Treasury ‘key blocker’ of UK-led debt relief programmes to help developing countries

TThe UK Treasury has consistently presented a significant obstacle to UK-led efforts to make debt systems fairer for developing countries, advocacy groups and MPs have said IndependentIt limits progress on an issue that many believe is vital to achieving global development goals. foreign aid cuts.

Following global shocks such as the Covid-19 pandemic, low-income countries are now 18 percent 3.3 billion people live in countries that spend more on debt repayments than on health and education. Countries are also paying billions of dollars more to pay down their debts than they receive in aid to combat the climate crisis

But momentum is building behind efforts to push the government to do more to help developing countries facing debt crises. NGOs including Christian Aid, Catholic Aid for International Development (CAFOD) and Save the Children have made debt relief an advocacy priority in the UK, while civil society groups report that at least 30 MPs have raised the issue, especially after the economic hit many countries have taken. aid cuts. Minister of Development Baroness Jenny Chapman there is also described Debt relief is seen as a “key international priority”.

Last month, Labor MP Bambos Charalambous introduced a private member’s debt relief bill for the second time, which aims to take advantage of the fact that, as a result of the power of the City of London, around 90 per cent of developing country debt eligible for G20 debt relief is legally domiciled in the UK.

The bill would require private lenders. Increasing share of developing countries’ debt – Negotiating in good faith when a country seeks to restructure its debts. It would also allow countries to suspend debt repayments and halt creditor lawsuits while negotiations continue.

Current debt relief processes are largely voluntary and have been widely criticized for being too slow. Last year, South Sudan – one of the poorest countries in the world where many people live living on the brink of starvation – was also sued in the UK Supreme Court by a private for-profit lender after the country fell behind on its payments.

However, as momentum builds behind calls for debt relief legislation – with many seeing the UK’s G20 presidency next year as a key opportunity to turn debate into action – aid groups said: Independent The treasury emerged as a significant obstacle to progress.

“We are in constant contact with around 30 backbench MPs and key ministers who are keen to push this agenda, and they are telling us that the Treasury is the key blocker on debt relief legislation,” says Jennifer Larbie, Christian Aid’s head of advocacy in the UK.

“The UK government committed to doing something about this in its manifesto, and we constantly remind government ministers of this,” he adds. “But the reality is that things are not moving fast enough for the countries facing this crisis.”

Mr Charalambous, the Labor MP, added: “With benefit cuts and multiple crises, the UK has the opportunity to support communities around the world without costing UK Taxpayers a penny. The Treasury needs to get behind my bill for a better, fairer debt system and not stand in my way.”

Ms Larbie says private lenders have been lobbying the Treasury not to introduce debt reform legislation and there is currently a reluctance to oppose the demands of these financial institutions in the City of London, which are major players in the UK economy. “So who does the Treasury really work for: the countries in crisis or the private creditors who make millions off their misery?” Ms. Larbie adds.

CAFOD chief economist Maria Finnerty adds that MPs have described the Treasury under Rachel Reeves as “driven by the will of the City” and says there is little appetite for senior Treasury ministers to get seriously involved in introducing debt legislation.

A common response to calls for debt relief legislation is that it will weaken creditors’ willingness to lend money in the future. But Ms Larbie rejects this claim, saying the evidence suggests debt restructuring could help restore countries’ access to capital markets in a more sustainable way. There is also the IMF defended that debt restructurings “could permanently restore market access.”

Another common argument is that losses suffered by private creditors could eventually affect pension funds and other savers who put their money into developing country bonds. But Ms Larbie says Christian Aid is in private discussions with investors who believe it is possible to restructure debt in a way that protects pensioners while providing meaningful debt relief.

Maria Finnerty, of CAFOD, said: “There is no evidence to support the government’s unduly cautious approach. Fear-mongering from City of London financial firms claiming that legal action will reduce lending to low-income countries is not new.” Independent.

“It is therefore extremely disappointing that the Labor government has so far refused to introduce a new Debt Fairness Bill that could solve the debt crisis affecting the lives and livelihoods of hundreds of millions of people at zero cost to UK taxpayers,” he says.

In response, a Treasury spokesman said: “Tackling unsustainable sovereign debt is a key international priority. We are working with our international partners across the G20 and beyond to help tackle debt vulnerabilities and deliver debt relief to countries in need.”

“We are committed to an international financial system that supports development outcomes and helps low-income countries solve their debt problems.”

This article was produced as part of The Independent. Rethinking Global Aid project