Finian McGrath
Question:107 Mr. F. McGrath asked the Minister for Foreign Affairs if the Government supports the campaign to cancel the debt of third world countries; and if he will make a statement on the matter. [5932/03]
Written Answers - Overseas Development Aid.
In July 2002, my colleague, Minister of State at the Department of Foreign Affairs, Deputy Tom Kitt, launched a new Ireland Aid-Department of Finance strategy on the issue of developing country debt. This updates and develops the Government's position on the debt crisis which had been issued in September 1998. The debt relief strategy indicates, inter alia, that the Government believes total debt cancellation to be a politically acceptable objective and one that it would support.
In our view, debt cancellation should be extended to those heavily indebted poor countries, HIPC, 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 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.
In 2002 we announced a three year funding commitment of €1.5 million to Debt Relief International, an intergovernmental organisation committed to helping poor countries manage their debts and negotiate with the international financial institutions.
Ireland's debt strategy also 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 HIPC initiative seeks to lower the debts of 42 indebted poor countries to sustainable levels and the level of HIPC debt relief granted is related to defined debt sustainability criteria, based on statistics such as debt to exports ratios.
However, the Bank and the IMF have admitted that between eight and ten countries emerging from the HIPC process continue to have unsustainable debt levels. Ireland believes that the bank and the IMF have used optimistic assumptions in their efforts to estimate sustainable debt levels, particularly about the future export revenues of the HIPC countries. The bank and the IMF have also focused on economic indicators, such as 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 will clearly be huge economic implications. Therefore, Ireland is also pushing for reform of the HIPC Initiative in relation to these issues.
In September of last year, the Taoiseach reiterated our commitment to debt cancellation in his address to the World Summit on Sustainable Development in Johannesburg. Minister of State, Deputy Kitt has promoted our debt strategy and our concerns about the effectiveness of the HIPC initiative in reducing debt to sustainable levels while in Washington in November last year and when Mr. James Wolfensohn, the President of the World Bank, visited Dublin in January this year.
My Department, 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 continue to follow closely developments in the HIPC process and participate actively in all relevant international meetings.