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Indebted Poor Countries

Answer

The UK continues to be absolutely committed to the rapid and full implementation of the Heavily Indebted Poor Countries (HIPC) Initiative to ensure that it delivers maximum debt relief for the world's poorest countries.Many bilateral donors have joined the UK in providing 100 per cent. relief. However, multilateral institutions only provide relief at around half this level. The Chancellor and Secretary of State for International Development announced in September 2004 that the UK would pay our share (10 per cent.) of 100 per cent. debt service relief on all World Bank and African Development Bank loans for all post-Completion Point HIPCs. This relief will also be extended to all low-income countries with sufficiently robust public expenditure management to ensure it helps towards the Millennium Development Goals (MDGs).The Chancellor discussed this proposal at the G7 Finance Ministers in London in February, and in Washington in April, where the G7 agreed that further debt relief is needed, and to the principle of up to 100 per cent. multilateral debt relief. We are working with G7 countries, the IMF and World Bank to put this principle into action. Canada and the Netherlands have announced that they will join the UK in providing their share of multilateral debt relief. We continue to urge other countries to join us in providing additional multilateral debt relief.Iraq is not eligible for the Highly Indebted Poor Countries' Initiative. The UK is in the process of reaching a bilateral agreement with Iraq to implement the terms of the debt relief package agreed between Paris Club creditors and representatives of Iraq on 21 November 2004; Paris Club creditors, including the UK, agreed to provide a total amount of debt reduction to Iraq of 80 per cent. in three phases.For IMF debt, we believe the IMF's gold reserves are an under-utilised resource that could be used to finance further debt relief by the IMF. IMF analysis of debt relief and gold sales show that sales of the magnitude which would be required to finance the UK's proposal for debt relief could if properly phased be accommodated by gold markets without significant difficulty, and fall well within the bounds set by official sellers of gold in recent years.

Secondary information

Type

Written question

Reference

1724; 434 c291-2W;434 c293-4W

Session

2005-06

Subjects

Debts Developing countries Debts written off Iraq Heavily indebted poor countries initiative