Reports earlier this week suggested that the US Treasury and the National Security Council along with Tony Blair, the British prime minister, had been pushing for a total write-off of multilateral debt.

Instead G8 heads of state yesterday agreed to a two year extension of their long running initiative to relieve the debt burden on the world's most impoverished countries, which had been due to expire at the end of the year.

This was seen as a bare minimum after a preliminary agreement by G8 finance ministers in New York last month to extend the scheme.

The Highly Indebted Poor Countries (HIPC) initiative was set up eight years ago with the aim of eliminating $100bn (£59.5bn) of the debt of the lowest income countries. So far about a third of the debt has been cancelled. Some estimates suggest HIPC countries still have about $90bn in debt stock.

"At this critical moment, when every minute another African child dies of aids, the global community needs 100 per cent cancellation of multilateral debt without harmful conditions," said Marie Clarke, national co-ordinator of the Jubilee USA Network, a campaign for debt forgiveness. "By failing to seize the opportunity, the G8 has once again chosen baby steps over bold action."

But the final communiqué of the meeting left open the prospect of further progress by calling on G8 finance ministers to engage in further work on debt sustainability before the end of the year.

"It is a great shame that the French and the Germans could not be brought round on this," said Jamie Drummond, executive director of DATA, the debt relief pressure group. "But the communiqué suggests we still have a shot at 100 per cent debt forgiveness."

The 27 countries that have entered the HIPC process continue to pay $700m a year in debt payments to the International Monetary Fund and World Bank.

Of the countries eligible for HIPC assistance, 11 have not been allowed to enter the process mostly because they are affected by armed conflict.

Even some countries that have completed the process still have levels of debt that are unsustainable according to the definition used by HIPC - that debt stock should not exceed 150 per cent of annual exports.