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Developing Countries’ Debt: Private Creditors

Volume 677: debated on Wednesday 10 June 2020

What discussions she has had with her international counterparts on requiring private creditors to cancel debt owed by developing countries during the covid-19 pandemic. (903052)

What discussions she has had with her international counterparts on requiring private creditors to cancel debt owed by developing countries during the covid-19 pandemic. (903057)

What discussions she has had with her international counterparts on requiring private creditors to cancel debt owed by developing countries during the covid-19 pandemic. (903059)

The UK, the G20 and the Paris Club will suspend debt repayments from the poorest countries due this year. My right hon. Friend the Chancellor of the Exchequer and his G20 counterparts have called on private sector creditors to do likewise. At the World Bank spring forum, my right hon. Friend the Secretary of State for International Development amplified that call, along with other World Bank governors.

Happy birthday, Mr Speaker. Following comments from the UN Secretary-General in recent weeks on the increase in allocations of its special drawing rights currency to give countries more access to funding, what is the Secretary of State doing to get an SDR issuance agreed multilaterally? Will she support the UK and other rich countries transferring some of their allocation to poorer countries?

Last time, the allocation was split, and I am sure we would want it to be used by developing countries if special drawing rights were exercised. That could be part of the solution, but as the hon. Gentleman knows, 85% of the banks need to agree, and the US effectively has a blocking right, which means that this is perhaps not a short-term solution but one to work on over time with international partners.

I welcome the Government’s role in the G20’s suspension of bilateral debt payments due in 2020 from the world’s poorest countries, as well as their donation of £150 million to an IMF debt relief scheme used for covid-19. However, the World Bank is yet to take action on debt relief, despite that being one of the most important things we can do to support developing countries in this global pandemic. Can the Minister tell me what actions the Government will take to ensure that the World Bank moves to cancel debt payments, to support the world’s poorest?

I thank the hon. Lady for recognising the work that has already been done on suspension and relief. That will perhaps be looked at again, in terms of private sector relief and expanding either the data or the amounts of both those schemes, before looking at cancellation issues, which will have a longer-term impact. We need to focus on solutions that will help immediately and leave longer-term solutions for the longer term, but that is still very much on the table. I would not want to leave the House with the impression the World Bank is doing nothing. The international development banks overall are putting $200 billion into developing countries over the next 15 months as a result of the covid crisis.

Have a wonderful birthday, Mr Speaker. The coronavirus is having a significant impact on developing countries. The economic impact of the crisis is very severe. Poor countries face a debt crisis unlike anything we have seen. Their finances have been decimated by the global crisis, with private creditors exploiting the debt. The commitments made by the G20 at the spring meetings were a great start in reducing countries’ debt burdens. However, does the Minister agree that suspension is not enough and that it will lead to a further debt crisis in two years’ time? Does he agree that what countries urgently need now from the G20 is the cancellation of debt payments?

The hon. Lady is right that suspension on its own is not an adequate response, but it was the right response to make immediately. She mentions the private sector. The Institute of International Finance is already working with the 450 main private sector lenders and put in place the terms of reference 10 days ago. The private sector, far from being abusive, can join that debt suspension. There will be a case potentially for extending that period and extending relief more generally, and we will continue our discussions with Her Majesty’s Treasury on that. Ultimately, for some countries, cancellation may be an option, but we have to remember that 50% of countries were struggling even before covid.