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Developing Countries: Debts

Volume 487: debated on Thursday 5 February 2009

To ask the Secretary of State for International Development what measures his Department has put in place to ensure that new loans to poor countries do not result in unsustainable levels of debt, with particular reference to loans for initiatives to address (a) climate change and (b) food shortages. (253421)

The UK has led international initiatives to resolve the debt problems of the poorest countries and is committed to ensuring that they do not reoccur. We have worked to:

Develop the Debt Sustainability Framework (DSF) which helps countries to take informed decisions about new borrowing.

Ensure the DSF is used by the Multilateral Development Banks to determine whether their assistance to poor countries is in the form of grants or highly concessional loans.

Ensure that new ECGD-guaranteed lending to low income countries is consistent with the DSF and will contribute to their development, and secured agreement at the Organisation for Economic Co-operation and Development (OECD) that other Export Credit Agencies do the same.

One of our major responses to the challenge of climate change has been to set up the climate investment funds (CIFs). Low and middle income countries will benefit from these resources, and the CIFs will provide grants and concessional loans. For low income countries assistance will be consistent with the DSF.

DFID has committed £868 million in response to the food crisis. All of DFID's aid is given as grants and therefore does not contribute to debt accumulation. The World Bank allocated $1.2 billion (£840 million) to the global food crisis response programme. $200 million (£140 million) of this was in the form of grants for the poorest countries.