Examination of witnesses (Questions 160 - 171)
18 MARCH 1998
ANN PETTIFOR
and DAVID WOODWARD
160. So is the smallholder coffee in Kenya, I might remind
you?
(Mr Woodward) I do not know a great deal about
Kenya, I must say, but I would have expected that there would
be a greater degree of specialism and a larger number of trees,
but that is basically speculative. Certainly, efficiency is a
problem. Certainly, when I was in Rwanda, the overcropping in
the previous year had been a problem, which seriously reduced
the productivity of the trees, and there had been uprooting of
trees due to developments in the international market, and so
on. So there are a number of problems.
161. It is also post-conflict neglect, or during the
conflict neglect?
(Mr Woodward) Yes, certainly. When there is genocide
going on then people have other things to do besides looking after
the coffee.
162. They just let the tea trees grow, that is all?
(Mr Woodward) Yes. The tea sector is rather different,
in that it is essentially state-owned plantations, which is, I
think, again, where neglect is quite seriously creating other
problems.
163. What assessment have you made of the cost to the
UK Exchequer if the Chancellor's targets which he set in Mauritius
were met? As you will know, he said he wants all eligible poor
countries to have embarked on the process of debt relief by the
year 2000. Well, what kind of assessment has there been made of
what that might cost us, I am not talking about the process, but
when we arrive at the finish of the debt negotiations what would
it cost the UK and what would it cost as a whole, and do you think
such targets are achievable within the HIPC Initiative?
(Mr Woodward) In terms of costing, I think it
would probably be better to ask the Treasury what they think the
cost would be to the UK. But I think in general terms it is very,
very problematic, partly because it depends a lot on what you
are comparing it with. If you are saying that the objective is
to get three-quarters of cases to decision point by the year 2000
then what is the time-frame that that is being compared with.
The other problem is that the amount of debt reduction which a
country gets depends very heavily on what happens to its exports,
what happens to its GNP and what happens to the present value
of its debt, from now until the completion point, which, having
just gone through this exercise, or tried to, for the former ZaiÏre,
is quite a complex process and inevitably is very approximate.
164. Okay; if that is too difficult, let us ask you another
question, to get some kind of handle on the figures. Can I just
ask you this question. You have made proposals for writing off
debt by the year 2000; how much would that cost the Exchequer?
(Ms Pettifor) We do not know the answer to that.
The reason we do not know the answer to that, I think I explained
earlier, is that the Exchequer is quite slow to tell us how much
is being received at the moment in debt service. For example,
Mr Fellgett, to your Committee, a few weeks ago, said that £40
million was being received a year in debt service from some of
the poorest countries; however, he omitted from that list Nigeria
and Indonesia, and I think one other country. Now we happen to
know that they are amongst our biggest debtors, and therefore
there should be substantial debt service from those two countries.
So we do not have a complete calculation of how much debt service
is currently being paid, and that if you wrote that off how much
it would cost. Now we are not asking for all of it to be written
off but for the unpayable backlog to be written off, so we are
not even asking for, say, the £40 million plus all to be
written off but for a proportion of that to be written off.
165. But we do not know what the unpayable backlog would
be, do we?
(Ms Pettifor) No. That is the calculation that
depends on assessing every country's debt sustainability. However,
what we are pretty sure of is that the Export Credit Guarantee
Department should have made provision for any losses on debts,
and if they have not they will have been acting irresponsibly,
in my view. We also happen to know that the Export Credit Guarantee
Department makes very good profits out of its business of providing
credits to exporters, we see this from their annual reports, they
use their money very wisely, and they make good returns. We are
assuming that a proportion of those returns are set aside for
bad debts, and we do not know what proportion that is. When we
have approached the Export Credit Guarantee Department they have
talked to us about the dense actuarial complexities of these matters,
and they will not explain. They think we are just humble activists
and that perhaps we will not understand them, perhaps we will
not, but it is rather difficult for us to come up with exact sums,
for that reason.
166. There is an assessment, which I can point you to,
which is about two or three years old now, of the indebtedness
of the ECGD, and that might be a starting-point.
(Ms Pettifor) We have got total debts, but not
total debt service.
167. This Committee was told by the Treasury that their
receipts are £60 million, that is the figure given to us.
(Ms Pettifor) Sixty million dollars.
168. Right; sixty million dollars, yes. I do not know
whether that includes Nigeria or not?
(Ms Pettifor) But, as I say, Mr Chairman, they
had left out some pretty big debtors from that list, and so it
is more than the £40 million, or it should be; $60 million,
£40 million, I think it was.
Mrs Kingham: Mr Chairman, can we possibly clarify that,
from the Treasury, as a sum?
Chairman: I am sure we will, yes.[27]
Now, Mr Canavan, could you continue on Uganda and Rwanda.
Mr Canavan
169. The UK has donated £6.5 million to allow a
full implementation of the African Development Bank's share of
HIPC debt relief for Uganda. Do you support this donation?
(Ms Pettifor) Very much so, we very much commend
what DFID has been doing, both in relation to Uganda and also
to Mozambique, and we particularly welcome the support that is
being given to the African Development Bank. The African Development
Bank is an important source of finance for African countries,
they have lent, we think, rather foolishly, over the eighties,
at very high interest rates, market interest rates, and their
debts are, therefore, rather burdensome, both for the countries
indebted and, of course, to the Bank itself. And we welcome very
much the British Government's role in helping to replenish the
African Development Bank Fund, I think it is called, which is
used for writing off some of the debts under HIPC.
170. When we were in Uganda, we were told that Ugandan
debt relief would not be front-loaded in its delivery, front-loading
would have delivered a higher percentage of debt forgiveness in
the first few years. How far does front-loading debt relief benefit
donor countries, and should front-loading be advocated as the
most appropriate way to deliver debt relief?
(Ms Pettifor) I think David should deal with that.
(Mr Woodward) I have to say, I do not know very
much about the specifics of the Uganda deal, so I cannot comment
on that; but, in principle, I would say there is quite a strong
case for front-loading, in that it makes sense to tailor the profile
of payments in accordance with a country's capacity to pay. So,
if one anticipates that exports and foreign exchange earnings
will increase progressively over time, it makes sense for debt
service payments under the agreement to increase in line with
that, rather than keeping the payments up-front when exports are
relatively low. So I think there is quite a strong case for front-loading
debt relief.
171. I do not know if there are any particular points
you think we have not covered, that you would like to bring to
our attention, but, if not, I would like to thank you both very
much indeed for coming here and answering our questions. I think
we have got a clear idea of what you want to achieve, not how
much it will cost though.
(Ms Pettifor) No, I fear not.
Chairman: But it will help the Committee hugely in
what we hope will be a report which will assist a sensible way
to proceed on relieving debt and enabling these countries to grow,
and to, indeed, help the very poor people who live in them. Thank
you very much indeed.
27 See Evidence p. 21, para 4. Back
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