Developing World: Debt Reduction

Lord Hamilton of Epsom Excerpts

Tuesday 13th February 2024 Lords Chamber

[Lord Cameron of Chipping Norton (Con)]

One of the most important ways to counter it is by offering an alternative, so that when countries are developing there are other offers on the table. That is why the expansion of British International Investment—what used to be the Commonwealth Development Corporation—is so important. We are also countering it through the expansion of the multilateral development banks, and in our White Paper we demonstrate how we can expand their balance sheets and get them to lend more. However, the noble Lord makes a very good point: if we look back 10, 15 or 20 years, when we were running debt forgiveness programmes to help highly indebted countries, we see that it was mostly Paris Club countries such as France, Germany, Britain and America that were responsible for the debt, so if we wanted to write it off then we could. Now that so much of the debt owed is to China, which does not believe in debt write-offs, we have to find other ways of delivering restructurings to help those countries which have got into trouble.

[Lord Hamilton of Epsom (Con)]

My Lords, if we write off the debt of these developing countries, what is to stop them running up more debt in future?

[Lord Cameron of Chipping Norton (Con)]

As ever, my noble friend makes a very good point. If we look back at the successful programmes that there were, such as the heavily indebted poor countries initiative, we see that they helped, but many of those countries have gone back into debt—although the situation is not as bad as it was before: the debt-to-GDP ratios in very indebted countries is some 60%, whereas it had got to 100%. One of the best things we can do for those countries is to help them to have better fiscal systems so they can raise their own taxes. I know that noble Lords like a Rwanda update: we have been working with that country since the 1990s and helped it to increase its tax revenue tenfold, and its ratio of tax to GDP has doubled from 8% to 16%, the highest in the region. That is a better thing to do in many instances than lending those countries money.