Poor Countries: Debt Burden (Hansard, 4 July 1996)

§ The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey)
My Lords, I am pleased to report that the summit endorsed further steps to offer a number of highly indebted poor countries an exit from their unsustainable debt burdens. They are set out in the communiqué, copies of which have been placed in the Library of the House.

§ Lord Rea
My Lords, I thank the Minister for that Answer which was, perhaps, optimistic in tone but a little lacking in immediate substance. Is it not a pity that the Naples terms, which were agreed two years ago, for a reduction of bilateral debt of the most severely indebted countries by two-thirds was not increased to a four-fifths reduction, as was hoped, thus helping those nations to rejoin the world's economy both to our benefit and theirs? Can the Minister say what recommendations the G7 and the Government are making as regards the forthcoming meeting of the Bretton Woods financial institutions in September?

§ Baroness Chalker of Wallasey
My Lords, it would be very useful if the noble Lord were to read 1580 paragraphs 46 to 50 of the G7 summit communiqué because it states there quite clearly what is going on. I believe that I am right to be more optimistic than the noble Lord. I say that because the IMF's ESAF (the Enhanced Structure Adjustment Facility) will be on more concessional terms in the future. There is absolutely no doubt that the summit urged the Paris Club of government creditors to improve on the 67 per cent. debt reduction available under the Naples terms, from which 18 countries have already benefited. We shall encourage the Paris Club to offer up to 80 per cent. debt reduction in certain cases. Indeed, we are working on that for the meetings which will take place in the autumn.

§ Lord Clark of Kempston
My Lords, does my noble friend the Minister agree that this was a purely British initiative? Does she further agree that my right honourable friend the Chancellor of the Exchequer should be congratulated?

§ Baroness Chalker of Wallasey
My Lords, I am extremely pleased to agree with my noble friend. It was indeed a British initiative, taken forward by the Prime Minister and known, first, as the "Trinidad Terms" in 1990. In May of this year, creditors wrote off some 500 million US dollars, which is more than 50 per cent. of Guyana's official bilateral debt. My right honourable friend the Chancellor of the Exchequer, Mr. Kenneth Clarke, who took the matter forward, did not let a single opportunity go by to press the case for debt reduction so that those countries could stand on their own feet again. Britain has taken the lead every time, including action on multilateral debt. We shall continue to do so.

§ Lord Judd
My Lords, while I commend the Government on their efforts on debt, is it not disappointing that the Lyons meeting still failed to agree arrangements for the sale of IMF gold stocks to fund multilateral debt relief? Does the Minister agree that the proceeds of such gold sales should be invested directly in debt relief and not used simply to replenish the IMF's structural adjustment facility? Given that IMF lending in the past has been part of the cause of the present debt crisis, does the Minister agree that further lending—even on more concessionary terms—is not an adequate response?

§ Baroness Chalker of Wallasey
My Lords, the noble Lord, Lord Judd, needs to differentiate between what is really happening and the art of the possible in the reduction of multilateral debt. We expect multilateral creditors to maximise the use of their existing resources. As the noble Lord knows, bilateral creditors are already doing this through the Paris Club. This was very much the spirit of last year's G7 summit which encouraged the better use of all existing World Bank and IMF resources. The IMF has moved a long way on this. Not all countries, sadly, have supported the sale of gold as a means to fund reduction of multilateral debt, but we are in a better position now than we were even six months ago. We are continuing to work at it and we are 1581 gradually having more and more success. I am glad that the noble Lord recognised that in his remarks. We shall certainly make sure that we make yet further progress.

§ Lord Avebury
My Lords, is the Minister aware that the announcement she has made about the remission of debt for Guyana will be particularly welcome in view of the Herculean efforts made by President Jagan to put the economy back on a sound footing and his great successes hitherto which will be materially assisted by this remission? Can she also say something about another country which has been mentioned frequently in your Lordships' House; namely, Uganda? Was anything special done at the summit to remit the debt of that country?

§ Baroness Chalker of Wallasey
My Lords, nothing new was done but of course Uganda is one of the 18 countries which has benefited. In addition to the reduction of 500 million US dollars for Guyana, a further 5.6 billion dollars of debt has been restructured under the Naples terms proposed by the Prime Minister. Progress is being made in this field. Uganda has benefited from that. I hope that Uganda will benefit more when the sales of IMF gold produce the funds to enable multilateral debts to be reduced.