The UK Treasury will count £139 million of "made up money" as overseas aid, according to debt campaigners.

The UK Government enshrined in law a commitment to spend 0.7 per cent of national income, or around £12 billion, on aid in 2015, finally meeting a target set by the UN in 1970.

Under an agreement with Cuba on its debt to the UK, the Treasury is to count £139 million of cancelled late interest payments towards this target, or around 1.2 per cent of the projected £12 billion spend.

Debt campaigners have called the debt "made up money" that was never expected to be paid.

The loans were backed by UK Export Finance, a Government arm that lends money to fund the purchase of UK Exports.

“British people think UK aid money should be used to reduce poverty and inequality around the world. But too often it is driven by the interests of British companies at the expense of increased poverty and inequality,” said Tim Jones, policy officer at the Jubilee Debt Campaign.

The £139 million that will count towards the aid budget is more than the UK gave in aid to Kenya in 2014, according to data from Statista.

(Statista)

Cuba defaulted on the original £42 million debt in 1987 and has since accrued £139 million in late interest payments at an annual interest rate of 11 per cent.

This money will be counted as Overseas Development Assistance in line with OECD rules over an 18-year repayment term, the Treasury said.

“Debt cancellation has always been part of Britain's development assistance and related aid targets, and is totally consistent ‎with the internationally recognised definition of aid monitored by the Organisation for Economic Co-operation and Development,” a Government spokesperson said.

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Cuba reached a debt agreement with 14 Western governments last year. Under the agreement, $2.6 billion of late interest payments will be cancelled, all of which is likely to be counted as aid in the respective countries, Jubilee said.

Cuba has agreed to repay the UK the £42 million that was lent originally, plus £21 million of contractual interest.

If Cuba does not pay international lenders by October 31 each year, it will be charged 9 per cent interest until payment, plus late interest for the portion in arrears, Reuters reported.

“Government policy, which is the same for all countries, is to seek to recover as much debt as possible. The agreement to restructure Cuba's debt is an important step for the Cuban economy,” the Treasury said.