International Debt (Hansard, 3 November 2003)

§ Mr. Edwards
To ask the Secretary of State for International Development what assessment he has made of the proposals for the establishment of an international body to supervise the investment of cancelled debts. [135063]
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§ Hilary Benn
The Government believe that all proceeds from debt relief should be channelled through nationally-owned poverty reduction strategies. These plans, drawn up by the countries themselves, set out how all aid flows—not only debt relief but also grants and loans—will be spent in order to maximise poverty reduction. So far, 46 countries have developed full poverty reduction strategies, and a further nine are in the pipeline. The Government believe that this form of national ownership is important, and that it would be inappropriate to pass this responsibility on to an international body.

§ Mr. Edwards
To ask the Secretary of State for International Development what conditions his Department places on aid to developing countries to ensure responsible and sustainable expenditure in future when debt has been cancelled. [135067]

§ Hilary Benn
Debt relief must be linked to poverty reduction. Each country that has qualified for debt relief under the Heavily Indebted Poor Countries' (HIPC) Initiative must develop and implement a nationally-owned and led poverty reduction strategy. This strategy forms the framework for spending all donor resources, not only debt relief. This improves aid effectiveness and ensures the maximum possible impact on poverty reduction.
Governments in HIPC countries lead national processes to develop Poverty Reduction Strategy Papers (PRSPs), in participation with civil society. These strategies set out the policy act ions Governments propose for reducing poverty.
Together with the World Bank and the IMF, we have been ensuring that PRSPs are costed and priorities are reflected in medium term expenditure frameworks and the annual budget. Annual progress reports and regular budget reviews provide the principal mechanisms for assuring ourselves that all aid, and savings from debt relief, are channelled in ways that have the greatest impact on poverty reduction.