This is a helpful reply which recognises the key issues facing countries in debt crisis, and the UK’s role in addressing the crisis. It suggests your MP is supportive of using legislation to make uncooperative private lenders – or ‘vulture funds’ – take part in debt relief, as part of the efforts the UK government should be making to lead on international debt relief efforts. It does not explicitly say that your MP would support legislation, so it would be helpful to gentle lobby them – ideally in person – to further increase their commitment to tackling this issues.
Below are a few short responses to specific things the response says:
What they say: “I agree that the debt crisis in low-income countries is clearly diverting resources away from public services and health systems. Before the coronavirus pandemic, debt was already a significant issue. The IMF states that 36 of 70 low-income countries were at high risk of debt distress or already in debt distress and the pandemic then pushed debt levels to new heights. The Debt Service Suspension Initiative (DSSI) was set up during the pandemic to allow countries to concentrate their resources on fighting the pandemic. From May 2020 to December 2021, the initiative suspended $12.9 billion owed in debt-service payments. The G20 called on private creditors to participate but only one did so.”
What we say: This is all correct. The debt suspension was only implemented by governments, and not by private lenders of multilateral institutions. As the largest governmental lender, China suspended the largest amount of debt payments. China is now reluctant to go further on debt relief because western private lenders did not take part in the suspension. Making private lenders take part in debt relief is a key part of encouraging other lenders like China to also go further on debt relief.
What they say: “The Common Framework for Debt Treatments beyond the DSSI is an agreement to cooperate on debt treatments for DSSI-eligible countries. It requires the debtor to seek from other creditors, including private creditors, a debt solution at least as favourable as the one agreed under the Common Framework. However, the participation of private creditors is voluntary. As you highlight, the report by the House of Commons International Development Select Committee is calling for a legislative solution to enable the Common Framework to provide a meaningful way to address this.
“As you also note, 90% of international bonds owed by countries eligible for the Common Framework are governed by English law. I believe the Government needs to show leadership to ensure ‘vulture’ funds cannot block debt-restructuring processes by simply refusing to come to the table.”
What we say: This suggests your MP supports legislation to make private lenders take part in debt relief.
What they say: “The Government’s response to the International Development Committee’s report is now due. I would like it to explain what type of role it plans to take in helping to unlock relief for countries in debt distress and bring creditors to the table. I will be interested to read the response.
“Between 1997 and 2010, Britain helped to lift almost 50 million people out of poverty and initiated a huge programme of debt relief. I would now like to see the Government lead a new programme of debt relief.”
What we say: The UK did play a key role in helping create the Heavily Indebted Poor Countries debt relief process, and the expansion of this to cancelling a significant amount of debt in 2005. In April 2010, the UK passed the Debt Relief (Developing Countries Act) which effectively made private lenders take part in the debt relief scheme. We are now calling on the UK to update this Act to ensure private lenders take part in current debt relief initiatives.