Written Answers. - Debt Relief.
David Stanton
Question:
66
Mr. Stanton
asked the
Minister for Foreign Affairs
the position with regard to debt cancellation of heavily indebted poor countries; if he has communicated his policy to the World Bank and the IMF; his plans in this regard; and if he will make a statement on the matter.
[21609/02]
Róisín Shortall
Question:
75
Ms Shortall
asked the
Minister for Foreign Affairs
his views on a reform of the debt sustainability criteria of the enhanced initiative for heavily indebted poor countries to take account of a country's human development needs.
[21440/02]
Jack Wall
Question:
135
Mr. Wall
asked the
Minister for Foreign Affairs
the steps he intends to take to secure the cancellation of debts owed by the world's poorest countries, in regard to the comments made by the Minister of State committing the Government to the total cancellation of the debts of the heavily indebted poor countries; and if he will make a statement on the matter.
[21452/02]
I propose to take Questions Nos. 66, 75 and 135, together.
I refer the Deputy to the replies to recent questions on the issue of debt relief given by my colleague, the Minister for Finance, to Deputy John McGuinness on 24 October 2002, and Deputy Richard Bruton on 15 October 2002.
The heavily indebted poor countries initiative, or HIPC, launched by the World Bank and the IMF in 1996 seeks to lower the debts of 42 indebted poor countries to sustainable levels. Under the initiative the level of debt relief granted is related to defined debt sustainability criteria. These in turn are based on statistics such as debt to exports ratios. All Ireland Aid's programme countries except Lesotho are classified as heavily indebted.
By September 2002, 26 countries had qualified for debt relief amounting to $25 billion under the HIPC initiative. About half of this relief stems from a reduction in their debts to the World Bank, the IMF and regional development banks. The remainder comes from the cancellation of their bilateral debts to individual governments. Almost all of the major government creditors have indicated that they will write off 100% of the debts owed to them by the HIPC countries qualifying for debt relief. The debt relief granted to date translates into a reduction of 50%, on average, in the annual debt service payments of the HIPC countries, or annual savings of $800 million.
In July 2002, I launched a new debt relief strategy which had been agreed with the Department of Finance. This updates and develops the Government's position on the debt crisis which had been issued in September 1998.
The strategy raises a number of concerns about the operation of the HIPC Initiative, such as the adequacy of the existing level of debt relief and the projections and assumptions used in the calculation of sustainable debt levels. The Bank and the IMF have admitted that between eight and ten countries emerging from the HIPC process continue to have unsustainable debt levels.
In their efforts to estimate sustainable debt levels, the bank and the IMF have used optimistic assumptions, particularly about the future export revenues of the HIPC countries. The bank and the IMF have also focused on economic indicators, such as the value of exports, rather than on development indicators, such as the amount of money a country has available to spend on health and education.
Ireland also believes that the impact of HIV/AIDS on the economies of HIPC countries should be taken into account in assessing debt relief. In countries where almost one adult in three is infected, such as in Zambia, there clearly will be huge economic implications.
Based on the detailed analysis set out in the debt strategy, we have concluded that, in principle, the total cancellation of the debts of the heavily indebted poor countries is a politically acceptable objective and one that we would support. In our view, debt cancellation should be extended to those HIPC countries who are making progress in implementing economic reform and are committed to good governance. We believe any such cancellation should take place within the framework of the existing HIPC initiative, which has strong safeguards to ensure that the resources released through debt relief are channelled to social sectors, such as health and education, and are not abused.
We also stressed that debt cancellation should be funded entirely through additional contributions from donors. In our view, it would not be possible to fund debt cancellation, wholly or partially, from the resources of the bank and the IMF. Cancellation would, in effect, require faster progress by the larger donors towards meeting the UN target of 0.7% of GNP for overseas development assistance.
Ireland has never given development assistance in the form of loans and is not owed any money by the heavily indebted poor countries. We have, however, contributed generously to international debt relief efforts. In 1998, the Government announced a package of £31.5 million for debt relief in the form of contributions to multilateral debt relief funds at the World Bank and the IMF and to national debt relief funds in Tanzania and Mozambique. In 2001, we paid an additional £4.5 million to the World Bank earmarked for debt relief in Ethiopia. Our share of the EU contribution to the World Bank HIPC trust fund is €6 million.
I was in Washington last week where I had the opportunity to discuss a wide range of development issues, including debt, with the World Bank. I also briefed Canada, the leader of our constituency at the Bretton Woods Institutions, on our ideas. The Taoiseach reiterated our commitment in principle to debt cancellation in his address to the World Summit on Sustainable Development in Johannesburg in September. In October we participated in a World Bank meeting convened to discuss the current financing gap that has arisen in the HIPC trust fund.
Ireland Aid, in close co-ordination with the Department of Finance, will continue to promote our views on debt relief in all relevant international fora. In the coming months we will monitor closely developments in the HIPC process and participate actively in all relevant international meetings. Our debt strategy will guide us as we seek to ensure that the HIPC countries efforts to achieve the millennium development goals are not inhibited by a continuing high level of debt and that a sustainable exit from the debt treadmill is secured.
