Debt relief in low-income countries: UK Government must bring the fight to a global stage

• Government response: Debt relief in low-income countries

The Committee has now published the Government’s response to its recent report calling on the UK Government to lead global action to ‘unclog the international gears’ of debt relief for low-income countries held back by the soaring costs of servicing debt.

Low-income countries are spending staggering amounts on servicing unsustainable debt at the expense of achieving Sustainable Development Goals. In Zambia, external debt repayments exceeded health and education budgets in 2021. Yet Zambia and other low-income countries have been unable to break out of debt purgatory due to the failings of the Common Framework.  Every dollar spent by low-income countries on servicing unsustainable debt is a dollar not spent on providing basic healthcare, educating girls or tackling climate change. 

One of the major barriers facing low-income countries is the lack of participation by private creditors in debt relief schemes. Given the prominence of English law, and the success of previous legislation, the Committee called on Government to consult on the introduction of legislation to bring them to the table. The Government’s refusal to even consult on the introduction of such legislation, arguing that such measures would be “complex", has dismayed MPs. 

Meanwhile, in the US, the state of New York is considering a law that would change conditions for developing countries restructuring sovereign debts. It would force commercial creditors, including bondholders, to give the same relief as lender governments and help streamline agreements between lenders and borrowers renegotiating terms following defaults.

Chair's comment

The Chair of the International Development Committee, Sarah Champion MP, said: 

“The UK Government is refusing to accept the one, virtually cost free, intervention that would make the biggest difference to the poorest countries.

“The Government dismisses our proposal to bring private creditors to the table as “complex,” and says it may lead to unintended consequences. However, this is exactly why we called on them to consult on such legislation before deciding whether it should be introduced. The Government’s preferred approach of relying on “market-based solutions” is not working, and it is not good enough. 

“Now we see the US moving in this direction and the UK must not falter. The UK has a strong reputation in this area and must continue the drive for action, breaking down barriers and chivvying international partners towards consensus on how to alleviate the debt burdens which prevent progress on the everyday necessities such as health and education. The UK must stay in the driving seat.” 

Further information

• Read the Committee’s report: Debt relief in low-income countries, published in March 2023  
• Read the speech by the Minister for Development, Andrew Mitchell MP, to Chatham House in April, setting out the future of international development 
• Further details on the New York State Senate Bill, relating to New  York state’s support of international debt relief initiatives for certain developing countries.

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