Select Committee on International Development Minutes of Evidence


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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