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HM Treasury News Release

3/00

11 January 2000

UK BANS EXPORT CREDITS FOR UNPRODUCTIVE EXPENDITURE TO 63 COUNTRIES

The UK is to ban export credits for unproductive expenditure to 63 of the world's poor countries the Chancellor Gordon Brown announced today.

The ban, the sequel to the 100% debt relief for the poorest countries announced before Christmas, is designed to maximise the benefits of debt relief in poverty reduction and economic development in the countries concerned.

The ban will cover 63 countries including the 41 Heavily Indebted Poor Countries and will be extended indefinitely and now be widened to cover all countries defined by the World Bank as 'IDA only' - a further 22 countries who can only borrow from the World Bank on highly concessional terms.

Speaking at the Gilbert Murray Memorial Lecture in Oxford, the Chancellor called on other countries to follow Britain and outlined a strategy for linking debt relief, poverty reduction and economic development. He said:

"Britain's export credits will only support productive investment that assist social and economic development and thus reduce poverty. Britain's ban will only fully achieve its aim if is applied by all exporting countries.

"I urge all countries to ban export credits for unproductive expenditure in the 63 IDA only countries and join us in banishing forever the spectre of unproductive unpayable debt."

The ban follows on from Britain's temporary two year ban, which has just expired, to the 41 most Heavily Indebted Poor Countries.

The Chancellor called for all nations to benefit from more global social inclusion and set out action in four key areas to allow all countries to participate in the opportunities of the new global economy. He said:

"This year 2000 we must set ourselves a new task: instead of the new vicious circle of debt, poverty and economic decline, we must seek to establish a new virtuous circle of debt relief, poverty reduction and economic development."

Those four key areas are:

*delivering the enhanced debt relief;

*ensuring the link between debt relief and a new approach by countries and the international financial institutions to poverty reduction strategies, supporting this by new approaches to transparency, surveillance and the provision of aid;

*recognising that true escape from poverty is in sustainable and equitable economic development, based on a new economic paradigm with the right conditions for this development; and

*recognising that education for all is central to all of this, with the creation and sustenance of human capital is both a means and an end for the virtuous circle of debt reduction, poverty alleviation and economic development.

The Chancellor said:

"To achieve our goals we need to move beyond the economic and social assumptions of the past two decades and require a new understanding of what makes for sustainable economic development.

"Debt reduction and aid on their own are just not enough. They could simply lead to millions of pounds flowing to prestige projects that do nothing to relive poverty or to corrupt regimes and to military excesses that destroy rather than build for a better future.

"Only when combined with the right economic and social policies which are essential to sustainable economic development, can debt relief be the catalyst for the true release from poverty."

The Chancellor emphasised that there must be a true link between debt relief and poverty reduction and set out four key tasks to ensure that effective delivery:

*a continuation of the current significant changes in the culture and operations of the IMF and World Bank;

*measures to build skills of individuals in Government and civil society of these countries to implement and participate in the process;

*a partnership with the NGOs on the ground, in as many countries as possible, to provide support and objective monitoring; and

*vigilance in ensuring that resources are not wasted on unproductive expenditure.

The Chancellor said:

"This would be one of the most worthwhile investments that can be made, not just ensuring the integrity of the poverty programmes in the short term, but in empowering the poorest to build a better future for themselves."

NOTES TO EDITORS

The full text of the Chancellor's Gilbert Murray Memorial Lecture is available from the Treasury Press Office on 0171 270 5185.

The 63 countries affected by the ban are listed below.

If you have access to the Treasury website you can find this news release and other Treasury information at http://www.hm-treasury.gov.uk

THE EXPORT CREDITS BAN WILL COVER:

Tonga Vanuata
Maldives Kiribati
Cape Verde Samoa
Bolivia Albania
Sri Lanka Guyana
Djibouti Solomon Islands
Honduras Cote d'Ivoire
The Gambia Kenya
Lao People's Dem Rep Togo
Vietnam Zambia
Uganda Central African Republic
Rep of Yemen Sudan
Cambodia Sao Tome and Principe
Madagascar Mali
Burkina Faso Rwanda
Chad Mozambique
Nepal Rep of Congo
Cameroon Lesotho
Guinea Senegal
Haiti Mauritania
Mongolia Ghana
Nicaragua Benin
Comoros Bangladesh
Tajikistan Angola
Tanzania Eritrea
Malawi Niger
Guinea-Bissau Burundi
Sierra Leone Dem Rep of Congo
Ethiopia Afghanistan
Bhutan Liberia
Myanmar Somalia
Equatorial Guinea