UK backs loans for arms sales as report shows 75% of debt illegitimate

In a report released today, the UK government has revealed it guaranteed £132 million of loans to the Indonesian government for arms sales in the last year, along with further loans to Saudi Arabia also for arms. The news comes as the Jubilee Debt Campaign releases a report showing that 75% of export debt owed to the UK is illegitimate, much of it coming from past loans for arms sales to repressive regimes.

British made Alvis Stormer vehicle, supplied to then Indonesian dictator General Suharto in the mid-1990s.
British made Alvis Stormer vehicle, supplied to then Indonesian dictator General Suharto in the mid-1990s.

UK Export Finance’s latest annual report shows that it guaranteed £132 million of loans to Indonesia for the South-East Asian country to buy ‘air defence systems’. The report also reveals UK Export Finance guaranteed £190,000 of loans to Saudi Arabia for unspecified ‘defence equipment’.

UK Export Finance has a long history of backing loans to developing countries and repressive regimes for arms sales. When countries are unable to repay these debts, UK Export Finance bails out the private lender, and the debt comes to be owed to the UK government. Jubilee Debt Campaign has today released a report showing that 75% of the debt owed directly by developing countries to UK Export Finance comes from dodgy deals, primarily arms sales.

This includes loans to previous Indonesian dictator General Suharto for fighter aircraft and tanks which were used against the Indonesian people, loans to previous Iraqi dictator Saddam Hussain for arms equipment including a chemical weapons factory, and loans to the 1970s military dictatorship in Argentina for warships and helicopters which were later used to invade the Falkland Islands. All of these countries are currently making payments to UK Export Finance on the debts.

The information has been gathered by Jubilee Debt Campaign over the last five years through freedom of information requests, research in the national archives and parliamentary questions after the UK government refused to conduct its own audit of the debt.

Tim Jones, policy officer at the Jubilee Debt Campaign said:

“The UK government has a horrendous history of backing loans for arms sales to repressive regimes and developing countries. This undermines human rights, fuels conflict, and takes precious resources away from vital development spending such as on healthcare and education. The UK government should stop subsidising arms sales by ending loans for military equipment. And it should audit the debt which is owed to it, and cancel that which is illegitimate.”

In 2012 Norway audited the debt owed to it, to work out how to prevent future loans undermining human rights and development objectives. It has also cancelled debts specifically attached to a ship export programme which were specifically shown to have been detrimental for development.

Indonesia is a developing country with a national income of £2,200 per person. According to the World Bank, 108 million people in the country live on less than £1.25 a day, 43% of the population. The Indonesian government spends £6.2 billion on foreign debt payments every year, 6.4% of its revenue.

Tim Jones continued:

“Loans to subsidise arms sales can never be justified, as they are the opposite of productive investment, wasting resources and trapping countries with unjust debts.”

Indonesia still owes £246 million to the UK government. 74% of this, £182 million, is from loans for arms sales to General Suharto.


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