UK Government supports action to tackle litigating creditors
19 February 2010
The UK continues to play a pivotal role in bringing international actions to deliver debt relief to low-income countries that face an unsustainable debt burden.
On 19 February 2010 HM Treasury outlined the Government’s position and set out the next steps in support of legislation to tackle the problem caused by a minority of commercial creditors that pursue legal action to recover the full value of debts owed, rather than participating in international initiatives for debt relief.
This follows consultation last year on legislation and the introduction of a Private Member’s Bill.
G7 agrees further debt relief following Haiti earthquake
Following the tragic earthquake in Haiti in January 2010, the G7 agreed that Haiti's major needs require exceptional debt relief. The UK and other G7 countries have agreed that all Haiti’s debts to the multilateral institutions (such as the IMF and World Bank) should be relieved. We are working to make this happen as soon as possible.
Prior to the earthquake, the UK Government had already cancelled all the debts owed to it by Haiti as a result of the country’s completion of the international Heavily Indebted Poor Countries Initiative.
Background
By the 1990s many low-income countries faced a debt crisis – with interest payments costing more than health and education spending combined, and creditors having little if any prospect of being fully repaid. In response, the international community established the Heavily Indebted Poor Countries Initiative, targeted at 40 countries that faced both high levels of poverty and unmanageable debt burdens.
The Initiative sets the level of reduction needed from all creditors to return the countries’ debts to sustainable levels. Once the World Bank and the International Monetary Fund (IMF) assess that a country has made progress so that the benefits of relief can be directed towards economic growth and poverty reduction, every creditor is expected to reduce their debt to the set level. Many, including most commercial creditors, already do so. The UK and others go further and cancel their debts altogether. Through the Multilateral Debt Relief Initiative agreed during the UK’s presidency of the G8 in 2005, all eligible debts to the key multilateral creditors are also cancelled completely.
Both our support for legislation to takle litigating creditors and the exceptional support for Haiti demonstrate the UK’s continuing international leadership on debt relief.
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Debt Relief Bill
By Ian Pearson, Economic Secretary to the Treasury
