§ Harry CohenTo ask the Chancellor of the Exchequer what his estimate is of the impact of a 1 per cent. rise in world interest rates on the debt of the world's poorest countries; how the extra debt burden would be met; and if he will make a statement. [169147]
§ John HealeyThe bulk of the debt of the world's poorest countries is contracted at fixed interest rates on concessional terms. For example, concessional loans from the World Bank and African Development Bank carry a service charge of three quarters of 1 per cent. This would mitigate any rise in world interest rates.
Nevertheless, the potential for a rise in interest highlights the importance of full implementation of the Heavily Indebted Poor Countries Initiative, both through postponing or abolishing the HIPC sunset clause to ensure that all eligible countries are able to benefit from debt relief, and through providing additional topping up relief wherever external factors—such as a change in the interest environment—have weakened a country's ability to service its debt, as was the case with Niger and Ethiopia recently.
This is why the International Finance Facility is so important. Ensuring long-term debt sustainability will require donor countries to make available significant additional resources in the form of grants rather than loans. IFF resources could also be used to provide further debt relief.
§ Harry CohenTo ask the Chancellor of the Exchequer what his policy is towards whether a country's debt burden accumulated under a brutal dictator should be written off; what representations he will make at forthcoming international financial fora meetings on this issue; and if he will make a statement. [169143]
§ John HealeyThe Heavily Indebted Poor Countries (HIPC) Initiative is helping to provide a robust exit from unsustainable debt for the world's poorest countries, regardless of how that debt is accumulated. As part of this, the UK is calling for full topping-up to be provided when countries face exogenous shocks, in order to bring their debt ratios back to the agreed HIPC thresholds. The UK also supports consideration of extension of the Initiative so that countries yet to enter it are able to benefit from HIPC debt relief. A number of countries—many of which are in the process of trying to exit conflict have yet to reach Decision Point and benefit from HIPC debt relief. This could deliver an extra US$30 billion in debt relief. HIPC debt relief is delivered through the Paris Club of official creditors.
For countries facing external financing difficulties, but who are not eligible for the HIPC Initiative, the Paris Club's Evian Approach was adopted in October 2003 with the aim of tailoring solutions to each debtor's 1114W specific circumstances. Iraq is likely to be one of the first countries to benefit from a comprehensive debt treatment under the Evian Approach.