Committees

MPs to quiz Government officials on pressing problem of debt in low-income countries

28 October 2022

In the final session of the International Development Committee’s inquiry into debt relief in low-income countries, MPs seek the UK government’s perspective on debt relief issues. As overall responsibility for UK debt relief policy sits with HM Treasury, rather than the Foreign, Commonwealth and Development Office (FCDO), the Committee will hear from representatives of both departments.

Purpose of the session

Close to 60% of the world’s poorest countries, many in Sub-Saharan Africa, are in or near ‘debt distress,’ according to the International Monetary Fund in 2022. This figure was just over 20% in 2013.

External debt payments for low-and-middle income countries are higher than at any point since 2001. Fast rising interest rates are pushing up borrowing costs, decreasing fiscal space and driving countries into or closer to debt distress.

Although the lower income countries that face a severe debt crisis represent little more than three percent of the global economy and 18% of the world’s population, recently the United Nations Development Programme reported that these countries account for more than half of people living in extreme poverty.

A country is in ‘debt distress’ when it is unable to fulfil its financial obligations and debt restructuring is required. As well as harming the country’s growth and investment prospects, defaulting on debt can incur higher borrowing costs and risk market access.

Debt relief is a policy lever that is used support international development. The International Development Strategy, published under the previous Foreign Secretary in May 2022, makes little direct mention of debt relief. However, it does promote the UK as a source of finance for lower income countries.

MPs are likely to explore:

  • The development impacts of high levels of debt in low-income countries
  • How the UK can use its influence to tackle unsustainable debt in low-income countries
  • Options for incentivising private sector engagement in debt relief schemes, including if necessary, through legislative means
  • The potential of debt-climate swaps to address the twin debt and climate crises.

Witnesses

At 2.30pm, Tuesday 1 November 2022, Committee Room 8, Palace of Westminster

  • Rachel Turner, Director for International Finance in the Foreign, Commonwealth & Development Office
  • Veda Poon, Director of International Finance, HM Treasury
  • Edward Wilson, Head of the International Debt and Development Finance Unit, HM Treasury

Further information

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