Heavily Indebted Poor Countries Initiative (Hansard, 19 January 2004)

§ Hilary Benn

On 1 September 2003, the International Monetary Fund (IMF) published a working paper entitled "Fiscal Sustainability in African HIPC Countries: A Policy Dilemma?" The paper focuses on the link between fiscal policy and debt sustainability. The authors concluded that, without more international assistance in the form of grants or private non-debt financing (such as foreign direct investment), Governments would need to raise taxes or scale down social spending programmes in order to maintain sustainable fiscal positions in the face of possible adverse shocks. The authors noted that the paper's conclusions were sensitive to assumptions on growth rate, interest rate, and exchange rate dynamics.

This problem has already been recognised by the World Bank and International Monetary Fund (IMF), and the UK is pressing for additional relief at HIPC Completion Point, where necessary, to ensure that countries have sustainable external debt levels. On longer-term debt sustainability, the UK welcomes the report being prepared by the World Bank and IMF on ensuring debt sustainability for low-income countries, including HIPCs, while enabling them to access sufficient finance for their poverty reduction strategies. We hope to reach agreement on the appropriate policy response at the spring meetings of the World Bank and IMF in April.

We also recognise that, in order to meet the Millennium Development Goals, an additional US$50 billion a year until 2015 is required from the international community. That is why the UK's proposal for an International Finance Facility is so important. It could provide the much-needed substantial increase in resources that debt relief alone would not achieve.