Developing Countries: Debt Burden (Hansard, 2 May 1996)

§ The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)
My Lords, at last week's meetings of the IMF and the World Bank, there was agreement that the burden of debt is unsustainable for a number of heavily indebted poor countries, and that action is needed to reduce it so as not to put at risk their reform efforts. Ministers, led by my right honourable friend the Chancellor, agreed that the IMF and the World Bank will move swiftly to make specific proposals to enable agreement to be reached at the institution's annual meetings.

§ Lord Judd
My Lords, I thank the Minister for that encouraging reply. Will he accept that he has the full support of this side of the House in all that the Government can do to encourage speed in restructuring the debts of the poorest countries? Does he not agree that one severe handicap at the moment is the reluctance of the International Monetary Fund to play its part? Can the Minister assure the House that at the G7 summit in June all possible pressure will be mobilised to persuade the IMF to restructure its enhanced structural adjustment programme with more concessional terms, perhaps financed by the sale of some of the gold stocks at the disposal of the IMF?

§ Lord Mackay of Ardbrecknish
My Lords, I am grateful to the noble Lord, Lord Judd, for his support. He gave it to me when we last addressed this matter. We would like to see far quicker progress than we have made so far, but it takes time to reach agreement between the members of the IMF. We are pressing for a resolution of the debt problem. The fund's managing director and most other members of the IMF support this move. They want that body to make a real contribution to a solution in the context of a continuing, enhanced structural adjustment facility. A few members of the fund, regrettably, still oppose the modest sale of IMF gold which we and the managing director have proposed as a means of financing this project. We shall continue to work on this matter and to press for some form of agreement to be obtained in the autumn.

§ Lord Redesdale
My Lords, I congratulate the Chancellor on the initiative he has taken on debt relief, which I welcome. Does the Minister agree that the six-year time lag which some countries will have to face before they qualify for debt relief may be seen to be too long?

§ Lord Mackay of Ardbrecknish
My Lords, it depends on the position of each individual country. With regard to the countries most seriously affected by their very large debt overhang, the sooner they have a solution to the problem the quicker they can get on with trying to restore their economies and bringing some 1749 prosperity to their peoples. I can assure the noble Lord that we are taking all the steps we can, as we have been doing for some time, to move the multinational institutions to take action.

§ Baroness Lockwood
My Lords, does the Minister agree that in dealing with this problem time is of the essence? Further, is he aware that for less than what is currently being spent by some of the poorer countries on debt repayment it would be possible by the end of the century, through social investment, to save the lives of around 21 million African children and provide 90 million girls with primary education? Therefore, will the Government undertake to continue this pressure until a speedy solution is found to this problem, which is so desperately needed?

§ Lord Mackay of Ardbrecknish
My Lords, the noble Baroness very graphically underlines the problem, which can be helped greatly by a resolution of the debt problems in the poorest countries in the world. I can only underline what I have already said; namely, that as regards multilateral debt, we are doing our very best to bring to a successful conclusion the plans brought forward and supported by Kenneth Clarke to sell some gold, invest it in resources which will generate interest and use that to reduce the burden of debt on the poorest countries.

§ Viscount Brentford
My Lords, will my noble friend ensure that my right honourable friend the Chancellor of the Exchequer recognises that two issues are involved in relation to debt: the relief of interest on the debt and the cancellation of some of the debt which, frankly, will never be repaid by some of the less developed countries?

§ Lord Mackay of Ardbrecknish
My Lords, my noble friend has a point. Indeed, on bilateral aid, the United Kingdom has "forgiven", as the jargon puts it, over £1 billion-worth of aid loans. All our new aid to the very poorest countries has been on grant terms for many years in order to get round the problem to which my noble friend rightly draws our attention.

§ Lord Monkswell
My Lords, when will the Government institute in relation to poor people in this country similar policies to those which they apply with regard to poor countries? What plans does the Chancellor of the Exchequer have to alleviate the debt burden that is faced by some of the poorest members of our community?

§ Lord Mackay of Ardbrecknish
My Lords, I am not entirely sure whether the noble Lord has got this Question mixed up with the next Question. I do not think that there is any comparison between the poorest people in the countries that we are now considering and the least well off people in our own country.

§ Lord Judd
My Lords, does the Minister agree that it is wasting the British taxpayer's money to channel aid to those countries which have no chance of regenerating their economies unless the debt burden is relieved? 1750 Therefore, will the Minister assure the House that in the Government's strategy there is a determination to bring together both bilateral and multilateral measures because, unless there is a comprehensive approach, there is no way in which this issue can be resolved?

§ Lord Mackay of Ardbrecknish
My Lords, the noble Lord is correct. It is not just a question of multilateral debt, but of bilateral debt also. This country has given something like 15 countries a debt reduction of up to the limit of the 67 per cent. agreed under the so-called Naples Terms. My right honourable friend the Chancellor indicated last week that we would be prepared to go as far as 80 per cent., as did some other Ministers. We have to follow a twin-track approach of trying to help with multilateral debt through the IMF and other organisations, and of trying to help with bilateral debt also.