Cafod calls for debt relief for countries impacted by one year of ‘devastating’ UK aid cuts

According to new research published by Cafod on 25 February, introducing new regulations on private lenders would save lives in countries impacted by Britain’s aid cuts, without any cost to UK taxpayers.

Director of Cafod Christine Allen has warned that the “devastating effects” of the cuts the UK made to international aid a year ago are palpable in some of the world’s most vulnerable communities, including in the Democratic Republic of Congo and South Sudan.  

Allen said the aid cuts were “more extreme than any other G7 country including the United States”, and that “children going hungry, women being denied shelter and access to safe spaces, and once-thriving communities unable to rebuild after disaster” are just the “tip of the iceberg” of damage caused around the world.

Allen called the UK to “restore our moral standing at a critical moment” ahead of the Global Partnerships Conference in May and G20 in November.

Cafod has urged decisive action on the international debt crisis alongside reversing aid cuts, which together “could transform millions of lives overnight and enable countries to invest in their own development priorities”.

According to new research published by Cafod on 25 February, introducing new regulations on private lenders would save lives in countries impacted by Britain’s aid cuts, without any cost to UK taxpayers.

90 per cent of low-income country debt is governed by English law, so the UK has the power to force private creditors to cooperate and deliver transformative global relief.

Maria Finnerty, the lead economist at Cafod, said, “Our laws allow lenders to charge extortionate interest rates on the grounds that they may not get paid back in full – and then sue in full amount in English courts.

“This is a clear contradiction. We can only limp on without a functional debt relief process for so long while the number of countries in debt distress go up and up.

“Sooner or later, something will have to change. If the UK government doesn’t act to make private lenders face the consequences of their actions, it will be UK taxpayers who end up having to bail them out.

“It’s simple. Pass a private creditors participation law, like the UK has done before. Ground it in the extensive research done by dozens of world-leading economists, including Nobel laureates.

“And watch as countries newly freed from punitive debt payments provide clean water and sanitation for tens of millions, classrooms full of children, properly staffed medical clinics, and budgets for growth rather than servicing yesterday’s loans.

“The cost to the UK Treasury is zero. The benefits are immeasurable. The only scarce resource is political will.”

The analysis found that gains from action on the debt crisis could more than counteract the projected lives lost and services scrapped as due to UK aid cuts.

Reducing debt payments for low-income countries from today’s average of 18 per cent of government revenue to 10 per cent could deliver major gains in water and sanitation, increase school enrolment, and protecting health systems.

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