Debt Relief (Hansard, 25 October 2000)

§ 2. Mr. Andrew George (St. Ives)
What assessment she has made of the impact of writing off the debt of heavily indebted less-developed countries on the poorest in those countries. [132182]

§ 4. Mr. John McFall (Dumbarton)
What decisions were taken at the recent World Bank and IMF meetings on debt relief. [132184]

§ The Secretary of State for International Development (Clare Short)
There are 35 heavily indebted poor countries that could qualify for enhanced debt relief, 30 of them in Africa. At the World Bank and International Monetary Fund meetings in Prague, it was agreed that all possible efforts would be made to get 20 countries on track for debt relief by the end of the year. After that we will face great difficulty because, of the remaining 15 countries that could qualify, 11 are affected by conflict. We are hopeful that six countries may qualify next year.
204 The enhanced debt relief initiative requires all qualifying countries to focus their policies and resources on the reduction of poverty. The debt relief that is being made available will write off up to two thirds of those countries' debt.

§ Mr. George
I am grateful for that reply, and I think that the Government should be thoroughly congratulated on what they have achieved so far. I know that many Members on both sides of the House are anxious for the debt write-off to be a success.
Does the Secretary of State agree, however, that many challenges remain? Half the 120 million population of Bangladesh still live in absolute poverty. Is it not unacceptable that that country will not benefit from relief because it has already—responsibly—paid off its debt? Will the Secretary of State publish targets showing when the poorest of the 41 poorest countries are expected to experience the benefit of the write-off?

§ Clare Short
There is no doubt that Bangladesh contains a large number of very poor people, but it does not qualify for the heavily indebted poor countries initiative. We should be careful not to suggest, in our enthusiasm for debt relief, that all debt should always be written off. Poor countries need to be able to borrow and repay responsibly, so that they have a good track record and can secure foreign investment and enable their economies to grow. Bangladesh, with its new textile industry, has been expanding its economy very well. Bangladesh has problems, but debt relief is not the best remedy. It needs good international development assistance, and we in the United Kingdom have a growing programme.
The hon. Gentleman asked whether we could show that the benefits of debt relief were going to the poor. He was right to stress that. The UK Government's objective was not debt relief at any price, but to lever policy that would bring real benefit to the poor, in terms of both better economic growth and better social policy. We believe that the framework of poverty reduction strategies is a great advance, but I cannot give the hon. Gentleman a target, because that will depend on good implementation. We will, however, be monitoring progress, and I shall be happy to report.

§ Mr. McFall
I congratulate the Government on their 100 per cent. debt cancellation initiative. It is not matched by multilateral institutions such as the IMF and the World Bank, which are responsible for more than 35 per cent. of long-term debt in these countries. As a result, the first five heavily indebted countries receiving help pay more than half a million dollars to foreign creditors each year. That is more than they spend on health. Will the Government ensure that the multilateral institutions live up to their responsibilities, so that we can finally get the debt cleared?

§ Clare Short
The IMF and the World Bank are international public sector institutions, funded by taxpayers internationally. They will find it difficult to fund debt relief in, for instance, Zambia, which has enormous debts, unless the American Congress votes for United States contributions. We have real difficulties in 205 funding the existing initiative, and it would not be possible for the IMF and the World Bank to commit themselves to more.
This initiative writes off two thirds of the debt of the countries concerned. Those that have qualified so far will be spending 10 per cent. of their Government revenues on debt payments, and in most cases their social spending is higher than their spending on debt. The initiative is better than some critics suggest.
We never achieve perfection in this life, and the IMF and the World Bank cannot contribute more. We must work hard to persuade the American Congress to vote for its contribution, or we shall be in trouble.

§ Dr. Jenny Tonge (Richmond Park)
Does the Secretary of State agree that even if all the debt of the world's poorest countries were written off, they would still remain poor unless we reformed the world's trading system? In that context, can she tell the House what she is doing to ensure that the United Kingdom and the European Union wipe out duty and quota systems so that the poorest countries can sell their goods all over the world and become less poor? Can she also update the House on progress with the Cotonou agreement, which has replaced the Lomé agreement?

