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Debts: Developing Countries

Volume 457: debated on Tuesday 6 March 2007

To ask the Chancellor of the Exchequer what steps he has taken to stop vulture funds from profiting from the debts of developing nations. (122754)

I share the hon. Member’s concern about the actions of vulture funds. The UK wants all creditors to join the multilateral debt workouts and urges all creditors of heavily indebted poor countries (HIPCs) to offer at least the debt relief agreed under the HIPC Initiative. The UK has been actively involved in assisting HIPCs to fight aggressive creditors though a number of channels. The UK has:

supported the World Bank’s International Development Association (IDA) Debt Reduction Facility, which provides funds for countries to buy off commercial debts at significant discount, thereby reducing the potential for litigation (since its establishment, this facility has provided support to extinguish around $8 billion of debt in low-income countries, including $3.8 billion of external commercial debt principal owned by HIPCs);

provided bilateral technical support and including financial support for legal services to the Zambian authorities through the Zambia Task Force of Corruption, to help them fight their recent court case;

provided around £4.5 million (and pledged further funds) to fund capacity building for debt management in developing countries, which will help to avoid these problems in the future;

encouraged the African Development Bank to develop a Legal Assistance Facility, which would—among other things—offer advice to HIPC countries facing litigation;

worked with our international partners to ensure that the IMF and World Bank raise public awareness of this problem by tracking and releasing data on lawsuits, litigations and settlements;

agreed, with our G20 partners, a set of Principles on Fair Debt Restructuring, which ensuring greater co-ordination between sovereign and commercial creditors and focus on transparency, sharing of information, good faith actions and fair treatment.

To ask the Chancellor of the Exchequer what assessment he has made of the impact of vulture funds on the effectiveness of international aid to assist debt relief. (122755)

By depleting the resources of developing countries’ governments, these companies reduce the funds available for poverty-reducing expenditures on services such as health and education. The British Government have led the way in helping to cancel the debts of heavily indebted poor countries (HIPCs). We have exceeded our commitments under HIPC, cancelling 100 per cent. of debts owed to the UK. However, the success of international debt relief initiatives depends on the participation of all creditors providing the debt relief these countries need.

The IMF publication “Initiative for Heavily Indebted Poor Countries (HIPC) and Multilateral Debt Relief Initiative (MDRI)—Status of Implementation” published in August 2006 and available at

http://www.imf.org/external/pp/longres.aspx?id=3887

provides the most up to date analysis of the scale of litigation.