CONSERVATIVE
New Forest East

TREASURY – POOR COUNTRIES' DEBT PAYMENTS [65898] – 28 June 2020

Dr Julian Lewis: To ask the Chancellor of the Exchequer, if he will takes steps to assist the 77 poorest countries to meet the (a) challenges and (b) effect of the covid-19 pandemic by (i) cancelling the bilateral debt payments already suspended for 2020 between those countries and the UK for 2020 and 2021, (ii) encouraging the (A) World Bank and (B) IMF to cancel such payments, (iii) discouraging other UK creditors not to initiate legal action against any of the 77 poorest countries that default on their 2020 and 2021 debt payments and (iv) initiating an international arrangement for the restructuring of the debts owed by those countries to render their future payments economically sustainable.  [65898]

[Due for Answer on 2 July.] 

ANSWER

The Economic Secretary to the Treasury (John Glen): The Chancellor joined his G20 counterparts to commit to a temporary suspension on debt service repayments from the 77 poorest countries under the debt service suspension initiative (DSSI). The DSSI extends to the end of the 2020, but the G20 will review the possibility for extension later this year, based on advice from the International Monetary Fund (IMF) and World Bank Group (WBG).

At Budget, the Chancellor announced a leading contribution of up to £150m to the IMF’s Catastrophe Containment and Relief Trust, which will provide the world’s poorest countries relief on IMF repayments. The WBG has made available significant amounts of new finance to help countries counter the effects of the pandemic, ensuring net positive financing flows to all DSSI eligible countries. For the poorest countries at high risk of debt distress, support from the World Bank’s International Development Association is provided on grant terms and does not add to debt vulnerabilities.

The Chancellor and his G20 counterparts called upon commercial creditors to participate in the DSSI on comparable terms to the official sector on a voluntary basis. It will be important that developing countries do not see their access to international capital markets become too costly or restricted as mobilising private finance will be essential for crisis recovery and long-term sustainable development.

The DSSI provides time to assess what further assistance for may be needed for these countries on a case-by-case basis. If debts do require restructuring, the UK will work with the Paris Club of official creditors, IMF, and WBG to support equitable debt reductions to long-term sustainable growth.