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International Debt

Oral Answers to Questions — Overseas Development – in the House of Commons at 12:00 am on 24th June 1996.

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Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South 12:00 am, 24th June 1996

To ask the Secretary of State for Foreign and Commonwealth Affairs what studies his Department has (a) commissioned and (b) evaluated of international debt as a factor in civil instability or conflict. [32634]

Photo of Mr Jeremy Hanley Mr Jeremy Hanley , Richmond and Barnes

We have no reason to believe that debt burdens have led to civil conflict, but there is a good deal of evidence to link economic problems with the breakdown of civil order. That is why we encourage Governments to implement sound policies that promote stable economic growth.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

Does the Minister agree—indeed, do the Government agree—that, in certain circumstances, debt can be a most potent, although hidden, form of slavery? Has his attention been drawn to the report of the Debt Crisis Network, appendix 2 and 3 of which point out that the conditions imposed on Rwanda and the former Yugoslavia by the International Monetary Fund were factors in exacerbating regional and ethnic differences, which contributed to the atrocities of which we are only too well aware? Will the Minister therefore send those appendices to the IMF, request the responses of our representative at the IMF and of its president and place their report and his own observations on it in the Library?

Photo of Mr Jeremy Hanley Mr Jeremy Hanley , Richmond and Barnes

I am grateful to the hon. Gentleman for his question, but I am not aware of the appendices to which he refers. If he will send them to me, I will study them and place my reply in the Library. Debt is only one of a number of factors that force Governments to spend less on social services and cause other problems. The primary cause of problems in countries with high debt is poor budget prioritisation and long-term economic mismanagement, leading to weak or negative economic growth. I am sure that the debt problem in the countries to which the hon. Gentleman referred was not one of the prime causes for the serious disasters from which they have suffered; in many countries, rapid population growth and weak public sector management are other factors. The important thing is to recover and to use debt sensibly, and I am proud of this nation's record of turning debt into aid and of forgiving debt.

Photo of Mr James Lester Mr James Lester , Broxtowe

Is that not all the more reason why we should continue to support the British Government and particularly the Chancellor of the Exchequer in his efforts to relieve multilateral debt in negotiations with the IMF and the World bank? The president of the World bank will attend a meeting in the House next week, at which, I hope, the positive steps for which we have all worked will be taken to anticipate and ease the problems of countries where multilateral debt is a severe restriction on the future.

Photo of Mr Jeremy Hanley Mr Jeremy Hanley , Richmond and Barnes

I agree very much with my hon. Friend. The British Government have written off the aid debts of 31 of the world's poorest countries: a total of £1.2 billion has been written off. All our aid to the poorest countries is now on grant terms so that their debt burden is not increased, and we have taken the lead in pressing for solutions to that burden.

The official bilateral debt of the poorest countries is now being rescheduled on Naples terms, and 18 countries have benefited so far. Last month, creditors wrote off some $500 million, more than 50 per cent. of Guyana's official bilateral debt. My hon. Friend referred, however, specifically to multilateral debt. The British Government have also taken the lead in pressing for more action on that, and significant progress has been made on agreeing a framework for action. We hope that progress at this week's G7 summit will lead to agreed measures later this year.

Photo of Miss Joan Lestor Miss Joan Lestor , Eccles

Although the recent increase in private sector investment in developing countries is welcome, it is not reaching the poorest African countries. As my hon. Friend the Member for Newham, South (Mr. Spearing) pointed out, those countries need urgent debt relief measures and high-quality assistance if they are to avoid some of the results and repercussions of debt. Bearing it in mind that the World bank itself has said that without debt reduction foreign investment will be discouraged, what plans has the ODA to rescue sub-Saharan Africa from its crippling debt problems? Will it discuss the matter with the IMF and the World bank?

Whatever the Government's record may be on trying to alleviate debt, some of the poorest countries are still suffering enormously from the burden that they carry. We need action now, not in a few years' time.

Photo of Mr Jeremy Hanley Mr Jeremy Hanley , Richmond and Barnes

I do not entirely agree. As the hon. Lady knows, Britain's aid programme is substantial, and is increasingly focused on the poorest countries in Africa and south Asia where the needs are greatest. We certainly do not ignore the countries of sub-Saharan Africa. In Africa, support for economic reform and social sectors remains a high priority. Our aid is concentrated on the poorest nations, and Africa benefits from that.