Response on the Jubilee Debt Campaign on Debt Relief progress and Doha
December 2008
Thank you for your letters and emails to Douglas Alexander about the Jubilee Debt campaign, ‘Stop the UK from blocking a new way of dealing with Debt’. I am replying as the Minister who leads on the issues raised.
The UK remains committed to comprehensive debt relief that ensures none of the poorest countries committed to poverty reduction is burdened by very high levels of debt. That is why we have led the way in agreeing the major international debt relief initiatives of the Heavily Indebted Poor Countries (HIPC) and Multilateral Debt Relief Initiative (MDRI) and why we continue to provide additional debt relief for the poorest countries that will use the resources for poverty reduction.
HIPC and MDRI have made a huge difference for poor countries. 23 countries have already had their debts cancelled in full and a further 11 are receiving help with their debt service payments while they work towards debt cancellation. HIPC and MDRI have so far delivered over US $110 billion of debt relief to these poor countries. Debt relief benefits poor people, and it is encouraging that in countries receiving debt relief, annual spending on anti-poverty programmes increased from US $4 billion in 1999 to US $17 billion in 2006. Money spent on poverty reduction is now more than five times the level of debt service payments by these countries.
The UK is committed to fair procedures for the resolution of debt problems of all countries. Any country can approach the Paris Club to seek assistance. Since 2004 the Paris Club has provided almost US $50 billion of debt cancellation outside of HIPC. It was through negotiations with the Paris Club that Nigeria achieved its debt relief agreement, under which the UK cancelled £2.85 billion of debt.
We must avoid the mistake of regarding all debt as bad. Borrowing is a useful tool of economic management which can provide financing for investment and development. Developing countries, especially middle income countries, rightly seek to gain the full benefits of our increasingly inter-connected world through better access to international finance, taking out new borrowing and repaying loans.
We believe the priorities for Doha were the major issues of concern for developing countries – the financial crisis, food and fuel shocks and climate change. We continued to work hard on debt issues at Doha, although we do not believe a new mechanism for resolving sovereign debts was a priority at this forum. We support further efforts to ensure the full participation of all creditors, including commercial creditors, in providing debt relief and greater transparency on debt reporting from all.
We will also be supporting further efforts to tackle vulture funds, which seek to profit from debt relief. That is why we recently approved a contribution of £5 million to the African Legal Support Facility to help poor countries tackle vulture funds as well as the additional support for the World Bank’s Debt Reduction Facility announced in May. We are also continuing to work on debt sustainability with poor countries and creditors, to ensure the poorest countries do not build up unsustainable debts again.
If you would like further information on our strategy on dealing with debt, this can be found on our website.
Mike Foster
Parliamentary Under Secretary of State for
International Development
