Thank you for contacting me about UK efforts to provide debt-relief in low income countries and the International Development Committee's (IDC) recently published report on this topic.
I understand that the Government has responded to the IDC's recent report, including their recommendation on consulting on the introduction of legislation to compel or incentivise participation of private creditors in the Common Framework.
As explained in the report, multilateral international finance institutions (MFIs), such as the World Bank and the International Monetary Fund (IMF), remain the core source of external finance for low-income countries. The UK is a member of the World Bank Group, IMF, and six regional development banks that lend to developing countries.
In the 1990s, the International Monetary Fund and the World Bank developed schemes to help low-income countries with unsustainable levels of debt restructure or eliminate debts, including the Heavily Indebted Poor Countries (HIPC) initiative. Set up in 1996, the HIPC was the first significant international initiative to tackle global debt, aiming to strengthen the links between debt relief, poverty reduction and social policies. I am encouraged that the UK has provided debt relief worth £650 million through this scheme.
In addition to being a significant contributor to the HIPC, the UK has consistently championed debt relief in recent decades and has taken a leading role in many international debt relief schemes and initiatives. Indeed, the UK exercised its influence at key international meetings to advance the Heavily Indebted Poor Countries (HIPC), such as the UK's presidencies of the G8 and the European Union in 2005. Furthermore, by promoting the 100 per cent of eligible debt relief by multilateral institutions, the UK led international efforts to create the Multilateral Debt Relief Initiative (MIDR) and has provided debt relief worth £1.4 billion. Collectively, under the HIPC and MIDR, around US$130 billion in debt was cancelled for 26 countries between 1998 and 2010.
There is no doubt that the events of the Covid-19 pandemic and Russia's illegal and unjustified invasion of Ukraine have compounded the debt crisis. In response, the global community acted swiftly in establishing the Debt Service Suspension Initiative (DSSI) by the G20 in May 2020. This initiative saw international governments agree to temporarily suspend debt repayments owed to them by 73 low- and lower middle-income countries that requested the suspension. Running from May 2020 to December, 48 out of 73 eligible countries participated in the initiative, providing approximately $12.9 billion of temporary fiscal space to enable the world's poorest countries to respond to the crisis.
More recently, to deliver a long-term, sustainable solution in delivering lower-income country debt vulnerabilities, the G20 and the Paris Club endorsed the Common Framework. Members, the UK included, pledged to co-operate on debt treatments for 73 countries eligible for the DSSI at their request. I am aware of recommendations from the IDC regarding the Common Framework and I will be sure to follow developments regarding the IDC's inquiry closely.
Thank you again for taking the time to contact me.