Debts Written Off: Developing Countries

Treasury written question – answered on 26th July 2021.

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Photo of Helen Hayes Helen Hayes Labour, Dulwich and West Norwood

To ask the Chancellor of the Exchequer, what (a) assessment he has made of the potential merits of cancelling debt for low income countries to help them prepare for the effects of climate change and (b) discussions he is having with private financial institutions on this issue.

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

Tackling climate change is a key priority for the UK. Holding the G7 and COP26 Presidencies this year, the UK is seeking to increase global climate action and help to deliver the long-term transition to a net zero, resilient and environmentally sustainable global economy. We recognise that governments’ existing fiscal pressures have been exacerbated by the pandemic, impacting countries’ abilities to pursue their development priorities, including the increasingly urgent and evident issues of climate change and biodiversity loss. The UK has committed to double our International Climate Finance to at least £11.6bn between 2021 and 2025, and we are working with partners to ensure the wider $100bn target is met in June. G7 Finance Ministers committed to increase and improve our climate finance contributions through to 2025, including increasing adaptation finance and finance for nature-based solutions.

We are also pushing for action on debt sustainability as constrained fiscal space and debt vulnerabilities can frustrate efforts to invest in climate action. That is why the UK fully supports the extension of the Debt Service Suspension Initiative to the end of 2021 and is committed to the success of the G20’s Common Framework. Under the Common Framework, private sector creditors will be required to implement debt restructurings on at least as favourable terms as official creditors. We regularly work with our international partners in the G7, G20 and Paris Club on debt issues, including private sector participation in debt restructurings. We also engage with the private sector through the Institute of International Finance (IIF) at Paris Club meetings.

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