I beg to move,
That leave be given to bring in a Bill to make provision for or in connection with the relief of debts of certain developing countries.
Debt remains a huge cause of concern for low-income countries in the wake of the covid pandemic and following rising inflation on food and fuel. Thirty-four African countries spend more on external debt payments than on their entire healthcare and/or education budgets. According to a report from the Send My Friend To School coalition, across low-income countries, debt servicing on net interest payments accounts for 60% of education expenditure. The latest figures for Africa show that the total external debt serviced by all African countries in 2024 was $104 billion. Over 45% of that amount, $47 billion, is owed to private creditors. To put that into perspective, the entire UK aid budget to Africa in 2024 was £993 million, or less than one hundredth of what African countries owe in external debt.
To use a specific example, this year the Kenyan Government will spend $5.149 billion on external debts, of which $2.981 billion will go towards external debt payments to commercial creditors. The UK provides Kenya with £45 million in aid, so in effect, UK aid is going towards helping service that debt. At a time when we have seen overseas development aid cut from 0.7% to 0.5% of GNI, we need to have an overview of the contribution that aid makes, rather than seeing aid in isolation. If we are truly serious about ensuring that UK aid goes further, debt relief from private creditors has to be addressed.
The G20 has identified debt as a problem for developing countries, and has taken some steps to address it. In November 2020, it created the common framework for debt treatments beyond the debt service suspension initiative. The intention was to allow low-income countries with unsustainable debt to use that framework to obtain debt relief, including from private creditors. Although well intentioned, the common framework has been ineffective, because it has no teeth. Private creditors have been unwilling to participate, and there is no process to ensure their participation. Consequently, while Governments were negotiating debt relief with low-income countries, private creditors were just going through the motions. One example is the in-principle agreement that Zambia made with private creditors, under which they would have been paid a third more than Government creditors, including the UK and China. Needless to say, the Government creditors vetoed that deal on the basis that there was no equal treatment of creditors as required by the common framework, leaving Zambia in limbo.
The four countries that requested debt treatment under the common framework experienced lengthy delays and a long, drawn-out process, with very little to show for all the time and effort spent on trying to obtain debt relief. Critics suggest that the failings of the common framework have been due to a lack of enforcement, a lack of a mechanism to co-ordinate creditors, a lack of transparent debt reporting, and an inability to prevent litigation and hold-out behaviour from creditors. The fact that only Chad, Zambia, Ghana and Ethiopia have used the common framework, and that none has seen any debt cancelled from private creditors, has shown how ineffective the common framework is and has put other countries off applying.