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Low-income Countries: Debt Cancellation

I beg to move,

That this House has considered debt cancellation for low-income countries.

It is a pleasure to serve under your chairmanship, Ms McVey. In the late 1990s and early 2000s, the momentous Jubilee 2000 debt campaign brought together people from all walks of life, trade unions, churches, community groups, and even the odd rock star and celebrity, with the sole purpose of demanding debt relief for the world’s poorest countries, which are suffering extreme poverty caused by debt payments. The campaign was a resounding success and resulted in more than $130 billion of debt cancellation for 36 low-income countries, equating to an average 75% debt reduction for each country, allowing them to invest in health, education systems and other public services.

Although the Jubilee 2000 campaign was widely celebrated, and world leaders felt that some good had been achieved, it later became clear that the symptom had been dealt with but not the cause. The current state of affairs is alarming. The World Bank’s latest international debt report stated that developing countries spent a record $1.4 trillion to service foreign debts, and that interest payments alone have soared by nearly a third to $406 billion, leaving many developing countries having to cut vital services, such as health, education and environmental programmes. The pressures are felt most greatly by the poorest and most vulnerable countries, which paid a record $96.2 billion to service their debt in 2023. Of that, $34.6 billion was in interest alone—a staggering fourfold increase on the figure a decade ago. Indermit Gill, the World Bank Group’s chief economist, said:

“In highly indebted poor countries, multilateral development banks are now acting as a lender of last resort, a role they were not designed to serve. That reflects a dysfunctional financing system”.

According to a report on the global debt crisis published recently by the Catholic Agency for Overseas Development, 3.3 billion people now live in countries that spend more on debt servicing than on health and education, and the most food-insecure countries have seen the highest increases. Debt servicing is expected to consume 55% of low-income countries’ budgets in sub-Saharan Africa by 2025.

A definition of insanity is doing the same thing over and over again, expecting a different result. When countries such as Ghana and Sri Lanka end up having to receive a 17th International Monetary Fund bail-out package, it is clear that things have to change.

A complicating factor in dealing with debt relief is the role of private creditors, which have exploded on to the international debt scene since the success of the Jubilee 2000 campaign. Today, 61% of global sovereign debt is owed to private creditors such as hedge funds, asset managers and investment banks. Private lenders’ terms and conditions are often far more onerous than those of multilateral lenders, leaving low-income countries at the mercy of exorbitant interest rates and quick repayment schemes.