Response on Jubilee Debt ‘Pick Up the Pace’ Campaign
April 2009
Thank you for your letters and e-mails to Douglas Alexander. I am replying as the Minister who leads on the issues raised.
Since the 1998 human chain in Birmingham much has been achieved through two international initiatives - the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI). These have delivered over $110 billion of debt relief since 2000. This money has made a huge difference. It has reduced the debt of countries receiving relief by about 90%. This means that countries can now spend more on essential services. Annual spending on anti-poverty programmes has increased from US$6 billion in 1999 to US$21 billion in 2007. The contribution of campaigners and the general public has been instrumental in this success.
You asked about the US $400 billion of debt that Jubilee Debt Campaign claims countries are not able to repay. It is clear that the vast majority of this sum refers to middle income countries’ debt. Cancelling this debt would mean reallocating our budget away from the poorest countries. It is also important not to make assumptions about this debt. In many cases, countries can repay it and do not want to receive debt relief. Sri Lanka, Lao PDR and Bhutan, for example, were eligible for debt relief under the HIPC Initiative, but chose not to pursue this. We need to keep in mind that not all debt is a problem. Borrowing is an important tool in economic management and, invested well it allows countries to accelerate their development, bringing benefits to their citizens more quickly than if they relied solely on their own revenues and donor grants. It also allows countries to establish creditworthiness and access to wider international financing. We also should not assume that debt relief is always the most appropriate way of supporting countries. Debt relief is only one form of aid and, in some cases, other assistance, such as funding a specific project, may be better.
On your point regarding delivering UK Multilateral Debt Relief Initiative to the poorest countries, we already do this; if we are convinced they will use savings from debt relief to help poor people. Last year we increased the number of countries eligible for this initiative from 8 to 12. There are now only 14 low income non-HIPCs that do not receive relief and they will qualify when their standards of financial management improve.
You mention ‘unjust debt’ in your letter. The UK Government does not consider any debt owed to us to be ‘illegitimate’ or ‘unjust’. All Government loans are made to internationally recognised governments, bound by legal contracts are recognised in international law. We provide debt relief on the basis of economic need, rather than other criteria such as governance history.
You might be interested to learn that our overall assistance to developing countries is increasing. As a result of the 2007 Comprehensive Spending Review, DFID’s spending is planned to rise each year by an average of 11% in real terms. Total UK Official Development Assistance is planned to rise to over £9.1 billion by 2010-11, to meet the EU's collective commitment of 0.56 per cent of Gross National Income (GNI). This keeps the UK on track to reach 0.7 per cent of GNI by 2013, two years ahead of the EU target.
If you would like more information on our work on debt, please have a look at
our website:
www.dfid.gov.uk/fightingpoverty/debt.asp.
This includes examples of how debt relief has been used to tackle poverty; for
example, savings from debt relief in Mozambique have allowed one million more
children to go to school.
I would like to thank you for your interest in this issue, and hope that this response has been helpful.
Mike Foster
Parliamentary Under Secretary of State for International Development
