Debt Relief (Hansard, 7 January 2003)

§ John Healey

The UK Government have been at the forefront of the international debate on debt relief issues, and continues to press for the rapid and full implementation of the enhanced Heavily Indebted Poor Countries (HIPC) initiative. Under the terms of the H1PC initiative bilateral creditors tyPlcally provide 90 per cent. debt relief. However, many creditors, including the UK, go further and provide 100 per cent. debt relief to qualifying countries.

In the provision of interim debt relief at Decision Point to reach a debt-to-exports ratio of 150 per cent. this additional bilateral voluntary debt relief is excluded. Subsequently at Completion Point if this debt ratio is greater than 150 per cent., perhaps due to new borrowing or weaker export prices, the initiative provides the option for further debt relief or 'topping-up'. Moreover, the UK has argued that we should be prepared to be proactive and flexible in providing this additional debt relief at Completion Point.

But at present this additional bilateral voluntary debt relief is included in the calculation of any 'topping-up' needed, and the net effect is that this additional relief benefits other creditors and not the HI PC. The UK believes that this additional relief should be excluded from the calculation of topping-up at Completion Point, and this would delineate more clearly the burden sharing between all creditors, both bilateral and multilateral, in the HIPC initiative.

This policy would ensure that this voluntary debt relief over and above HIPC terms would be truly additional. Moreover, it would provide an additional degree of support to vulnerable HIPCs facing the challenges of a global economic slowdown and weaker commodity prices.

However, even the provision of 100 per cent. debt relief to all low-income countries would still far short of the resources needed to fund the Millennium Development Goals (MDGs). It is our ultimate objective to make a lasting difference in the lives of the world's poorest people by achieving the MDGs, but debt relief is only part of the solution: the real issue is one of total resources. That is why the Chancellor has proposed an International Financing Facility to leverage significant additional resources from developed countries, to help achieve the 2015 MDGs. Increasing our support from $50billion currently to the $100 billion a year needed to meet the MDGs would transform the ability of countries to increase their investment in critical poverty reducing programmes. The UK Government will shortly be publishing a detailed proposal on the International Financing Facility.