14 January 2005
Remarks by The Rt Hon Gordon Brown MP, Chancellor, of The Exchequer on Debt Relief
I am honoured tomorrow to be signing an historic Memorandum of Understanding which launches the next stage of debt relief.
Building on HIPC 1 and HIPC 2 – a journey that started in Birmingham and completed under the German G8 Presidency in Cologne - we want to go further to complete historic debt reduction - and I want to explain why it is so important and what our next stage will be.
In 1997 just one country was going to receive debt relief, today 27 countries are benefiting with $70 billion of unpayable debt being written off; and 37 countries are now potentially eligible, with up to $100 billions of debt relief now possible.
Because of the half a billion dollars of debt relief received so far by Tanzania 31,000 new classrooms have been built, 18,000 new teachers recruited, 1000 new schools built and the goal of primary education for all will be achieved by the end of 2005 – 9 years early.
And because of the half a billion dollars of debt relief received so far in Mozambique, health spending in Mozambique has increased by $13.9 million; half a million children are now being vaccinated against tetanus, whooping cough and diphtheria increasing coverage to over 80 per cent; $10 million is being spent on electrification in rural schools and hospitals, and rebuilding of infrastructure following the recent floods; and $3.2 million is being used to increase the number of girls attending school.
We do not wipe out the debt of the poorest countries simply because these debts are not easily paid. We do so because people weighed down by the burden of debts imposed by the last generation on this cannot even begin to build for the next generation.
So when many developing countries are still choosing between servicing their debts and making the investments in health, education and infrastructure that would allow them to achieve the Millennium Development Goals, we know we must do more.
While we have achieved bilateral debt write off, the fact is that in some of the poorest countries 80 per cent of the historic debt is now owed to international institutions – indeed here in Tanzania, multilateral debt service now makes up over 90 per cent of external debt. So a solution to the debt tragedy now requires progress on debts owed not just to us but owed to the World Bank, the IMF and the development banks.
And this year I believe we must make a historic offer that finally removes the burden of decades old debts that today prevent the poorest countries ever escaping poverty and leading their own economic development.
Economic development is the key to meeting the Millennium Development Goals and long term prosperity.
And no country has escaped poverty other than by participation in the international economy and focusing on macroeconomic stability and encouraging private investment, with a clear sense of country ownership of their policies.
Our task is and remains helping developing countries build the capacity – the monetary and fiscal policies, the infrastructure, the support for private investment and the necessary transparency – essential for their development. I will set out later how country-owned and community-owned policies make a difference.
The focus on transparency is that it is only in an open, accountable and corruption-free environment that progress will be sustained.
Today I want to set out how the final stage of relief from historic debts can be delivered.
My central proposal is that this year the richest countries should match bilateral debt relief of 100 per cent with the bold act of offering 100 per cent multilateral debt relief --- relief from the $80 billion of debt owed to the IMF, the World Bank and the African Development Bank.
The cancellation of debts should be financed in two ways. First the cancellation of debts owed to the International Monetary Fund should be financed by a detailed plan and timetable to use IMF gold. Second we propose that countries make a unique declaration that they will assume responsibility for their share of the World Bank and the African Development Bank's debts on behalf of eligible developing countries.
And just as the UK led the way on 100 per cent bilateral debt relief, so too today we will again lead by example. Although there is no international agreement yet, Britain will relieve those countries still under the burden of this debt by paying our share – 10 per cent – of their payments to the World Bank and African Development Bank in their stead.
Our first agreement is being signed here in Tanzania tomorrow with President Mkapa. And I am pleased to be in Tanzania for this historic signing.
Under current HIPC debt relief arrangements, Tanzania is receiving an average of $140 million per year in debt relief – around $3 billion dollars committed in total over the next few years – and has used the funds to finance poverty reduction, education and healthcare programmes.
If our full multilateral debt relief proposals were adopted by the international community, Tanzania could receive over $1.1 billion more in relief over the next ten years for health, education and anti-poverty programmes - and Tanzania’s debt service payments could fall from the $393 million per year they would have been without HIPC relief to below $26 million.
And tomorrow we will sign a Memorandum of Understanding between the UK and Tanzania which will enable the UK to begin making payments for 10 per cent of Tanzania’s debt service to the World Bank and African Development Bank in their stead – benefiting Tanzania by $74 million dollars over the next ten years.
Later this week I will be in Mozambique.
Under current HIPC debt relief arrangements, Mozambique is receiving an average of $130 million per year in debt relief – around $4.3 billion dollars committed in total over the next few years.
If our full multilateral debt relief proposals were adopted by the international community, Mozambique could receive over $600 million more in relief over the next ten years for health, education and anti-poverty programmes – and Mozambique’s average debt service payments could fall from the $219 million per year they were without HIPC relief to below $30 million.
And the UK will begin making payments for 10 per cent of Mozambique’s debt service to the World Bank and African Development Bank shortly – benefiting Mozambique by $46 million dollars over the next ten years.
What we offer to Tanzania today we now offer to the whole developing world tomorrow. So in Africa, Asia and Latin America we make this offer not just to the 37 Heavily Indebted Poor Countries but to all low income countries, as long as they can ensure debt relief is used for poverty reduction.
We will pay their share of debts owed to World Bank and African Development Bank.
We make this offer unilaterally but we are now asking other countries to join us. At the G7 Finance Ministers Meeting early next month we will examine the concrete proposals that could finally bring the sad chapter of theses historic debts to a conclusion.
Millions of people worldwide campaigned for debt relief – and for a new beginning for countries weighed down by debt burdens. Today, building on HIPC 1 and HIPC 2, we enter what I hope will be the final stage in debt reduction.