HC Deb 11 April 1989 vol 150 cc421-2W
Mr. Andrew Smith

To ask the Chancellor of the Exchequer whether Her Majesty's Government support the initiative by United States Treasury Secretary Nicholas Brady to provide debt relief to major Third world debtors.

Mr. Lilley

The United Kingdom welcomes the recognition that the next phase of the debt strategy can give greater emphasis to debt reduction. It believes that this should not require a transfer of risk from the private to the public sector.

Mr. Andrew Smith

To ask the Chancellor of the Exchequer what action Her Majesty's Government intend to take, in support of the Brady initiative, to persuade British banks to reduce the debt and the debt service of major Third world debtors.

Mr. Lilley

The interim committee of the IMF encouraged the Governments of creditor countries to review the extent to which tax, regulatory and accounting systems might unnecessarily constrain the participation of commercial banks in debt reduction. It does not appear that such obstacles arise in the United Kingdom, but the United Kingdom has agreed to review its policies in these areas. G7 Ministers agreed that concrete negotiations on debt and debt service reduction are a matter for the debtor countries and the commercial banks.

Mr. Andrew Smith

To ask the Chancellor of the Exchequer if Her Majesty's Government will support a United States initiative to increase the resources of the International Monetary Fund and the World Bank so that greater debt relief can be provided for major Third world debtors.

Mr. Lilley

Secretary Brady has not proposed that the resources of the International Monetary Fund or the World Bank should be increased. A general capital increase at the World Bank of $74.8 billion was agreed in February 1988. The United Kingdom share was $3.7 billion. The interim committee has asked the executive board of the IMF to complete its work on the ninth review of quotas with a view to a decision by the board of governors before the end of this year.

Mr. Andrew Smith

To ask the Chancellor of the Exchequer, following the International Monetary Fund riots in Venezuela, whether it remains the Government's policy only to assist major Third world debtors who comply strictly with International Monetary Fund adjustment policies.

Mr. Lilley

The United Kingdom fully supports the internationally agreed strategy for middle-income debtors which involves the adoption by debtors of appropriate strong adjustment policies supported by the IMF and World Bank in conjunction with the provision of finance by creditors. Economic reform is vital to this process, which aims to restore growth and creditworthiness. The United Kingdom is playing an important role through its financial support to the international financial institutions, through Paris Club reschedulings and the provision of new export credits, and by maintaining and encouraging an open trading system and a favourable world economic environment.

Mr. Andrew Smith

To ask the Chancellor of the Exchequer when Her Majesty's Government anticipate that positive flows of resources to the major Third world debtors will be resumed.

Mr. Lilley

Future resource flows to the major Third world debtors will depend in large part on the efforts of the countries themselves to repatriate flight capital and attract inward direct investment. The OECD estimates that in 1987 net resource flows to developing countries as a whole less net investment income paid by these countries were positive by $30 billion.

Mr. Andrew Smith

To ask the Chancellor of the Exchequer what information he has on what percentage of the pre-tax profits of British banks was accounted for by debt servicing and repayments by major Third world borrowers in each of the last five years.

Mr. Lilley

Data are not collected centrally in the form requested.