Brown debt deal gives back £2bn

Gordon Brown today unveiled a multi-billion-pound deal to help countries devastated by the tsunami.

He upstaged Tony Blair by brokering an international plan to slash debt payments owed by Indonesia, Sri Lanka and other victim states.

Mr Brown has won provisional agreement from the world's seven biggest economies to suspend at least ?2 billion worth of annual payments, enabling the money to be kept for reconstruction.

His success will be a further embarrassment to the Prime Minister, who has been criticised for refusing to cut short his holiday in Egypt and take command during the crisis.

Awkwardly for Mr Blair, the Chancellor clinched the agreement by using Britain's status as head of the G8 group of nations, which began on New Year's Day. Treasury officials say he spent the Bank Holiday weekend "working intensively" by phone to negotiate the plan with America, Japan, Germany and the other major economic powers.

Critics have questioned whether the Prime Minister could have used his new position as leader of the G8 to galvanise the internat ional delivery of aid.

Under Mr Brown's deal, all the G8 countries apart from Russia will announce within days they are suspending the annual debt and interest payments owed by tsunami victim states.

Britain will forego some £52.5 million due to be paid by Indonesia and Sri Lanka alone during 2005. But other countries - in particular Japan - have agreed to give up far greater sums.

In total the deal is worth some $3billion (£1.57billion) to the two countries but the Treasury said every nation affected by the tsunami would benefit. A formal agreement will be announced next week at a meeting of the "Paris Club" of western creditors before the Chancellor embarks on a threeday tour of poverty-stricken African states.