Debt in Africa

Tanmanjeet Singh Dhesi Excerpts

Tuesday 21st November 2023 Westminster Hall

[Mr Tanmanjeet Singh Dhesi (Slough) (Lab)]

I beg to move,

That this House has considered the matter of debt in Africa.

I am extremely grateful to the House authorities for allowing me to secure this crucial debate on debt in Africa. I intend to cover the essential points that demand our urgent action. Today, I stand before this Chamber to confront a crisis of global magnitude—the escalating debt crisis in African countries. This is not merely an economic issue; it is a humanitarian challenge that demands our immediate and decisive response. The way in which we address this crisis does not just reflect on our policies but on the core values of Great Britain on the world stage. This moment is more than a test of financial acumen. It is a testament to our commitment to human dignity and global justice.

The decisions that we make in Parliament have far-reaching implications, shaping the futures of millions. In our interconnected world, the fortunes of African nations are intrinsically linked to our own. The Labour party has a proud history of leading international efforts on debt cancellation and relief for the world’s poorest. We remain committed to international development. I feel our response to this crisis will define our legacy in international solidarity and moral leadership.

The situation in Africa is increasingly alarming. Currently, more than half of the continent’s low-income developing countries are either in debt distress or on the brink of it. Debt distress refers to a situation in which a country is struggling to meet its debt obligations. That figure has worryingly doubled since 2015, and looking ahead to 2024 and 2025, those countries will face debt repayments six times higher than their total debt servicing in 2021. This drastic increase is a result of several factors, including the covid-19 pandemic and global tensions—such as Russia’s invasion of Ukraine.

Having liaised with the shadow Foreign Office Minister —my hon. Friend the Member for West Ham (Ms Brown) —I am cognisant of the fact that the Labour party has long advocated for debt relief as a cornerstone of its foreign policy. It steadfastly believes that the resources of low-income nations must be directed towards enhancing the lives of their citizens rather than being drained by unsustainable debt repayments. Our perspective must be rooted in the principle that investment in infrastructure and public services is crucial—not just for Britain’s societal stability, but equally for countries across Africa.

We need to see a model where an increase in GDP in those nations translates into significant investment in their own societies and infrastructure. That approach counters a current trend where a substantial portion of their national income is funnelled into servicing external debts, often with stringent conditions attached. We should envisage a world where economic growth in African countries is harnessed for their own development, fostering stronger, more resilient economies and societies. It is a vision where international co-operation and fair debt practices replace the cycle of debt and dependency, allowing those countries to realise their full potential on the global stage.

If I now come on to the middle east and north Africa region, the contrast between the accumulating wealth of the few and the deepening debt of the many is stark. The richest 0.05% in the region, with wealth above $5 million, saw their wealth surge by 75% from $1.6 trillion in 2019 to $3 trillion by the end of 2022. That boom in ultra wealth comes on the back of every country in the middle east and north Africa region sinking deeper into debt. For instance, in Tunisia, public debt increased from 43% of GDP in 2010 to 80% in 2021. In Egypt, it increased from 70% to 90%.

In the light of the escalating crisis, I ask the Minister: what steps are the Government taking to work with international partners to address the debt crisis that some African countries are facing, including debt held bilaterally, multilaterally and by private creditors? A World Bank report has highlighted a 35% increase in debt interest bills for the world’s poorest countries, further strained by the pandemic and increased food import prices. I ask the Minister to elucidate the UK Government’s response to that alarming development.

The G20 common framework for debt treatments was designed to deliver a sustainable solution to lower-income countries’ debt vulnerabilities, but it has failed. Only four countries have so far applied for debt treatment. Of those, only Chad has reached an agreement with both its private and bilateral creditors. That agreement appears inadequate, and has been criticised for its failure to reduce Chad’s debt burden and make it sustainable. Another example is Zambia. It defaulted in 2020, but has not yet reached a comprehensive restructuring agreement. The failure of the framework to deliver necessary relief is largely due to private creditors’ reluctance to participate in debt restructuring.

As a significant funder of debt relief initiatives and a supporter of international financial institutions, the UK has a role in ensuring that private creditors participate in restructurings. Some organisations, such as Debt Justice, argue that without firm action, English courts may end up enforcing repayment on behalf of private creditors who are exploiting official debt relief initiatives. Those organisations argue that the reluctance of private creditors to agree to restructuring creates a domino effect where other large creditors also refuse to accept a loss. It leads to a slow, uncertain process that consistently fails to deliver effective debt relief.

Given those challenges, I ask the Minister: what proactive steps are the UK Government taking to engage with, and ensure the participation of, private creditors in the debt relief process? How are the Government planning to address the issues raised by organisations such as Debt Justice to prevent debt relief initiatives from being used to pay off other debts rather than investing in the country? The United Kingdom, as a key player in global finance, has a crucial role in shaping frameworks that govern sovereign debt contracts. My challenge to the Government is: what initiatives are being pursued to reform the frameworks and facilitate effective debt restructuring?

