Debt Relief: Ten years on
On 18 May 2008 a
Jubilee Debt Campaign event was held in Birmingham.
It marked the tenth anniversary of when 70,000 people joined together to form a ‘human chain’
around the G8 summit to campaign for debt cancellation for the world’s poorest
countries. They called for leaders to mark the new millennium by providing a new
beginning for the world’s poorest. Ten years on there are many achievements to
be proud of:
- In 1999 we secured faster, broader and deeper debt relief through the
- In 2005 at Gleneagles, under the UK’s Presidency, we won G8 agreement for the Multilateral Debt Relief Initiative (MDRI).
- Today, 33 countries are benefiting, with over $100 billion of unpayable debt written off.
- In Tanzania US$3.5 billion of debt relief has put 50% more children in primary schools, built 2,500 new schools and recruited 28,000 teachers.
- In Uganda US$2 billion of debt relief has helped eliminate user fees for healthcare and doubled the use of health services in five years.
More countries benefit from debt relief
The UK’s focus has not only been on HIPCs. UK leadership secured the largest
ever Sub-Saharan debt deal in 2005 for Nigeria. $1 billion a year now goes to a
poverty reduction fund instead of debt relief, and included in this are $167 million
for health and $143 million for education in 2006 alone.
The UK Government continues to believe that many countries, not just HIPCs, require additional support with their debt payments in order to achieve the MDGs. Under the UK’s Multilateral Debt Relief Initiative (UK-MDRI) we provide multilateral debt relief to poor countries not covered by HIPC that can use the savings for poverty reduction.
We have changed the UK MDRI eligibility criteria to provide a clearer focus on good public financial management. This enables more of the poorest countries to benefit from debt relief. Under the revised criteria four new countries (Bhutan, Lesotho, Samoa and Vanuaut) joined Vietnam, Georgia, Modlova, Nepal, Mongolia, Armenia and Cape Verde in benefitting from UK-MDRI. In 2007 in Vietnam, over US$10 million of debt relief provided through UK-MDRI helped rebuild schools and housing destroyed in the recent floods.
Tackling the threat of 'vulture funds'
The benefits of debt relief can be reduced by the actions of so-called ‘vulture funds’ (companies which buy up the debt of poor countries and then sue for the full value of the debt plus interest). The UK Government has made concerted efforts to tackle this problem and secured international agreement on the need for action. To reduce the risk of debts falling into the hands of vulture funds we have been working with the World Bank to help poor countries buy back their commercial debts at a deep discount through the Debt Reduction Facility (DRF). Read more on DFID's response on Debt Relief and Vulture Funds
Last year we provided £1.8 million to assist with Nicaragua’s US$ 1.3 billion commercial debt buy-back operation at 4.5 cents in the dollar. This operation eliminated over two-thirds of all reported court judgements against Completion Point HIPCs.
Last May, the UK called for assistance from the DRF to be available earlier for HIPCs, a position supported in February by G7 Finance Ministers, and agreed last month by the World Bank Board. We will provide up to £10 million for future DRF country operations to help tackle the threat of Vulture Funds. In addition, with strong UK support, the Board of the African Development Bank has agreed to promote the establishment of an independent Legal Support Facility to advise countries on how best to tackle vulture fund activity.
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Last updated: 9 October 2008
