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UK to cut £861 million from aid budget using fictitious debt

The UK government has confirmed that it will cut a further £861 million from the UK aid budget through cancelling debt owed by Sudan.  

In a Freedom of Information Act response, the government has confirmed that debt relief to Sudan will count towards the annual aid target of 0.5%. [1] 

The UK has already cut £4.3 billion from the aid budget in the last two years.[2] 

Much of the debt owed by Sudan was never lent by the UK in the first place, but is the result of the UK charging an 11% interest rate since it was defaulted on in 1984. 

Commenting on the revelations, Heidi Chow, Executive Director of Jubilee Debt Campaign, said:

“The government is adding insult to injury on aid cuts. Unsatisfied with slashing the aid budget to shreds earlier this year, it is now using fictitious debt as a cover for making further cuts. This debt has not been paid for almost four decades and should have been written-off long ago. The government should not be able to get away with this sleight-of-hand with the aid budget and must ensure that all future loans are made responsibly so that countries like Sudan are not plunged into further debt crisis.”

The loans to Sudan were given in the 1970s and early 1980s. Following drought, civil war and global economic recession, Sudan defaulted on the debt in 1984[3] and has not repaid any of the loans since. When Sudan defaulted the debt was £173 million.[4] 

Since 1984 the UK has added 11% interest every year, making the debt claimed to be owed now £861 million.[5] 

In July 2021 Sudan entered the Heavily Indebted Poor Countries initiative. Western countries, including the UK committed to cancel $14.1 billion of the total debt owed, with a further $9.4 billion to be cancelled when Sudan completes the initiative, expected by 2024.  

In its response to a parliamentary question by Shadow Secretary of State for International Development Preet Gill, the UK government has confirmed that £580 million will be cancelled in 2022, all of which will count as aid and as contributing to meeting the UK’s aid target. The remaining £281 million will be cancelled when Sudan completes the HIPC initiative and will also be used towards the aid target. 

According to calculations by Jubilee Debt Campaign, if other countries follow the same approach to Sudan as the UK, it could cut $23.5 billion from global aid budgets. Of Sudan’s debt to Western creditors, $4.2 billion was original loans and $19.3 billion interest.[6] 

Andrew Mitchell MP and Preet Gill MP are available for comment.[7] 

Notes  

[1] The response to the FOI request, dated 19 October 2021, is as follows: 

“Thank you for your enquiry of 30 September 2021, which we have considered under the terms of the Freedom of Information Act 2000 (the FOI Act). 

“You asked for the following information: 

““I would like to know if: 

  1. a) Debt relief for Sudan has been included in Treasury accounts for 2021/22, 2022/23 and/or 2023/24?
  2. b) Whether debt relief for Sudan will be counted as Official Development Assistance (ODA) and how much ODA it will be counted as?
  3. c) Whether debt relief for Sudan will be counted as contributing to meeting the target of 0.5% of GNI being spent on ODA?”

“Following a search of our records, we can confirm that HM Treasury does hold information within the scope of your request.  

“As part of the Heavily Indebted Poor Countries (HIPC) Initiative, the UK will provide debt cancellation on Sudan’s bilateral debt owed to the UK. 

“Sudan owes the UK a total of £861m. This will be cancelled in two tranches: £580m in 2022 as a result of HIPC Decision Point and the remainder at HIPC Completion Point, the date for which is yet to be confirmed. 

“The UK reports debt relief as ODA in line with international rules set by the OECD’s Development Assistance Committee. As such, all of Sudan’s debt owed to the UK will be scored as ODA. 

“HM Treasury does not hold any of the debt owed to the UK by Sudan and the debt relief for Sudan will not appear in HM Treasury’s annual report and accounts. 

“HM Treasury is however responsible, with the Foreign, Commonwealth & Development Office, for monitoring the UK’s annual ODA spending. The ODA cost of debt relief to Sudan is additional to departmental ODA spending. 

“As with all ODA eligible spend, debt relief to Sudan will count towards the meeting of the UK’s annual ODA target; this is the established UK approach in line with international rules. 

“You can find statistics on international development here: https://www.gov.uk/government/collections/statistics-on-international-development. 

“The government has temporarily reduced the aid budget to the equivalent of 0.5% of gross national income and will return to the 0.7% target when the fiscal situation allows.” 

[2] The UK’s ODA is expected to be £10.9 billion in 2021 (https://commonslibrary.parliament.uk/research-briefings/cbp-9224/#:~:text=Download%20full%20report-,For%20the%20first%20time%20since%202013%2C%20the%20UK%20will%20not,Official%20Development%20Assistance%20(ODA).&text=It%20is%20estimated%20total%20ODA,14.5%20billion%20a%20year%20before) UK ODA was £15.2 billion in 2019 (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/878395/Statistics-on-International-Development-Provisional-UK-Aid-Spend-2019.pdf). 

[3] UK Export Credits Guarantee Department (2011). Freedom of Information Act response FOI(10)65. 

[4] https://www.theyworkforyou.com/wrans/?id=2011-01-17d.33213.h&s=date%3A20110117+column%3A619+section%3Awrans#g33213.r0  

[5] In a previous Freedom of Information response the UK government has said the debt is charged a 10%-12% interest rate every year (UK Export Credits Guarantee Department (2011). Freedom of Information Act response FOI(10)65.) In 2011 the UK government said between 1984 and end-2010 £491 million of interest had been added. This is £19 million a year, at an interest rate of 11% https://www.theyworkforyou.com/wrans/?id=2011-01-17d.33213.h&s=date%3A20110117+column%3A619+section%3Awrans#g33213.r0 

[6] Collectively the Paris Club group of Western creditors claim they are owed $4.2 billion from Sudan – without including late interest, as of end-2020 ) https://clubdeparis.org/en/communications/press-release/the-paris-club-releases-comprehensive-data-on-its-claims-as-of-31-4 ). Including the late interest, the total claimed amount is $23.5 billion (https://clubdeparis.org/en/communications/press-release/the-paris-club-creditors-provide-debt-relief-to-sudan-16-07-2021). 

[7] In a response to a written question from Preet Gill MP on the same topic on 20 October(https://questions-statements.parliament.uk/written-questions/detail/2021-10-15/57230), Chief Secretary to the Treasury Simon Clarke said only: 

“As part of the Heavily Indebted Poor Countries (HIPC) Initiative, the UK will provide debt cancellation on Sudan’s bilateral debt owed to the UK. 

“Sudan owes the UK a total of £861m (as of August 2020). 

“HM Treasury does not hold any of the debt owed to the UK by Sudan and the debt relief for Sudan will not appear in HM Treasury’s annual report and accounts. 

“The UK reports all ODA eligible spend in line with international rules set by the OECD.” 

The Jubilee Debt Campaign is a UK charity working to end poverty caused by unjust debt through education, research and campaigning: http://www.jubileedebt.org.uk 

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