HC Deb 01 March 2000 vol 345 cc412-4
4. Mr. Jim Cunningham (Coventry, South)

If she will make a statement on the action taken by her Department to ensure that debt relief is linked with poverty eradication. [111176]

The Secretary of State for International Development (Clare Short)

The Government contributed a paper to last year's review of the heavily indebted poor countries initiative, a copy of which is in the Library. We argued that, to qualify for debt relief, countries should develop a national poverty reduction strategy. The strategy should set out the Government's policies and actions to tackle poverty, and demonstrate how all resources will be allocated, including those arising from debt relief. Governments should consult their public and the international financial institutions in formulating the strategy, so that it commands broad-based support. I strongly support this approach, which was agreed at the annual meetings of the World Bank and the International Monetary Fund in September, and is now being implemented. In this way, debt relief will help to achieve a stronger commitment to policies to reduce poverty.

Mr. Cunningham

Given the number of natural disasters, particularly that in Mozambique, what practical steps have been taken to help to restructure and rebuild those economies that have been affected; and can my right hon. Friend give some examples of poverty relief schemes?

Clare Short

Debt relief on its own cannot help countries to restructure their economies. It can remove the hangover of debt that prevents Governments from using their money well, and we can give such countries further support to help them to manage their economies better. In Mozambique, we have a crisis and we need to save lives, but there will be a massive reconstruction effort. The reduction of poverty requires good macro-economic management to attract domestic and inward investment to help the economy to grow; children need to be educated and basic health care needs should be met. The poverty reduction strategies that are developing alongside debt relief will help to achieve such policies.

Dr. Jenny Tonge (Richmond Park)

Under the HIPC2 initiative, Mozambique was due to qualify for more debt relief this year, but that would only have reduced its debt service bill to $62 million a year, which would still have been more than its total spending on health and education. That fact, combined with the destruction of its infrastructure due to the floods, means that it will be years before Mozambique ever reaches the level that it was at even two weeks ago. Will the right hon. Lady reassure the House that she will press the international community to strengthen long-term aid for Mozambique and press for immediate 100 per cent. debt cancellation?

Clare Short

As we said on Monday, Mozambique has been a star reformer since the end of the civil war, and that is admirable for one of the poorest countries on earth. The present crisis is a tragedy because it has been driving its economy forward. However, at the moment, it has big reserves because its Government's capacity to spend is so weak. We must get it through this crisis. Yes, it must have its full debt relief and the debt overhang must be removed. As the hon. Lady knows, Britain is committed to 100 per cent. debt relief, for which Mozambique has qualified. It will repay no more money to the UK, and yesterday the Chancellor pressed other Governments to do the same. After the immediate crisis in Mozambique, the big job will be to help with the reconstruction when it will draw down on many of its reserves, but it will need more support.

Mrs. Maria Fyfe (Glasgow, Maryhill)

I congratulate my right hon. Friend on the rapid response of sending two plane loads of small boats to Mozambique. Does she agree that, while, of course, corruption must be rooted out for the good of those who suffer poverty, it can far too easily be used as an excuse by those mean people who do not want to give money to good causes and simply refuse to cough up?

Clare Short

I agree that we must find ways of helping. In countries with grave corruption we should not allow the poor who are the victims of that to become victims twice over by denying them help from the international community. The poor pay the price for corruption in the loss of economic development and by having to pay bribes for basic services. We must root out corruption to obtain faster development and eradicate poverty, and the international community is now, at last, addressing that.

Mr. Bowen Wells (Hertford and Stortford)

Last week, when the International Development Committee visited Malawi—one of the poorest countries—the Finance Minister told us that with HIPC, for which the country does not yet qualify, it would receive a reduction in capital repayments and interest on its indebtedness of only $30 million. Therefore, the reduction per year would be from $120 million to $90 million, which is insufficient. Is the right hon. Lady satisfied that HIPC is generous enough and that, when there are savings, those will be concentrated on poverty reduction in the spheres of health and education?

Clare Short

It is my view that the enhanced HIPC, which will cancel $100 billion of debt—the highly indebted poor countries have $145 billion of debt—is about right. Countries have to be responsible about their borrowing, but HIPC will reduce it to reasonable proportions. Malawi is a desperately poor country, which inherited limited capacity from a dictatorship. The United Kingdom has a large and growing programme. My view is that HIPC2 is the right balance. Beyond that, we should help countries to get their debt down to manageable proportions and to drive forward by borrowing wisely and receiving aid, not focusing on ever-increasing amounts of debt relief. HIPC is about right and we should speed up implementation.

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