Response on Jubilee Debt “Pick up the Pace” Campaign
August 2008
Thank you for your letter to Douglas Alexander, about debt relief. I agree that poor countries need to spend more on essential services to achieve the Millennium Development Goals (MDGs).
The UK continues to lead international efforts in support of debt cancellation and poverty reduction for poor countries. We have provided generous relief on debts owed to the UK, and been instrumental in developing and implementing international debt relief initiatives such as the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative, and the Multilateral Debt Relief Initiative (MDRI). 23 countries have already had their debts cancelled in full and a further 10 countries are receiving interim debt relief, which reduces their debt service payments while they work towards qualifying for debt cancellation. These international debt relief initiatives have so far delivered over US $100 billion worth of debt relief to poor countries.
We agree that many poor countries require additional support with their debt payments in order to achieve the MDGs. This is why the UK has cancelled almost all old aid loans and billions of pounds worth of debt for countries not covered by the HIPC initiative. We wrote off £2.85 billion of Nigeria’s debt in 2006.
The majority of countries yet to have their debts completely cancelled are affected by conflict and poor governance. The international community has provided additional financing to help countries qualify, for example helping clear Liberia’s arrears so it now receives debt relief. Through our bilateral development programmes and with international partners, we work to build peace, strengthen governance and financial management, so these countries meet the standards required to ensure debt relief benefits the poor.
Under the UK-MDRI we offer relief for all the poorest countries not covered by HIPC. Recent changes in the eligibility criteria mean that 4 more countries are now benefiting (bringing the total to 12). There are only 14 other low-income countries not covered under the UK-MDRI or HIPC. These countries do not currently meet the criteria, but would receive support if their standards improved. We must be sure that the savings from debt relief will be used well.
You request for another US $400 billion of debt relief, much of which would be for Middle Income Countries. However, this would mean reallocating our budget away from poorer countries and the Government’s focus should remain on assisting them.
On the issue of conditionality, I agree that countries should lead their own development and conditions linked to aid and debt relief should not be used to impose policies on governments. However, we need to ensure that debt relief will be used well to benefit the poor. Countries therefore should demonstrate commitment to good financial management and poverty reduction before receiving debt relief.
Gareth Thomas
Parliamentary under Secretary of State for International Development
