Draft International Development Association (Multilateral Debt Relief Initiative) (Amendment) Order 2017 Draft African Development Fund (Multilateral Debt Relief Initiative) (Amendment) Order 2017 Draft International Development Association (Eighteenth Replenishment) Order 2017

Debate between Rory Stewart and Nadhim Zahawi

Monday 20th November 2017 General Committees

[Rory Stewart]

I cannot promise to do that off the top of my head. The broad answer is that the World Bank divides into two halves. With regard to the IBRD and non-concessional loans, which are not what we are talking about today, some of those go to middle-income countries; we would expect them to be the larger middle-income countries. The IDA, which we are talking about, and which is the concessional arm, will focus on the lower-income countries. We would expect large amounts of that money to go to Nigeria, Ethiopia and Pakistan; they are very large examples of non-middle income country recipients. That is where we want to direct increasing amounts of the IDA’s funds.

The other two statutory instruments are about multilateral debt relief. I remind everybody that many of the poorest countries in the world ended up in huge amounts of debt—very heavily indebted. By the 1990s, many of the poorest countries of the world were spending most of their taxation revenue on trying to pay off debts accumulated by previous Governments. By the late 1990s, we realised that probably the most useful thing the developed world could do was forgive that debt, giving countries the chance to get off the ground again and to start to spend money on the provision of services—education and heath in particular. It was the former right hon. Member for Kirkcaldy and Cowdenbeath who drove that process through, and at the Gleneagles summit in 2005 we, along with other countries, committed to playing our role in debt relief.

The Committee will not be surprised to hear that the amount we have put into debt relief in the international community is again around the 13% to 14% margin; that represents both our commitment to aid and the size of our economy. These statutory instruments are part of ongoing obligations determined by a previous Government in 2005, but continued by that Labour Government and by the coalition Government. Now, our Government continue to fulfil these long-standing obligations that a British Government took on, with the rest of the international community, to forgive the debt of these states.

That is not enough in and of itself. We have also put new processes in place to ensure that as those countries get money again, it is invested back in education and health, rather than going to building up more debts. We need to be particularly careful, because since the 1970s and 1980s when they accumulated the debts, the nature of international finance has changed. Increasing numbers of private sector actors in China, India and the City of London could be lending large amounts of money—there could be eurobond offers, for example, from the City of London—without the kind of conditionality that would have come with the previous debts. That could lead to countries again accumulating a large debt burden that it would be difficult for us to deal with.

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

The Minister mentioned that our contribution to the IDA is about 13%. Will he put that into perspective? Are we top five? Top three? Who is No. 1?

[Rory Stewart]

The answer is that we are currently No. 1. That does not mean that we are the No. 1 international development donor in the world—countries such as the United States and Germany give more development aid than us—but in terms of our contribution to this mechanism, and our focus on the poorest countries in the world, Britain is leading the way in the world, and that gives us a very special influence over the use of the funding.

There are three statutory instruments before us. The first is about replenishing the World Bank’s IDA instrument, in line with the House’s practice for nearly 15 years. That money is directed towards some of the poorest people in the world, through probably the most effective multilateral development institution in the world. The multilateral debt relief instruments come out of the 2005 Gleneagles agreement, in line with the actions of the Labour Government, the coalition Government and this Conservative Government, to ensure that some of the most heavily indebted, poorest countries in the world are able to get a clean start.