§ Clare Short
I agree very much with the hon. Lady that we need a more just trading system and that developing countries need better trading opportunities. That is especially true in agriculture—the EU needs to reform that sector—and, in particular, the trade in processed agricultural goods, in which those developing countries have a natural advantage. That is one of the reasons why I believe passionately, and the Government in general believe strongly, that we need another trade round and that developing countries could make great gains from it. I am afraid, however, that there is no immediate prospect of reaching an agreement, not just because of the United States election, but because many developing countries are so burdened with their commitments under the Uruguay round that they are not demanding a round themselves. We have to keep up the argument and the agenda for trade reform that would bring real benefits to developing countries.
On the Cotonou agreement, which replaces Lomé, it is now agreed that poverty reduction is the central focus of all the development assistance and the way in which the assistance will flow has been simplified. I am hopeful that it will be a much better instrument of aid for the African, Caribbean and Pacific countries than that represented by the EU record to date.

§ Mr. Andrew Reed (Loughborough)
We welcome the initiatives that have been taken. I understand that, for example, Cameroon's debt has been reduced by a welcome $100 million, but that still leaves it paying $400 million a year in interest alone—a great deal of money, as my right hon. Friend would agree. What further steps can be taken with the IMF and the World Bank to ensure that the HIPCs initiative makes a substantial difference to some of those countries? Although we have taken welcome steps so far, I am sure that she would agree that there is much further to go. So far, this country has 206 taken a lead internationally, but can we push that effort much further as we head towards the end of the year 2000, in which we hoped to make such progress?

§ Clare Short
No. It is my view that we will not persuade the international community to finance a more generous debt relief programme than the current one. As I have said, we have not received the American contributions—that is still in doubt—and we shall be in difficulty if we do not get them. Under the HIPCs initiative, $100 billion will be written off. People talk as though that is nothing, but it is a massive sum by any account, certainly given the budgets of those very poor countries.
Those countries will need other help, for example, continuing aid and other forms of assistance, such as better trading arrangements. Cameroon has just qualified to start on the process, but it has terrible problems because of corruption. It needs help with debt relief, but it needs to instigate reform, deal with corruption and prioritise the poor. We need reform from all sides, and that includes that undertaken by the Governments of the countries concerned.

§ Mrs. Cheryl Gillan (Chesham and Amersham)
Everything that the Secretary of State has said does not change the fact that the timetable for debt relief has been badly misjudged by the Government. Last year, the Prime Minister said that 25 countries would get relief by the end of 2000. This year, the Chancellor confirmed that, saying that 25 countries would get relief by the end of 2000, and he should know because he chaired the IMF committee. However, by May this year the Chancellor admitted that the figure had fallen to 20. As we stand here today, only 11 countries have qualified and there are only nine weeks to go to the end of the year. What possible confidence can we have in the commitments of the World Bank, the IMF and the Government when the targets for helping the world's poorest and most vulnerable have been allowed to slip so dramatically? Is the Secretary of State prepared to guarantee the current timetable predictions of her colleagues, the IMF and the World Bank? We need to know.

§ Clare Short
Thank heavens, the Conservative party is in opposition because the hon. Lady clearly does not understand the problem of debt or the international system. For example, Côte d'Ivoire has had a coup and is therefore unlikely to qualify for debt relief. We need co-operation from all the countries that give debt relief and the qualifying countries must adopt the necessary reforms to receive it.
For the hon. Lady to talk as though the UK Government can control all that is completely foolish and shows that she does not understand what is going on. Ask anyone in the international system: Britain has been—[Interruption.] If the hon. Member for South-West Devon (Mr. Streeter) stopped heckling, he might learn something. Clearly, he has many problems and needs to learn a lot. [Interruption.] He is still heckling. I wonder whether you, Mr. Speaker, could—[Interruption.] The hon. Lady just asked an ill-informed and foolish question and will not listen to the answer. [Interruption.] The hon. Gentleman is still heckling continuously. Therefore, it is 207 difficult to speak and impossible for him to hear. I do not think that that is appropriate behaviour for the House of Commons. [Interruption.] He laughs, but—

§ Mr. Speaker
Order. I will decide what is appropriate behaviour. It is for the Minister to answer the question.

§ Clare Short
I am pleased to hear it.
We are very hopeful, but there is no possibility of the UK Government giving a guarantee. Can the hon. Member for Chesham and Amersham (Mrs. Gillan) give a guarantee that the Cameroon Government will start to deal with corruption and focus on poverty, that we will get some decent resolution of the coup in Côte d'Ivoire, and that Ethiopia and Eritrea will make peace and therefore qualify for assistance? It is impossible. What we will guarantee is that we will maintain the pressure on the IMF and World Bank to keep to the commitment that was made in Prague. We will continue to be the leading force for that.