Debt in Africa

Patrick Grady Excerpts

Tuesday 21st November 2023 Westminster Hall

[Patrick Grady (Glasgow North) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Vickers. I congratulate the hon. Member for Slough (Mr Dhesi) on securing what I think has been a very thoughtful and surprisingly theological debate, at a very timely moment in the context of the UK Government publishing their new White Paper. That White Paper presents a very welcome change of tone and perspective on issues of global development. I hope that the language of aid being a giant cash machine in the sky is consigned to the past, and that we can focus on moving forward in a much more constructive and consensual tone. I think that that has been reflected in the debate today.

The same is true of the memories of the Jubilee Debt Campaign, which of course had very deep theological roots of its own, given the biblical concept of a jubilee. I might say again at the end that this is a concept that we perhaps need to come back to. Like the hon. Members for Putney (Fleur Anderson) and for Rochdale (Tony Lloyd), I worked with very committed campaigners, some of whom are now constituents, who wrote to whoever their MP was back in the day and who continue to write to me all these years later, because they are so passionate and so motivated. It was such an effective campaign in so many different ways. It went from being Jubilee 2000 to the Jubilee Debt Campaign, and it is now known, as we have heard, as Debt Justice. That is part of a wider movement for a fair economy, for corporate justice, and for climate justice.

It is interesting that whenever the word “justice” is used in the White Paper, it is in the technical, juridical sense relating to a country’s justice systems, rather than in the sense of striving for just, equitable and more peaceful solutions to the challenges that face the modern world. As everybody has said, debt is now one of those biggest challenges. Africa’s debt is at its highest level in over a decade. That is frustrating and disappointing, given all the work and effort that went into setting up the mechanisms for Jubilee 2000 and the Make Poverty History campaign. Progress and huge strides were made for a variety of reasons. Some of those were beyond individual control—such as the likes of the pandemic—but some were very much within our control, such as the way in which multilateral organisations have continued to work, avoidable conflict and, of course, the impact of climate change and the need to respond so quickly, leverage finance and look around to wherever that finance can come from.

That has led to a change in the structure and composition of the debt. Previously, the debt was owed to official creditors, high-income countries and multilateral lenders like the World Bank and the International Monetary Fund, but now we see China holding a huge proportion of that debt and private creditors making up an increasingly large proportion, as well. At the moment, the debt is not subject to the kinds of structures that were put in place around the millennium, and the effect of that is that the cost of servicing the debt has also increased, and so developing countries in sub-Saharan Africa paid about $84 billion simply in debt servicing in 2021, with countries in the middle east and north Africa paying a further $45 billion. We have heard the expression “doom loop” on a number of occasions, from a number of Members, because that just builds and compounds and then has all the effects that a number of Members spoke of so powerfully, affecting the infrastructures of the countries.

The hon. Member for Slough and I were both in Malawi this year—I refer to our entries in the Register of Members’ Financial Interests—with the all-party parliamentary group on malaria and neglected tropical diseases. Malawi is one of those 21 African countries we heard about that are in, or at high risk of, debt distress. Its external debt effectively tripled between 2009 and 2021, and we can see the impact of that simply in the country’s inability to get moving; there is a need for infrastructure, and it is simply unable to leverage the resources.

As the hon. Member for Leicester East (Claudia Webbe) so powerfully said, we absolutely want countries to be able to realise the true potential of their riches. Africa is not a poor continent, and African countries are not poor; they are rich in resources and human potential, and yet that potential is not properly realised because they are not in a position to properly and fairly leverage that and they are tied to debt, especially unfair debt. As the hon. Member for Rochdale said, there is this idea of super-abundant extraction of resources through punitive interest rates and unfair deals, which simply compounds that cycle. The DRC should be the richest country in the world. Almost every single person in this Chamber walks around with a little piece of the DRC in our pocket, and yet it is one of the poorest countries in the world and, like so many other countries, it is saddled with debt.

We need fair trade, fair taxation, and a just and sustainable use of the continent’s resources. The responses that have been put forward so far clearly are proving to be inadequate. The analysis has shown that different mechanisms, such as the debt service suspension initiative that was set up in 2020 as a result of the pandemic, have not been fully utilised. The countries that applied to that scheme had an average of just 23% of their debts suspended. The remaining mechanism beyond the DSSI announced in 2020—the common framework for debt treatments—is also incredibly slow; only four countries have so far applied, and none of them has effectively seen any of its debt being cancelled.

Crucial to all of this, as we have heard from some of the contributions, is the lack of co-operation from private sector creditors, both blocking the progress of the countries that are applying and discouraging other countries from applying for those relief processes in the first place. Responsibility has to fall to the UK Government for a large part of this. There has to be multilateral initiative, and there have to be easier and fairer ways of accessing, financing and writing off or restructuring debt; but getting to the heart of this issue of how private companies are able to extract and apply debt is absolutely crucial. Even though the UK Government are not a massive creditor these days, some 90% of the bonds issued by countries eligible for these debt reliefs are governed by English law. The Government say in the White Paper that they want to pioneer new approaches to debt, so they should listen carefully to the proposals being put forward.

I was saying to a colleague earlier today that it is unlikely that legislation will come out of the White Paper, as it is really a statement of Government policy, but here we are in Westminster Hall a couple of hours later talking about firm proposals for legislation on the back of it, put forward by the Debt Justice campaign—the hon. Member for Putney spoke about those. They would have a number of practical effects, including easing the debt restructuring process by undermining the ability of minority creditors to hold out on agreements, easing financial settlements for debtor Governments in distress, increasing the speed of restructuring processes, reducing uncertainty for debtor countries and creditors, enabling borrowing Governments to access capital markets more quickly, and addressing the power imbalance between the single debtor country and often a large number of creditors.

It would be interesting and useful to hear the Minister commit at the very least to consult on what such legislation might look like and speak about how it could be taken forward practically. Of course, it would have to be taken forward in parallel, because there would not be much point in the UK legislating if all the debts transfer to another jurisdiction—New York is the other very popular area for binding these kinds of contracts. It would have to be an international initiative.

I wonder whether we need to think in the even longer term. The White Paper is supposed to take us to the sustainable development goals in 2030. The year 2000 was a jubilee year, which is a biblical concept—debts were written off and everybody had a fresh start—and Pope Francis has designated 2025 as a holy year of jubilee for the Catholic Church, but perhaps we need to think in the longer term about where we will be in the middle of the century. Will we continue in this doom loop, or will we seize the opportunity now to make progress towards the sustainable development goals and go beyond them to create a fairer, more just and more equitable system? Tackling pervasive debt absolutely has to be a part of that. As the hon. Member for Strangford (Jim Shannon) and others said—this is in the Debt Justice campaign material—people struggle with huge amounts of debt in the United Kingdom and other western countries. As the hon. Member for Leicester East said, we effectively end up in hock to incredibly powerful companies, and that affects the dignity of countries as a whole and the dignity and power of individuals.

If we do not rise to the challenge, the other goals—everything else in the White Paper and the sustainable development goals—will remain exactly that: goals and targets. They will never actually be realised because the money will continue to spiral and line the pockets of people who already have more than enough at the expense of people who do not even have enough to get by.

That is the challenge before us. This has been an incredibly thoughtful and useful debate, and I hope, in the new spirit of consensus that the Government have set today with the publication of the White Paper, that the Minister and the Labour spokesperson will respond appropriately, and that we can find just and sustainable solutions to the challenge of debt in Africa.