International Monetary Fund

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 4th May 1989.

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Photo of Alistair Burt Alistair Burt , Bury North 12:00 am, 4th May 1989

To ask the Chancellor of the Exchequer when he last attended a meeting of the International Monetary Fund; and what was discussed.

Photo of Andrew Mitchell Andrew Mitchell , Gedling

To ask the Chancellor of the Exchequer when he last attended a meeting of the International Monetary Fund; and what was discussed.

Photo of Mr Nigel Lawson Mr Nigel Lawson The Chancellor of the Exchequer

I attended the interim committee meeting of the IMF in Washington last month. Much of the discussion focused on international debt, where several countries, including the United States, had made new proposals. The committee agreed that the IMF should set aside a portion of its lending to help finance debt reduction in countries which are pursuing appropriate economic reforms, including in particular removing barriers to inward investment. But the committee also stressed that official creditors should not substitute for private lenders.

Photo of Alistair Burt Alistair Burt , Bury North

I thank my right hon. Friend for that reply. May I urge on him the need to continue the step-by-step, case by case analysis of the debtor countries, as he will recognise that there is strong support from Conservative Members for careful consideration and good giving to those countries which are doing their best to improve their economic position, but that there is no support for giving to countries that refuse to learn the economic facts of life?

Photo of Mr Nigel Lawson Mr Nigel Lawson The Chancellor of the Exchequer

My hon. Friend is absolutely right. The conditionality which has always been a part of IMF lending and of other international financial institution lending under the debt strategy is absolutely vital. If these countries are not going to take steps to put their own economic houses in order, really they will get nowhere at all and any lending will be completely fruitless. In many cases it is the conditions attached to the loans, as a result of IMF programmes which these countries have to implement, which are more important than the amount of money that is being lent itself. I realise that in many countries they feel that, politically, it is very difficult to take the measures that are necessary, but the plain fact is that unless those measures are taken, they are never going to get their economies to recover.

Photo of Andrew Mitchell Andrew Mitchell , Gedling

While we all applaud the valuable efforts that have been made by the IMF in terms of Third world countries' debt reconstruction and relief and the considerable efforts made by my right hon. Friend in generating new ideas in that respect, will he treat with some scepticism the recent calls at the IMF sub-committee that quotas should be increased by up to 100 per cent., bearing in mind that at the moment IMF resources are at an all-time high?

Photo of Mr Nigel Lawson Mr Nigel Lawson The Chancellor of the Exchequer

Yes, my hon. Friend is right. There is really no case—no objective case, no logical case—for a substantial increase in IMF quotas. The International Monetary Fund is fully able with its existing resources to continue to do what it is necessary for it to do and I pay tribute to the work that it does do in order to pursue the debt strategy. But it is wrong to talk soley, or even mainly, in terms nowadays of the IMF because the overwhelming problem that is being addressed at the present time is the problem of the big debts run up by Latin-American countries, which are overwhelmingly debts owed to commercial banks in the private sector. This is a matter which the commercial banks have got to sort out with the countries to whom they have lent the money and they are going to have to accept that the amount of debt has got to be reduced and they have got to make themselves responsible for that debt reduction.

Photo of Mr Tony Worthington Mr Tony Worthington , Clydebank and Milngavie

The Chancellor should face up to the fact that our contribution to the Third world has fallen from 0·59 per cent. to 0·28 per cent. during the period of this Government and that many Governments who are in desperate circumstances have had responsible policies. Although the greater environmental consciousness of the Government nowadays is to be welcomed, the fact is that there will be no future for people in this country or anywhere in the world unless we assist Third world countries to deal with environmental and population issues. The Government will be harshly judged in the future for their callous attitude towards assisting countries with much worse problems than our own. Does the Chancellor agree?

Photo of Mr Nigel Lawson Mr Nigel Lawson The Chancellor of the Exchequer

No, I do not agree, not merely because we took the lead in the initiative to help the very poorest countries of sub-Saharan Africa—the very poorest countries in the world—with their debt problems. But further than that, in the first place what matters even more than economic aid, although we give a substantial amount of aid, is investment in those countries. The United Kingdom invests more in private investment in developing countries than the whole of the rest of the European Community put together. That is our record and it is a very good one. I shall say one other thing to the hon. Gentleman who has asked that question, and to Opposition Members: the two things above all that they need are private overseas investment—the Labour party has always been hostile to overseas investment of any kind—and the other thing is to open our markets to the goods from those countries and, again, it is the Labour party that has always been hostile to that.

Mr. John Smith:

What possible reason can the Chancellor give for halving overseas aid during the period of this Conservative Government? We are constantly told that the Government have an economic success, which many of us doubt, but if they do have an economic success, why can they not at least maintain the aid to the poorest countries instead of halving it, which the Chancellor must admit is what they have done?