H.M. TREASURY NEWS RELEASE

HM Treasury News Release

213/99 21 December 1999

GOVERNMENT TO REMOVE BURDEN OF DEBT FROM POOREST COUNTRIES

Britain now pledged £5 billion in debt relief package

The Government is to lift the burden of debt owed to the UK by the world's poorest countries, the Chancellor Gordon Brown and International Development Secretary Clare Short announced today.

The commitment covers all debt owed to the Government's Export Credit Guarantee Department (ECGD) by the 41 Heavily Indebted Poor Countries (HIPCs), including debt which falls outside the terms of the multilateral debt agreements. Britain's debt relief package to the world's poorest countries now totals over £5 billion.

The Chancellor, speaking at a Downing Street seminar attended by religious leaders and heads of non-governmental organisations, said:

"For too long these countries have been weighed down by the shackles of an unsustainable debt burden. I want these countries to go into the new millennium free from these shackles and able to invest for the good of their people - in health and education.

"The UK has played a leading part in securing a multilateral deal on debt relief that will reduce the debts of these countries by two-thirds. The time is now right to take the extra step on our own and to lift the burden of the remaining debt owed to us. I have therefore taken the decision that we will remove the burden of debt to the UK government of all countries that come through the HIPC process.

"The Government is satisfied that the conditions of debt relief applied under HIPC are sufficient to guarantee that monies freed up will be spent on social programmes and poverty reduction."

The Chancellor said that he hoped other countries would match the UK's commitment and enable the world community to make even further progress on debt relief before the end of the millennium.

Stressing the link between debt relief and poverty relief, Clare Short said:

"Debt relief is crucial if we are to achieve the levels of poverty reduction to which we and the whole international community are committed. Through this new action Britain is continuing to lead international efforts to reduce the debt burden of the poorest countries and to ensure that the money saved will be spent on health and education services for some of the poorest people in the world."

The Chancellor also said that he expected the Boards of the International Monetary Fund (IMF) and the World Bank to be announcing later that day a timetable of the first countries to receive debt relief under the enhanced HIPC initiative early in the new year. The timetable, he hoped, would include early relief for countries such as Uganda, Bolivia and Mauritania and up to seven more countries to be brought forward before the IMF's Spring Meetings in April.

NOTES TO EDITORS

1. Today's seminar at Downing Street was attended by representatives of the Anglican, Catholic, Jewish, Muslims Sikh, Hindu, Methodist and United Reform faiths; by representatives of OXFAM, Christian Aid, the World Development Movement, CAFOD, Save the Children, Jubilee 2000 and by representatives of the World Bank and Commonwealth Secretariat.

2. The Chancellor's announcement of bilateral UK debt cancellation refers to the 41 countries classified as Heavily Indebted Poor Countries (HIPCs) by the World Bank and International Monetary Fund.

3. The HIPC Initiative reduces the overall debt burden of a country to a sustainable level, as defined by the new lower debt sustainability ratios adopted as part of the enhancements to the initiative agreed at the Annual Meetings in September 1999.

4. The total amount of debt owed by the 41 HIPC countries to the UK's Export Credit Guarantee Department is approximately £1.9 billion. This includes post-cut off date debt which does not fall eligible for relief under the terms of the HIPC initiative, but which is covered by the UK government's bilateral cancellation policy.

5. The cost of providing 100% debt relief will depend on a number of factors, including the timetable of countries coming through the HIPC process and the level of relief they receive to reach sustainability under the terms of the HIPC initiative.

6. The £300 million value of debt being removed is over and above the costs to the Export Credit Guarantee Department of the UK's participation in the multilateral HIPC debt relief initiative.

7. The UK is strongly committed to the multilateral debt relief initiative. The Government has pledged $385 million to the HIPC Millennium Trust Fund, which includes the UK's share of a 680 million euro pledge recently made by the European Union, on the UK Government's urging. The UK's contribution to the Trust Fund is the largest single pledge by a bilateral creditor nation.

8. If you have access to the Internet, you can find this news release and other Treasury material at www.hm-treasury.gov.uk.