a means of assuring that new aid funds would be well spent. Officials also argued that the IFF would unconstitutionally bind future Congresses to appropriations. IFF supporters noted that the funds would be passed through existing aid agencies with their own monitoring mechanisms. Some also argued that the United States routinely agrees to repay debt in the future. At Gleneagles, the IFF proposal was dropped, but the participants agreed on a $25 billion increase in annual aid to Africa by 2010. Moreover, the G8 ratified an agreement on debt forgiveness for 18 of the world's poorest countries, including 14 in Africa. The donors are to compensate the World Bank and the African Development Bank for the lost repayments. The IMF will fund the loss from its own resources, but not sell gold. Participants reiterated that they supported the removal of trade barriers, but no specific actions were taken. Many development experts welcomed the summit's results as an important step forward; but several non-governmental organizations argued that the summit had done too little on trade or to mobilize "new money."

Previous G8 meetings have also focused on Africa. There has been much debate over whether G8 countries have fulfilled past promises -- and over whether the African states have met their own promises of reforms. This report will not be updated. For further information see CRS Report RL32489, Africa: Development Issues and Policy Options, and CRS Issue Brief IB95052, Africa: U.S. Foreign Assistance Issues.