HIPC Process (Hansard, 10 June 2004)

§ John Healey

The UK fully supports the cancellation of debt of the world's poorest countries through the Heavily Indebted Poor Countries (HIPC) Initiative. The UK was instrumental in securing international agreement to enhance the original Initiative in 1999, to ensure that as much debt relief as possible is granted to as many countries as possible. The UK continues to be a champion of the HIPC Initiative. We have provided commitments of £2.3 billion of debt relief to eligible countries and have pledged a total of US$474 million through multilateral institutions to support the Initiative further. The UK goes even further than is

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Estimated set-up running costs of the Financial Services Authority (FSA) were £14 million (FSA's annual reports for financial years 1999–00 and 2000–01). Outturn set-up running costs, relating to the new organisational structure of the FSA, were £13.2 million. A further £1.8 million was incurred in relation to the transfer of the UK Listing Authority function from the London Stock Exchange, which was not included in the original estimate. These costs were recovered from FSA fee-payers during the three years including and following N2 and so were not accounted for in the public finances.

In 1998–99, the FSA also incurred capital expenditure of approximately £37 million, to prepare the FSA's new premises in Canary Wharf, London. Annual depreciation is also being included in the amount charged to FSA fee-payers and is not accounted for in the public finances.

The overall outturn expenditure of the FSA since it was established (N2) was £69.1 million in the remainder of 2001—02, and £203.1 million in 2002–03. In addition, a £2 million deficit reduction contribution was made in 2002–03 to finance the FSA's pension scheme shortfall. The responsibilities of the bodies the FSA took on as successor, and the outturn expenditure of these bodies for the three financial years of their operation up to and including N2, shown in the table as follows. In addition, the FSA took responsibility for the UK Listing Authority function from the London Stock Exchange on 1 May 2000. Between 1 May 2000 and N2, FSA outturn expenditure in relation to this function was £17.7 million.

required under the Initiative, and is committed to providing 100 per cent. debt relief to eligible HIPC countries.

The HIPC Initiative is delivering real benefits to participating countries. it is providing over $70 billion of debt relief to the 27 counties which have reached Decision Point. It is helping increase annual social expenditure in countries receiving debt relief. Total social spending has increased by around $4 billion since 1999—equivalent to 2.7 per cent. of GDP. On average, health and education spending account for 65 per cent. of the use of HIPC debt relief.

However, there are countries forecast to exit the Initiative with debt-to-export ratios above the HIPC target of 150 per cent. because of factors beyond their control. The UK continues to push for additional relief to be granted to these countries at Completion Point 489W ("topping up" relief). We successfully campaigned for Niger and Ethiopia to receive such additional relief, resulting in over $800 million in additional relief for two of the world's poorest countries.

The UK also continues to lobby for a change in the topping up methodology to maximise the quantum of topping up relief. At present, the additional bilateral assistance (ABA) granted by some countries—including the G7—is included when calculating the amount of additional relief to be provided at Completion Point. We are pressing for this ABA to be excluded from this calculation, which could increase the quantum of debt relief delivered to HIPCs by around $1 billion.

We are also working closely with the IMF and World Bank as they finalise a new debt sustainability framework, which will govern all lending decisions for low-income countries, including those that have participated in HIPC. When operational, this framework will ensure that sufficient official finance is provided in the right blend of grants and highly concessional lending to aid future development without threatening long-term debt sustainability prospects.

However, all low-income countries will need additional aid to meet the Millennium Development Goals (MDGs). This is why the UK has proposed the International Finance Facility (IFF), which could provide the much-needed substantial increase in aid—in the form of grants, concessional loans, or further debt—needed to attain the MDGs without threatening the long-term debt sustainability of the world's poorest countries.