South Africa: IMF Loan (Hansard, 8 December 1982)

§ Lord Kennet
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

§ The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Trefgarne)
My Lords, the United Kingdom supported the South African application on its merits. There is no provision within the IMF's articles for declaring a member ineligible to use the fund's resources unless it fails to fulfil any of its obligations under the articles. South Africa is not in this position.
Performance criteria related to macro-economic variables (for example, credit to the Government, total credit to the banking system) are usual. The fund is effectively prevented under its guidelines from setting specific conditions of a political sort.

§ Lord Kennet
My Lords, if the last part of the noble Lord's Answer is correct, how is it that the fund refused to make a loan to Tanzania unless that country changed its internal economic structure? Secondly, has the Treasury guaranteed the British part of this loan, as they did recently with a corresponding loan to Mexico?

§ Lord Trefgarne
My Lords, the answer to the noble Lord's second supplementary is, no. As to the first supplementary question which the noble Lord put to me, the situation is rather different. It is certainly part of the fund's normal procedure to secure a change in domestic economic policy. Although I do not have before me the information about Tanzania, doubtless that was the circumstance there.

§ Lord Leatherland
My Lords, may I congratulate the Minister upon the promptitude with which he discharges his duties?

Lord St. John of Bletso
My Lords, is it not the case that unless the International Monetary Fund and other supranational organisations are seen to observe their own policy guidelines and obligations without practising undue discrimination towards one country, it will be impossible to persuade South Africa of the 172 good faith of the world community in pressing her to accept international obligations in regard to nuclear proliferation and Namibia?

§ Lord Trefgarne
My Lords, with respect to the noble Lord, his question goes rather wide of the Question on the Order Paper which relates to the IMF facilities which have been made available to South Africa. Perhaps that could be a Question for another day.

§ Lord Cledwyn of Penrhos
My Lords, given the Government's stated position on apartheid, is not the Government's support for this loan absolutely indefensible? Is not their support indefensible in view of South Africa's attitude towards Namibia? Do not the Government think that conditions should have been attached to this loan: that South Africa should be more forthcoming on the question of Namibia and also upon the improvement of human and civil rights in South Africa? Does not the noble Lord feel extremely guilty that he should be answering the Question in this way?

§ Lord Trefgarne
My Lords, the Government have consistently taken the view—as, I believe, did our predecessors—that it is wrong for considerations of this kind to be brought into the affairs of the specialised agencies of the United Nations, of which this is one. We believe that the right way for the IMF to proceed is without interference of a political kind. That is why we support this proposal.

§ Lord Boyd-Carpenter
My Lords, if the IMF acted on the principles suggested by the noble Lord opposite, would it not be unable to give financial help to other than a handful of countries? In that case, would not the whole valuable system for which it stands be brought to a standstill?

§ Lord Trefgarne
My Lords, I quite agree with my noble friend. I have no doubt that there are those represented on the board of the IMF who disagree with some of the policies that noble Lords opposite followed when they secured IMF support.

§ Lord Cledwyn of Penrhos
My Lords, is not the South African Government an outstanding example of an odious and oppressive Government? Does not this loan sustain one of the worst Governments in the world, notwithstanding what the noble Lord, Lord Boyd-Carpenter, said?

§ Lord Trefgarne
My Lords, I absolutely agree that some of the policies followed by the Government of South Africa are deplorable, but the fact remains that some of the policies supported by other Governments which have secured IMF support are also deplorable.

§ Lord Nugent of Guildford
My Lords, is my noble friend aware that if he followed the advice given to him by the Leader of the Opposition, the IMF would be unable to make loans to any Iron Curtain country or to any South American country which has scant regard for the liberty of the subject, and that its general purpose in assisting the economies of weak countries 173 would be completely defeated? Will my noble friend please stick firmly to the line he has taken?

§ Lord Trefgarne
My Lords, it is in the interests of all the nations of the world, particularly ourselves, that the economic arrangements between nations remain sound. If the IMF were to be selective on a political basis in the way that it disburses its resources, that objective would not be achieved.

§ Lord Hatch of Lusby
My Lords, is it not a fact that the IMF is selective on a political and ideological basis? In addition to the instance given by my noble friend Lord Kennet, the IMF is now negotiating with Zambia. In the case of both Zambia and Tanzania, is it not the case that the IMF is insisting upon a reduction in Government expenditure, against the socialist principles of both of those countries?

§ Lord Trefgarne
My Lords, I do not believe that anybody in his right mind would support the proposal that IMF funds should be made available to Governments who are not determined to get their own economy in order and that they should be disbursed for political or sociological purposes.

§ Lord Glenamara
My Lords, does the Minister's reply mean that if a Government is pursuing a mildly democratic socialist policy and is trying to create a socialist economy of a very mild kind, as in the case of Tanzania, conditions are imposed; but that if it is pursuing a policy of apartheid, almost a fascist policy, no conditions are imposed?

§ Lord Trefgarne
My Lords, the conditions imposed have nothing to do with the ideological persuasion of the Government concerned but rather with the prospects of the money being repaid in due course.

§ Lord Brockway
My Lords, in view of what the noble Lord the Minister has said regarding the difficulty of differentiating between different countries in giving aid, would it not be possible for the Government to accept the principle that they will give neither loans nor military aid to any Government criticised by the United Nations' Human Rights Commission for denying human rights?

§ Lord Trefgarne
My Lords, I believe that would be a slippery slope, if I may say so. The United Kingdom Government have been criticised occasionally for alleged lapses in this area; one or two recent occurrences come to mind. I do not believe that is the right way for the IMF to proceed, and neither is that the Government's policy.

§ Lord Kennet
My Lords, since the noble Lord the Minister has taken it upon himself, which he need not have done, to defend the IMF in this matter, will he take a look at Tanzanian history and see whether the Government really think that Tanzania is a worse bet financially than Mexico or Argentina?

§ Lord Trefgarne
My Lords, it is not for me to decide precisely which are the best or worst bets from the IMF's point of view, but I certainly support the 174 proposal that the IMF should, where it sees fit, impose conditions upon the receiving Government which make it certain, or at least more likely, that the funds it disburses, will be repaid.

§ Lord Campbell of Alloway
My Lords, is my noble friend the Minister aware of any power which resides in Her Majesty's Government to control the conditions imposed by an international agency such as the IMF?

§ Lord Trefgarne
My Lords, the United Kingdom Government have a representative on the board of the IMF and we make our views known through that medium.