Recommendation 22

HM Government Accepted

Government Response – Partially Agree 37. This Government has committed to tackling unsustainable debt and is leading efforts to ensure all developing countries have the fiscal space to invest in development. The UK has a strong record of working bilaterally and with international partners to assist countries on their road to longer-term debt sustainability and will continue to do so. 38. Debt relief is a tool provided multilaterally with other creditors where we have financial exposure and at the request of a debtor country. The UK remains committed to working with other creditors to build consensus to address country debt vulnerabilities and provide swift debt treatments where they are required, in line with the IMF and World Bank Debt Sustainability Analyses. 39. The Common Framework was set up in 2020 to bring all G20 creditors together to coordinate on restructurings for the first time. Where we are a creditor, we have fully engaged in multilateral negotiations with debtor countries to put their debt back on a sustainable trajectory but we recognise progress has been too slow and are calling on all G20 partners to strengthen, speed up and expand the G20 Common Framework to all middle-income countries. 40. The UK championed the major debt relief initiatives of recent decades, including the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI). Under the HIPC Initiative, the Government has cancelled 100% of loans owed by HIPC-countries when they have reached the HIPC Completion Point. This has amounted to a UK contribution of £650m. The Government has also provided £1.4 bn of relief through contributions to the MDRI. The Government is committed to meeting its obligations in terms of debt owed by the remaining eligible countries as they qualify. HIPC has delivered an estimated $74.8 bn of relief in total so far, freeing up space for investment in social spending. 41. The UK was also the first bilateral creditor to systematically offer Natural Disaster Clauses (also known as Climate Resilient Debt Clauses) – a form of debt suspension clause for exogenous climate or health shocks - through UK Export Finance lending to all countries. Natural Disaster Clauses are a contractual innovation that allows borrowers to temporarily pause debt repayments when hit by a major climate or health shock, thereby freeing up money for the country to use for relief and recovery. In total, six bilateral creditors and six MDBs have now launched CRDC pilots or are committed to doing so.