Third World Debt

HC Deb 26 June 2002 vol 387 cc862-3

2. Andrew Selous (South-West Bedfordshire)

If she will make a statement on the repayment of third world debt. [62469]

The Secretary of State for International Development (Clare Short)

Twenty-six of the 37 eligible heavily indebted poor countries have now qualified for debt relief of $62 billion. That has been provided through the poverty reduction strategy process, which has led to improvements in economic management and improved spending of local revenues and aid money.

Of the remaining 11 countries, many are mired in conflict and misgovernment. We are working to try to achieve progress on peace. We estimate that because of the fall in commodity prices, we will need an extra $1 billion by 2003 to get the countries that qualify to debt sustainability levels.

Andrew Selous

Do the Government agree with the Jubilee debt campaign that the number of countries that benefit from the HIPC initiative should be extended to include further countries that have unsustainable levels of overseas debt?

Clare Short

No, I do not agree with the Jubilee debt campaign. For example, it is proposed that Nigeria should benefit. Nigeria is massively oil-rich, and oil prices have gone up. It is terribly misgoverned and its resources are not used for the benefit of its people. To write off debt unconditionally would not bring any benefits to poor people. We are using the leverage of debt relief to write off unpayable debt and get good economic policy and better social spending. That is the right way. Countries such as Sudan, Burma, Somalia and Liberia could qualify if we could get them to peace. It is no good giving them debt relief while they are still buying arms and fighting, so I disagree. We must drive those countries forward, achieve peace and reform, and reward that with debt relief so that the countries get better economic management and the life of the people improves.

David Taylor (North-West Leicestershire)

Further to the previous question, there are nevertheless several dozen countries that lie just outside the HIPC—heavily indebted poor country—criteria. Can the Secretary of State tell us what our Government are doing to help those countries to move forward to a sustainable debt framework not unlike the HIPC one?

Clare Short

The other thing that hon. Members must understand is that, because there has been such a wonderful campaign on debt, people sometimes talk as if it were the only problem. Many very poor countries do not have a debt problem, but need continuing support. For example, in Uganda, which has qualified for debt relief, 50 per cent. of the Government's revenues are supported by aid, and the country has made enormous progress in reducing poverty and getting all its children to school. We are helping country after country in the appropriate way and not pretending that the only problem is debt. Some countries are poor but do not have debt, and they need help as well.

Mr. Stephen O'Brien (Eddisbury)

The Secretary of State will be aware that the debt of many heavily indebted countries is not only sovereign-to-sovereign debt, but involves private finance in the banking system. She will also be aware that back in the 1970s and 1980s, when most of the debt was extended, many of the banks knew that they were very unlikely ever to be repaid and are quite happy to continue to exercise their leverage. Given that they have now written off the amounts in their own balance sheets, should it not be possible to persuade them, in exchange for having direct access through NGOs rather than Governments, that that debt should now be relieved?

Clare Short

My understanding is that those countries have limited commercial debt and that as they are such poor countries, they did not get much commercial lending. However, some commercial debt that should be part of the HIPC process is not properly being written off, and we need to attend to that issue. In general, commercial debt is written down through the London Club. If the hon. Gentleman would like to explain his points more fully, perhaps in a letter, I shall look into the matter and respond to him.