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Heavily Indebted Poor Countries

Treasury written question – answered on 29th April 2004.

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Photo of John Battle John Battle Labour, Leeds West

To ask the Chancellor of the Exchequer what representations he has made to the (a) World Bank, (b) IMF and (c) Paris Club creditors on increasing the debt cancellation available to the world's poorest countries, with particular reference to Iraq, through the heavily indebted poor countries process.

Photo of John Healey John Healey The Economic Secretary to the Treasury

The spring meetings of the International Monetary Fund (IMF) and the World Bank were held on 24–25 April 2004. All Paris Club creditors were represented at the meetings.

At the meetings, the UK stressed the importance of the Heavily Indebted Poor Countries (HIPC) Initiative in helping to provide a robust exit from unsustainable debt for the world's poorest countries. As part of this, the UK called for full topping up to be provided when countries face exogenous shocks, in order to bring their debt ratios back to the agreed HIPC thresholds. The UK also supported consideration of extension of the Initiative so that countries yet to enter the Initiative are able to benefit from HIPC debt relief. A number of countries—many of which are in the process of trying to exit conflict—have yet to reach Decision Point and benefit from HIPC relief. This could deliver an extra $30 billion in debt relief. Iraq is not eligible for the HIPC Initiative, and so will have relief for its external debt considered under the auspices of the Paris Club's Evian Approach. However, the Government's view is that Iraq's debt position is unsustainable and that a substantial reduction will be needed to restore them to sustainability. That is likely to require writing off the vast majority of Iraq's debts.

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