MPs to probe debt and development
27 April 2022
The House of Commons International Development Committee is starting an inquiry into one of the most serious issues faced by low-income countries – high levels of sometimes unsustainable national debt, much of which is owed to private sector creditors in high-income countries such as the UK.
Some countries spend more on servicing their debt than on developing adequate healthcare, education and social protection combined. In 2019, the UN children’s organisation, UNICEF, said 25 countries were in this situation.
High levels of debt limit countries' capacity to invest in the production of goods and services and in effective tax collection systems, both of which are required for sustainable development.
These are some of the reasons why the Committee is launching its new inquiry, Debt relief in low-income countries. The inquiry will also examine whether debt relief schemes traditionally aimed at low-income countries could or should be extended to middle-income countries, such as Ukraine.
For all countries, the Covid-19 pandemic has exacerbated economic problems and for the heavily indebted, the effects have often been dramatic. An International Development Committee report on the secondary impacts of the pandemic, published in January 2021, said that in some nations routine healthcare had ground to a halt and that vulnerable economies risked failure under rising levels of national debt.
Chair of the International Development Committee, Sarah Champion MP said:
“Debt repayments can be a silent killer. If they leech out routinely from the already severely stretched budgets of low-income nations, year after year, it can be devastating. That’s money which could be used for front line health services or building sustainable development.
“I’m looking forward to my Committee investigating the best ways the UK Government can help tackle this issue”
Scope of the inquiry
The new inquiry will look at different sorts of debt relief, such as rescheduling debt repayments on more favourable terms and ‘debt-for-nature' (conservation) swaps.
The inquiry aims to cover the following terms of reference:
- The current debt levels in low-income countries;
- The impact on development of high levels of debt – including the ability of countries to respond to climate change and the pandemic;
- An examination of where low-income debt is concentrated, and who holds the debt;
- Lessons learned from previous debt-relief initiatives such as the Highly Indebted Poor County (HIPC) Initiative, Multi-lateral Debt Relief Initiative (MDRI) and Debt Service Suspension Initiative (DSSI);
- How the pandemic has impacted debt levels, and the implications of the Debt Service Suspension Initiative closing at the end of 2021;
- The implementation of the Common Framework for Debt Treatment;
- The relative merits of debt cancellations compared with debt relief;
- The criteria used to determine eligibility for debt relief schemes, and whether this should be expanded to, for example, middle income countries;
- What role the UK Government could and should play in low-income debt relief – both through bilateral and multi-lateral initiatives; and
- The role of the private sector in low-income debt relief, the role of the City of London and UK financial system, and how private debt holders can be incentivised to participate in debt relief programmes.
The Committee will welcome evidence to inform its inquiry from a wide range of people. These may include experts, stakeholders, government leaders and officials - but we welcome contributions from anyone with insights. In this instance we will be gathering written information until a deadline of 2359 HRS on Friday 22 June 2022.
For information on how to submit written information to us, and how we then use that information, please click here. As well as taking written evidence the Committee will hold question and answer sessions. These sessions will take place in public and will be announced in advance on our website. The sessions can also be watched on parliamentlive.tv.
Image: Crown Copyright