It is consulting on legislation that would restrict the proportion of the debts of these countries that a creditor could reclaim under UK law.
‘Vulture funds’ buy up defaulted debts at very low prices when a country is in economic distress and aggressively litigate to recoup the debt’s full value which can negate the benefits of debt relief provided by others.
The Government says it is determined to ensure that these activities do not prevent resources being freed up to finance development and tackle poverty in the poorest countries.
The consultation will run for 12 weeks, concluding on October 9.
Treasury economic secretary Ian Pearson MP says: “It is vital that all creditors play their part in debt cancellation initiatives. And the proposals we are consulting on today are designed so that companies are unable to profit at the expense of heavily indebted poor countries by seeking to claim the full value of these debts under UK law.”