Britain has been accused of padding its aid budget with "made up money" so it can claim to have met its millennium promise of increasing the amount it donates to the world's poorest people.
The Department for International Development, headed by Andrew Mitchell, has confirmed that cancelling the debts of some of the world's poorest countries will count towards the aid total, helping the UK to achieve its millennium target of spending 0.7 per cent of national income on overseas aid by 2014.
One of the most controversial debts is the millions that the Sudanese nominally owes for weapons purchased during the Cold War. The money was loaned in the late 1970s by an agency of what is now the Department for Business, at interest rates of 10-12 per cent per year, which have added £405m to the original £173m loan, bringing it to £678m.
The Government is no longer able to say what this money was used to buy. Earlier this year, the Labour MP Lisa Nandy asked questions in Parliament about what the original loans were for, and was told the records have been lost.
But in the late 1970s, the west was arming Sudan as a counterweight to the Marxist regime in neighbouring Ethiopia, which was backed by the Soviet Union, because of fears that communist influence in the Horn of Africa could threaten oil supplies.
The arms sales ended around the time when Sudan descended into civil war between the predominantly Muslim Arab north and the Christian, African south. There have been no repayments on the loans since 1984. The debt is expected to be cancelled in 2013-14, a formality which will instantly add 7 per cent to the UK's nominal aid budget.
Tim Jones, the senior policy officer at the Jubilee Debt Campaign, said: "The debt comes from loans to win business for Britain in the Cold War. Most of the debt is made-up money based on ridiculously high interest rates. It should be cancelled because it is unjust and unpayable, not used to meet targets and massage figures."