§ 22. Ann McKechinTo ask the Chancellor of the Exchequer what assessment his Department has made of the impact of the HIPC debt relief initiative in delivering a sustainable exit from debt for all eligible countries. [85270]
§ John HealeyThe 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 Heavily Indebted Poor Countries (HIPC) initiative.
466WThe Treasury closely monitors Highly Indebted Poor Countries' throughout the process of the HIPC initiative and follows their progress with International Monetary Fund (IMF) programmes.
Indeed, when the spring 2002 meetings of the IMF and the World bank highlighted the threat to debt sustainability from the global economic slowdown and weaker commodity prices, the UK argued strongly that we should be prepared to be proactive and flexible in providing additional debt relief at Completion Point—the stage at which countries have their debts irrevocably cancelled to ensure a robust exit from unsustainable debt.
In a speech to the United Nations General Assembly Special Session in May, the Chancellor called for richer countries to provide a further US $1 billion to the HIPC initiative to finance more realistic and generous debt relief. And at the recent IMF/World bank meetings in Washington, the international community agreed the need for up to $1 billion of further debt relief for Highly Indebted Poor Countries. So I am pleased to confirm that the UK, joined by 16 other donors, have so far made firm commitments totalling $850 million to the HIPC Trust Fund. And EU member states have called on the Commission to make a contribution through the European Development Fund. This will benefit 26 Highly Indebted Poor Countries.
Debt sustainability over the longer term is an issue that goes beyond the financing of the initiative though. At their summit meeting in Kananaskis in June 2002, G7 leaders asked the IMF and the World bank to prepare a comprehensive review of debt sustainability, and going forward asked them to ensure that forecasts of debt sustain ability are made on the basis of prudent and cautious assumptions about growth and exports.
We are determined that the HIPC initiative should provide a robust exit from unsustainable debt. That is why we have been forcing the debate on the use of voluntary additional bilateral debt relief. Although under HIPC rules creditors are typically only required to provide 90 per cent. relief on bilateral debts, many bilateral creditors (including the G7 countries) provide additional relief to 100 per cent. on a voluntary basis.
This extra relief is currently being included in the calculations of any additional debt relief provided at Completion Point to ensure countries exit the HIPC initiative with a debt to exports ratio of 150 per cent. This means that currently G7 countries are effectively subsidising other creditors. The UK has proposed that voluntary additional debt relief should be excluded from calculations, and this would clearly define the burden sharing among all creditors, both bilateral and multilateral, in support of the HIPC initiative.
Moreover it would mean that this additional voluntary debt relief would be truly additional, and allow countries to exit the process in a more favourable position than the agreed sustainability threshold. We are currently working to build international support for this policy.