Tuesday, 15 December 2009
Question 33: To ask the Minister for Foreign Affairs his plans to promote more debt cancellation, free from conditions, for all southern countries that require it; and if he will make a statement on the matter. [46651/09]
Ireland has played an important role internationally on the issue of the alleviation of the debt burden on developing countries. The Government's policy strategy was prepared jointly by the Department of Foreign Affairs and the Department of Finance, and was launched in 2002. It supports the total cancellation of the debts of the world's poorest countries. A joint review of this strategy is currently being undertaken by the two Departments and I expect it will be completed within the coming months.
It is important to note that Ireland's bilateral assistance to the developing world has always been exclusively in the form of grants rather than loans. The Government has also provided very significant resources for initiatives to ease or cancel the debt burden.
There are two main international instruments which address the debt burden on developing countries. They are the Multilateral Debt Relief Initiative, MDRI, and the Heavily-Indebted Poor Countries Initiative. The MDRI came into effect on 1 July 2006, and provides for the cancellation of eligible debt from the World Bank, the African Development Bank and the International Monetary Fund for many of the world's poorest and most indebted countries. Ireland's share of the total cost of debt relief provided by the World Bank under the initiative is €58.64 million. The Government contributed this amount in full in 2006. Ireland has also contributed over €20 million under the 1996 heavily indebted poor countries initiative, which is implemented by the World Bank and the IMF, with the objective of reducing the debt burden of qualifying countries to sustainable levels.
The aim of these international initiatives is to relieve the poorest countries from the burden of servicing debt, and help them implement effective poverty-reduction and economic growth programmes. It is important to ensure that the success of the initiatives to date is not undermined by any further irresponsible lending or borrowing by these countries. The Government supports the development of an international consensus on responsible lending and borrowing procedures and I welcome the dialogue which the World Bank has initiated with civil society groups on the complex issues involved.
Was the €58.64 million contributed under the MDRI initiative in 2006 classified as Irish aid funding at the time? Am I right that there is a review ongoing currently on debt cancellation? When can we expect the publication of this review?
The Deputy must appreciate this is a significant contribution to a massive global fund. Many of these countries want to develop, but cannot because they cannot get access to the international capital and bond markets because of their heavy debt burdens. By forgiving this debt, albeit with conditions which ensure they have the capacity and power to maintain sustainable financial economies in their own right and by focusing their lending on poverty reduction, we are making a real contribution towards enabling these countries to develop their economies under their own national development plans. This is quite apart from our bilateral programmes where, through grant assistance, we initiate and help development and programmes. By engaging significantly in this programme, we allow these countries develop in their own right. Ultimately, that is what sustainable development is about and it is important.
The Minister of State referred to the World Bank initiative. Is he concerned at the high proportion of odious debt that remains in the outstanding debt of the southern countries referred to in the question? The World Bank is insisting on interest repayments from countries indebted by dictators, for example, Nigeria in 1995-2000, €15 billion - €1.5 billion in 23 London banks, €600 million in Liechtenstein, €500 million in Luxembourg. The Minister, Deputy Martin, referred earlier to Switzerland and its legate. With regard to the debt issue, is there any possibility of the opening up of the books in Switzerland?
The purchase of the debt of southern countries by debt vultures is a continuing heavy burden. I support the Minister's emphasis on development, but these debts - odious dictators' debts - are being serviced and providing remuneration to debt vultures. The World Bank is not forgoing that, nor is the International Monetary Fund with its Limón arrangements.
I agree fully with Deputy Higgins on this issue. Vulture debt is an odious practice and I would welcome any initiative to make this internationally illegal. Debt vulture hedge funds or other funds involved in buying debt on the verge or eve of it being forgiven as part of international debt alleviation is a reprehensible practice. In essence it represents funds in the major financial markets preying on countries just before they experience debt relief and trying to extract enormous profits from them.
The issue of what is known as illegitimate debt has arisen more frequently in discussions on international debt relief. This is why initiatives such as the UNCTAD initiative to address responsible lending and, in particular, to closely involve the World Bank, IMF, the Paris Club and civil society so as to properly define proper, legitimate - and almost moral - debt and lending to these countries are so important. We cannot go back to the situation we had where there was irresponsible borrowing and lending by states in which we are involved. We want these states to build up their inherent country systems to ensure they do not go down the road of irresponsible lending and borrowing again.