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Overseas Aid: Debt Burden

Volume 570: debated on Tuesday 19 March 1996

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2.47 p.m.

What are the implications for their overseas aid and development strategy of the deliberations on multilateral debt at the most recent IMF and World Bank meetings.

The Minister of State, Foreign and Commonwealth Office
(Baroness Chalker of Wallasey)

My Lords, the British Government are at the forefront of discussing multilateral debt in all relevant international fora. The World Bank and the IMF have important roles in contributing to the solution. But debt relief alone is not enough. There must also be continuing economic policy reform to promote sound growth. That is essential for effective and sustainable poverty reduction strategies.

My Lords, will the Minister join me in welcoming the recent decision by the IMF and the World Bank to recognise that many countries have a debt problem which is simply not capable of being resolved? At the forthcoming spring meeting of the IMF and the World Bank, will the Government urge those two bodies to take rapid action to reduce the burden of debt on many of the poor countries?

My Lords, I certainly agree with the noble Lord, Lord Dubs, that it is very welcome that the IMF and the World Bank are both now moving in the right direction with suggestions being put to the different meetings in April and the meeting of the development committee. Some shareholders still remain to be convinced of the ideas which are being advanced. We shall continue to debate and lobby for a solution to the problem of multilateral debt at the April meeting.

My Lords, does my noble friend have any news in relation to the discussions regarding replenishment of the International Development Assistance?

My Lords, I am delighted to announce that today in Tokyo the negotiations on the replenishment of IDA were concluded successfully. That means that the United States will not contribute to the first year of the package, but it will clear its arrears to IDA 10 and will pledge 800 million dollars a year for the following two years. That is very good news. If we achieve the right results at the spring meetings I believe that many countries will have a much brighter future.

My Lords, I welcome the news about IDA; I believe that it will be welcomed on all sides of the House. However, the proposals in the solutions paper apply only to eight countries. Will the Minister push for more of the 41 highly indebted countries to be included in the proposals?

My Lords, I shall be very happy if we can make progress, first, with eight and then go on to deal with the remaining 33. We need to get the principles established as regards solving the problem of multilateral debt before overloading the whole system. We have made good progress as a result of the efforts of my right honourable friend the Chancellor of the Exchequer on bilateral debt; we have made some progress on commercial debt; and we now need to make real progress on multilateral debt.

My Lords, does my noble friend the Minister agree that, in the past, much of our overseas aid was misdirected and, in some recipient countries, misappropriated? Is she aware that the emphasis now on giving aid for managerial expertise is to be welcomed? Is not the increase in private investment to third world countries also to be welcomed when those countries need trade, not aid?

My Lords, I can assure my noble friend that Britain's development assistance has not been misdirected. Indeed, we have been at the forefront in monitoring and evaluating our aid to ensure that it was not misdirected or misapplied. We have extended our systems to other bilateral and some multilateral donors to make sure that their assistance is not misapplied. I agree with my noble friend that the wider use of managerial experience from this country and others to put right the inabilities of civil servants and politicians alike in some developing countries is most welcome. The great increase in private investment flows to developing countries means that many are now much more able to get involved in real trade, provided that the developed countries do not bar that trade with themselves.

My Lords, does the Minister accept that we on this side of the House congratulate her and her colleagues on the part they played in bringing about the replenishment of IDA? That is splendid news. Will the Minister also accept that we are full of goodwill for the lead which she and her colleagues are giving on debt generally? However, at the spring meetings, can she say whether the Government will give priority to ensuring that the IMF plays its part by selling some of its gold stock towards debt relief as proposed by the Chancellor of the Exchequer a year ago? Will the Government also ensure that meetings are held soon between multilateral and bilateral creditors to work out a meaningful strategy for the most severely affected countries?

My Lords, the answer to the noble Lord's first two questions is, thank you. The answer to his third question is that, of course, we are going to work away at that possibility. We have to persuade other colleagues who are not yet fully convinced of the need for the sale of the gold that that is the right way to go. So far as concerns the overall plan to reduce debt and help countries to stand on their own two feet, the noble Lord knows full well that we are 100 per cent. behind that aim.