I will turn to the impact on women and girls, who are being disproportionately affected by the debt crisis in Africa. I am aware that many hon. Members will elaborate further on this topic. The crisis leads to a reduced governmental investment in vital public services such as healthcare, education and social services. It also has an impact on supply-side factors, affecting those who work in health and social care. Globally, women account for 67% of the health and social care workforce. As we strive for a society where women are empowered globally, it is important that we look at the consequences of the debt crisis and its impact on egalitarianism and progressive values. Clearly, if Governments do not have the funds to support the basic needs of their populations, women and girls in particular will suffer. I call on our Government to outline how our international aid policies are addressing the unique impact of this crisis on women and girls in Africa.

Beyond that, there would be no good or relevant debate without mention of our effort to combat climate change. The debt burden significantly impedes African countries’ abilities to adapt to a changing climate and mitigate the impacts of the climate crisis. As we know, reaching net zero is of critical importance for us all, here and around the world, and I know that the Labour party is doing all it can to acknowledge the impact that the climate crisis is having on African nations.

Sustainable development and climate resilience are urgent needs, yet the debt crisis presents a formidable barrier. I implore the Government to detail collaborative efforts, aligning debt relief with climate change mitigation and adaptation strategies in the countries that I am discussing.

I will now address the long-term consequences of the African debt crisis and the serious threat that they pose to development, poverty alleviation and progress towards achieving the sustainable development goals. The SDGs are fundamental pillars of the international organisations that the UK works so diligently to support.

Low-income countries trapped in a debt doom loop cannot access the transformational finance that would allow them to escape from extreme poverty, fight climate change and meet their global goals. So, I urge the Government to share comprehensive strategies for confronting those profound challenges.

This critical moment demands international solidarity and decisive action. The UK, along with other leading economies, must spearhead the search for fair and sustainable solutions. Therefore, I ask the Minister the question: how are the Government working with international partners to develop strategies for long-term economic stability and social wellbeing in African countries?

I understand from my hon. Friend the shadow Minister that a Labour Government will restore Britain as a trusted and long-term partner to tackle the great challenges of our time, to promote the rules-based order and to deliver transformational change with communities around the globe. In seeking to address the challenge of debt burdens and to foster sustainable and resilient economies in Africa, I say to hon. Members here in Westminster Hall and indeed the whole House that now is the time not to cling to existing strategies but to leave no stone unturned.

In conclusion, the gravity of the African debt crisis necessitates collective action. We must look beyond temporary fixes and address the systemic issues that are at play. I am sure that a future Labour Government will embrace a new approach towards development that is based on respect and a genuine partnership with the global south, which involves supporting its plans to eliminate poverty, tackle climate change and reach the global goals. However, we cannot wait for that future Labour Government; we must act now. So, I implore the current UK Government to act now to address the debt crisis facing African nations.

[Martin Vickers (in the Chair)]

I intend to call the Front-Bench spokesmen from 3.25 pm onwards. I have four other Members indicating that they wish to speak, so I would be grateful if they could bear that instruction in mind.

--- Later in debate ---

[Mr Dhesi]

It has been a pleasure to serve under your chairmanship, Mr Vickers, for what has been a thoughtful and emotive debate. I thank all hon. Members for their commendable contributions. My hon. Friend the Member for Putney (Fleur Anderson) drew on her enormous experience as a long-standing campaigner who has worked in the field, asking the Government for effective legislation to address the issues. The hon. Member for Strangford (Jim Shannon) spoke about how we need to help African countries out of their difficult patch. He spoke about having compassion and realism when restructuring debts, because the United Kingdom must be a supportive nation. The hon. Member for Leicester East (Claudia Webbe) spoke at length about the legacy of colonialism and the exploitation of mineral extraction. She said that wealth is not benefiting local people and asked for debt cancellation.

My hon. Friend the Member for Rochdale (Tony Lloyd), who has substantial knowledge and experience in this area, said that the debt crisis is real. In his eloquent way, he said that debt is an enslavement of future generations. He said that the battles against global poverty and other ills are being lost, that we must be a true partner to our African friends and that we must work together.

The SNP spokesman, the hon. Member for Glasgow North (Patrick Grady), mentioned our recent visit to Africa, where we looked into the effects of malaria and neglected tropical diseases, and at how the growth of African nations is being hampered. We spoke at length to other stakeholders about that. He spoke about the need for co-operation from private sector creditors that are charging higher interest rates, which the Government need to address.

The shadow Minister, my hon. Friend the Member for West Ham (Ms Brown), said that Africa has a young, dynamic population. She said that although the international development White Paper is a welcome sign, our collective plea is that the Government must show commitment and compassion to deliver.

We need to break the downward doom loop of debt in Africa. There is so much potential in Africa, but we must help our friends there—yes, our friends and fellow human beings—to achieve that aim.

Question put and agreed to.

Resolved,

That this House has considered the matter of debt in Africa.