The approval brings to an end months of tough negotiations among the World Bank's biggest donors over how to fund future loans by the bank's low-interest lending arm, the International Development Association.

The 40-year term of debt cancellation will begin on July 1.

It will cover debt service payments of the 17 countries to the World Bank on debt accumulated to the end of December 2003, allowing governments to increase spending on programs that reduce poverty.

"This is a historic agreement combining increased financing with debt relief, which will help poor countries meet the Millennium Development Goals," World Bank President Paul Wolfowitz said.

The package covers countries that graduated from the Heavily Indebted Poor Countries Initiative, or HIPC, a global debt relief plan approved in 1996 that was based on good economic performance.

Mauritania would not be covered under Tuesday's decision until its government strengthens its public expenditure management, a World Bank official said.

However, the country could still qualify by July.

The bank had received firm commitments from donor countries to cover 60 per cent of the costs for the full 40-year term, while the rest "will have to be dealt with over time," the official said.

Some donors had worried that the debt cancellation would compromise the capacity of the IDA facility to keep lending to the bank's poorest borrower countries.

"It is very difficult for governments to make commitments over 40 years," the official said.

"It's a good start and time will of course tell what will happen."

Among the countries to benefit are Zambia, Mozambique, Tanzania, Benin, Bolivia, Burkina Faso, Senegal, Guyana, Nicaragua, Niger, Mali, Rwanda, Ethiopia, Honduras, Ghana, Uganda and Madagascar.

More countries could become eligible for debt relief under the HIPC scheme once the World Bank and International Monetary Fund decide who qualifies.

The World Bank board is expected to discuss the issue on April 6.

-Nampa-Reuters

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