Abstract

This pamphlet describes the IMF-World Bank initiative begun in 1996 to address in a comprehensive manner the overall debt burden of eligible heavily indebted poor countries (HIPCs) pursuing programs of adjustment and reform supported by the two organizations. The aim of the Initiative is to reduce these countries debt to sustainable levels so that they can meet current and future debt service obligations without unduly compromising growth. This pamphlet describes the rationale for and the main features of the Initiative as it was originally conceived in 1996 and its implementation through the fall of 1999, which culminated in the approval of an enhanced HIPC Initiative in late 1999 that is aimed at providing deeper and more rapid debt relief to a larger number of countries. The enhanced HIPC Initiative also seeks to ensure that debt relief is integrated into a comprehensive poverty reduction strategy that is developed with broad-based participation and tailored to the country's circumstances.

1

Major non-Paris Club bilateral creditors include China, Kuwait, the Libyan Arab Jamahiriya, Russia, and Saudi Arabia. Kuwait sometimes participates in Paris Club reschedulings.

2

That is, countries that receive funds from IDA but not from the International Bank for Reconstruction and Development (IBRD).

3

According to the World Bank’s Debtor Reporting System, the ratio rose to 11½ percent in 1995 reflecting the clearance of Zambia’s arrears to the IMF. Excluding Zambia, it remained at about 8 percent in 1995.

4

A target range for the NPV debt-export ratio would be specified (plus or minus 10 percentage points of the target) to allow for some variability in the outcome without the need for creditors to adjust their committed action.

5

Such problems should also be reflected in the current NPV debt-to-exports ratio.

6

Risk can be reduced through such action as participation in investment insurance programs such as Multilateral Investment Guarantee Agency.