Gordon Brown speech to Commonwealth Finance Ministers, 16 Sept 1997

http://www.hm-treasury.gov.uk/speech-chex-160997.htm

First, let me thank the Mauritian Government and, in particular, our Chairman today, Dr Bunwaree, for the warmth of their welcome and their kind hospitality.

The Commonwealth is a unique asset. It brings together countries from all over the world and at all stages of development. We learn from each other: we do not lecture each other. This is my first meeting and I have the privilege of speaking early. Let me spell out my thoughts. Then I can look forward to hearing your ideas and resolving how best to achieve our Commonwealth objectives.

The timing of these meetings is as fortuitous as is the location. Many of us will move on from here to Hong Kong for the annual meetings of the IMF and the World Bank, where we will consider a range of issues, including debt relief.

Yesterday my colleague from Botswana called on me to say how we could take forward work on debt relief for highly indebted poor countries. I am happy today to rise to that challenge.

The British Government has been reviewing its international development policies, which will be the subject of a white paper to be published within the next few weeks. This will focus sharply on the elimination of poverty. We shall work with partner governments and international bodies to meet the agreed international development targets, and, in particular, the overarching goal of halving by 2015 the proportion of the world's population living in absolute poverty.

To put that goal within the reach of all developing countries, we have to resolve the central issues of the problem that challenges us all - that of billions of pounds of debt. I would like to focus today on debt, and how we give new impetus to debt relief for the poorest countries. You may know the new Government in Britain was elected on a Manifesto which promised we would support further measures to reduce the debt burden borne by the world's poorest countries. I propose to share with you today my thoughts on how we will deliver that pledge.

I would like us today to set a time horizon for making real progress on debt relief.

As we were reminded yesterday, to so-called HIPC initiative derived from a Commonwealth Finance Ministers' initiative in 1994. We must now build on the progress made since then. Uganda was the first country to reach a "decision point" under the existing initiative for heavily indebted poor countries (HIPCs). More countries, including Guyana and Mozambique, are close to following their lead in the 'cluster' of HIPCs being considered this autumn.

As we all know, while much has begun, much remains to be done and we have by no means yet solved the problem. But I believe a resolution is within our grasp. I thank the church groups and others who have drawn out attention to the opportunity to resolve the problem by the start of the new millennium. I do not claim that making these decisions will be easy, but I am confident it can be done.

My proposal is that we make a commitment that every eligible poor country should at least have embarked on the process of securing a sustainable exist from their debt problems by the year 2000. But that is not enough. We should also aim by the millennium to have firm decisions on the amounts and terms of debt relief for at least three quarters of these countries. That should be our Mauritius Mandate. In human terms this means around 300 million people in some of the world's poorest countries should gain from this initiative.

This Mandate will only work if debt relief by creditors is matched by concrete action by the debtors. This means that the debtor countries must adopt and stick to the sound economic policies needed to make sustainable economic development possible. This is something that each country has to decide for itself. Precisely what needs to be done differs because every country is unique, but I am sure that in each case open, accountable economic decision-making and a focus on productive expenditure, including basic health and education, will be vital aspects of their economic programmes.

It is equally a challenge to creditors, whether they are individual governments such as the UK or the International Financial Institutions in which we are all shareholders. And it is in the creditors' interest too that the problem of unsustainable debt should be cleared out of the way.

We must not allow the HIPC initiative to fail and the problem cannot be solved by any creditor alone. Someone needs to provide a lead. Today I want to explain five areas where the UK will take action and three areas where joint action is needed.

First, countries who meet all the conditions of reform are still unable to relieve many of their debts. So my first initiative is to help countries meeting all the conditions to escape from the debt trap. My colleague Clare Short, the Minister for International Development, who is in Bangladesh, is announcing today that the UK will contribute 10.5 million dollars towards reducing Uganda's debts to the African Development Bank.

Second, writing off aid loans. Ms Short will also announce today that the UK is willing to cancel the remaining debt due to the UK from lower income Commonwealth countries. This can benefit all Commonwealth countries with a GNP per capita below the threshold for World Bank loans, and for small island Commonwealth countries, provided they are committed to the "pro-poor" policies, transparent and accountable government and the second economic policies I have mentioned. In total, this additional debt relief available to Commonwealth countries is worth up to 132 million pounds.

I hope other countries will follow our lead in writing off aid loans to poor countries.

As one of the join actions, in the Paris Club of government creditors we stand ready to interpret the rules flexibly. Where necessary the UK will agree to apply relief to all categories of debt, including the so-called "post cut-off date debt" which has hitherto been excluded from debt reduction. We will urge other creditors to do the same.

As a third action the UK will take, I can say today that we stand ready to finance through our aid programme technical assistance to poor countries, particularly in the Commonwealth, to assist in debt management, including the provision of practical advice by one poor country to another on debt relief negotiations.

Fourth, the IMF still has a financing problem in meeting its part of the debt initiative. I remain convinced that, in the long term, sales of IMF gold will be necessary. Action is, however, needed now is we are to meet our ambitious targets. I can say today that the UK's pledge to the IMF trust fund will now be implemented free of previous conditions. I hope other creditors who attached other conditions to their pledge will respond in the same way.

Fifth, we need to make sure that poor countries never again become saddled with insupportable debt burdens. For the next two years the UK will ensure that export credits for poor, highly-indebted countries will only support productive expenditure. Over that period we will seek a firm international agreement that all officially supported credits for poor countries are focused in this way.

And we should ensure that countries with the strongest reform programmes, including a focus on transparency and productive expenditure, should get the maximum possible relief needed to ensure their debt burden is sustainable - and get it in less than the maximum 6 years presently envisaged under the rules of the initiative.

To achieve our overall objective, I suggest there needs to be a stronger debtor voice in negotiations that today seem too often to be concluded behind closed doors. Just as I hope the whole international community will buy into a "millennium pact" to resolve the debt problems, the results of each individual negotiation need to be accepted as fair and lasting by all parties.

Finally, we need to make sure that the mechanisms available are genuinely comprehensive and will solve the problem. Flexibility in implementing existing mechanisms, going beyond past practice whenever necessary to achieve debt sustainability, may not be enough. I therefore call on the World Bank, in co-operation with others, to use their expertise to analyse if there are gaps in current mechanisms.

Specifically, I would like them to look at the position of severely indebted countries whose debts are owed primarily to multilateral institutions. In principle the HIPC initiative deals comprehensively with multilateral and bilateral debts. But it is built on existing Paris Club mechanisms, which can benefit only countries with substantial bilateral debts. We need to ensure countries whose debts are primarily multilateral have as much chance as any other of early and full debt relief. It would be timely to examine whether there are gaps in current arrangements when we have the experience of the current 'cluster' behind us.

We must now all make it our business to set aside the over-rigid approaches of the past and focus our whole attention on the best practical solutions, free of past dogma to achieve our debt 2000 objective of ensuring that every HIPC country is launched on the process of debt reduction by 2000.

This is an important Commonwealth conference for all of us. The issues we are discussing today affect world economic development - the future of international institutions and the condition of our countries. But it is for this commitment to debt relief that we will all, I believe, want Mauritius 1997 to be remembered. It is my ambition that we, in 2000, will be able to look back on Mauritius 1997 as the conference that helped turn the vision of debt reduction into reality.

So let us sign up today to the Mauritius Mandate. It is a Mandate to debtors and creditors alike. You cannot build for the new century on a mountain of unsustainable debt. Together we can set the developing countries on a path to sustainable growth.