The hon. Gentleman referred specifically to Brazil. With me on the Government Front Bench is the Minister for Trade, who knows much more about these matters than I do, but I do not think the position is precisely as described by the hon. Gentleman.

Just as in Africa, debtors in Latin America require external finance to support their economic reforms. That is why we have supported the recent decisions of the IMF interim committee to encourage further voluntary debt reduction by the commercial banks. But that raises questions about the respective responsibilities of the public and private sectors. I do believe that the right sort of debt reduction can have an increasing role to play in meeting those financing needs.

Many have called for what I consider the wrong sort of debt reduction—debt reduction brought about by taxpayers bailing out the banks. All along we have taken the view that management of their existing debts is a problem that banks must sort out with debtors. If the banks have lent unwisely, they must face the consequences.

In their negotiations with debtors, banks have developed a range of innovative financing arrangements. Some of those involve an element of debt reduction. Chile, for example, has reduced its debt by about a quarter, largely by means of a vigorous debt-equity programme. But overall, the impact of debt reduction has so far been small in comparison with the total stock of debt.

In the years since 1982, Governments have done a great deal to help middle income debtors. We have provided financial assistance through rescheduling Paris Club debts and providing new lending through the IMF and the World Bank. We have also maintained a strong commitment to an open multilateral trading system and general stability and growth in the world economy.

The consequence so far has been that Governments have done more than their share. Commercial banks have rescheduled principal payments. The Paris Club has been prepared to reschedule interest, too. Together with substantial new lending by the IMF and World Bank, this contribution from the official sector has provided far mote resources for debtor countries than the new money and debt reduction provided by the banks. Overall, while exposure of commercial banks to the 15 most heavily indebted countries has risen by 17 per cent., that of the public sector has risen by 107 per cent.—over six times as fast.

That injection of funds by Governments and the international institutions has given the banks some breathing space to restore their balance sheets. The danger of systemic collapse of the banking system has been averted. Banks are now in a position to increase the rate of debt reduction. But we believe that this remains a matter for commercial banks to negotiate with the countries concerned. To abandon now our policy that Governments should not finance reductions in bank debt will only increase the already disproportionate burden being borne by taxpayers.

The agreements reached at the IMF and World Bank spring meetings in discussion of Secretary Brady's proposals to which the hon. Member for Monklands, West referred in interesting terms, are designed to support this sort of voluntary negotiated debt reduction—what I referred to earlier as the right sort of debt reduction. Secretary Brady's initiative consisted of ideas for further work. It was not a blue print. The interim committee agreed, with United Kingdom support, that those ideas should be pursued further. It also reiterated the cardinal principals of the existing strategy—the need for fundamental and convincing economic reforms in debtor countries, the need for a case-by-case approach, and the principle that official creditors should not subsidise private lenders. It was agreed that the IMF and World Bank should set aside a part of their policy-based lending to facilitate debt reduction operations for countries undertaking sound economic reforms.

It was agreed that the two institutions should work out specific proposals to put to their respective boards, and we are now playing a full part in the further detailed work that is going on. No details have yet been decided. We are also participating fully in the international review of tax regulatory and accounting obstacles to debt reduction which Secretary Brady has proposed. In those further discussions, Britain will seek to ensure that, as agreed, official lending supported by the taxpayer will not substitute for private lending. We shall, therefore, be looking particularly carefully at proposals for additional interest support mechanisms. We want support for debt reduction to go where it can be effective—to countries undertaking strong economic reform programmes. We shall want to see——