The UK tops a list of lender nations taking out more from the developing world than they put in, reports Richard Thomas in London
Britain is squeezing cash out of the world’s poorest countries by demanding levels of debt repayment far outweighing new loans or aid, according to figures published this week.
As representatives of the world’s richest creditor nations met in Paris on Monday to discuss initiatives intended to reduce the debt burden on the developing world, aid agencies say the first comprehensive analysis of lender countries undermines the British government’s claim to be at the forefront of the campaign to help the world’s poor.
A representative for Christian Aid said: “It is quite simply morally wrong that one of the world’s richest countries should be getting more money out of the world’s poorest than it puts in. The very last thing these countries need is to be shelling out like this.”
The European Network on Debt and Development (Eurodad) – a Brussels-based umbrella group including Christian Aid, Cafod and Oxfam – has undertaken the first country-by-country survey of the main creditor nations.
A copy of the research shows Britain has been a net recipient of cash from the Third World since 1981. The paper shows that, of the nations in the Organisation for Economic Co-operation and Development (OECD), only the United States has a longer record of taking more money from the developing world than it gives out.
The figures will add to pressure on the OECD member states to relax repayment schedules. The World Bank is trying to squeeze a commitment to more generous debt relief before the bank’s annual meeting in Washington next week, where a British-backed package to help “heavily indebted poor countries” (HIPCs) will be on the table.
The Christian Aid representative said: “This study throws into stark relief just how much needs to be achieved in the next week. Britain has a good record of taking the lead in negotiations, but in the end we have to put our money where our mouth is.”
An official at the Overseas Development Agency declined to comment on the Eurodad report before publication, but insisted the British government had a good record on aid.
Finance Minister Kenneth Clarke is prepared to increase the slice of outstanding loans that can be written off – now fixed at 67% – to 80 or 90%. But a number of lenders, in particular Japan, have refused to offer anything more than the possibility of more generous relief on a case by case basis.
An announcement on the HIPC initiative involving a trust fund to pay off debts is expected in Washington next week. The World Bank is lobbying the OECD nations for a more concrete commitment on cuts in bilateral debt.
The bank has pledged $2-billion to the HIPC initiative. But officials point out that the eligibility criteria stipulate that only debt accumulated before any loan rescheduling is eligible for relief. This would rule out many of the world’s poorest nations from significant assistance.
An internal World Bank paper issued this month estimates that even with an 80% cut- off, the eligibility rules mean that in practice only 17% of bilateral debt could be written off.
Christian Aid said that because many of the loans to poor countries were conditional on the purchase of British goods, Britain gained twice over. “We benefit from the increased exports, and then again from the interest on the loans given to buy these exports.”