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Mr. Kamau Thugge and Mr. Anthony R. Boote

Abstract

At their meetings in September 1996, the IMF’s Interim Committee and the IMF and World Bank’s Development Committee endorsed specific proposals put forward jointly by the IMF and the World Bank to address the problems of a limited number of HIPCs that follow sound policies, but for which traditional debt-relief mechanisms are inadequate to secure a sustainable external debt position over the medium term. The Committees requested the two institutions to proceed quickly with the implementation of the Initiative.

Mr. Kamau Thugge and Mr. Anthony R. Boote

Abstract

The HIPC Initiative is not a panacea for all of the economic problems of the HIPCs. Even if, hypothetically, all of the external debts of the HIPCs were forgiven, most would still continue to need large-scale concessional external assistance; as noted earlier, currently their receipts of such assistance are much larger than their debt-service payments. Given their high levels of poverty and limited domestic resources available to meet the costs of social programs that address the needs of the poor, most HIPCs are likely to continue to be dependent on aid. The HIPC Initiative does not imply a cessation of aid to HIPCs: if it leads to withdrawal of aid, it will fail. However, given the pressures on aid budgets in major donor countries, which are likely to prevail in the foreseeable future, continuing aid will be most effective if it catalyzes private financial flows, particularly investment. There is a limit to the extent to which these flows can be debt creating, if future overindebtedness is to be avoided. This suggests a need for institution building that is essential for attracting private investment as well as for providing support for putting in place necessary infrastructure.

Anne O. Krueger

Abstract

The absence of a robust legal framework for sovereign debt restructuring generates important costs. Sovereigns with unsustainable debts often wait too long before they seek a restructuring, leaving both their citizens and their creditors worse off. And when sovereigns finally do opt for restructuring, the process is more protracted than it needs to be and less predictable than creditors would like.

Anne O. Krueger

Abstract

What features of a legal framework would need to be in place in order to establish adequate incentives for debtors and creditors to agree upon a prompt, orderly, and predictable restructuring of unsustainable debt? As will be seen, although the features of existing domestic legislative models provide important guidance as to how to address collective action problems among creditors in the insolvency context, the applicability of these models is limited by the unique characteristics of a sovereign state.

International Monetary Fund

Abstract

This paper describes the Heavily Indebted Poor Countries (HIPC) Initiative and suggests that it should enable HIPCs to exit from the debt-rescheduling process. It argues that implementation of the Initiative should eliminate debt as an impediment to economic development and growth and enable HIPC governments to focus on the difficult policies and reforms required to remove the remaining impediments to achieving sustainable development. The paper describes the implementation of the Initiative through the end of September 1998.

International Monetary Fund

Abstract

This paper analyzes the IMF’s Enhanced Initiative for Heavily Indebted Poor Countries, which provides debt relief for low-income countries. The paper highlights that countries affected by the debt crisis of the 1980s received concerted support from the international financial community in the form of Paris Club flow reschedulings, stock-of-debt operations under the Brady plan, and adjustment programs supported by the multilateral financial institutions. These measures proved effective in significantly improving the debt situation of many middle-income countries.

Mr. Kamau Thugge and Mr. Anthony R. Boote

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.

Ms. Jacqueline T Irving

Abstract

This pamphlet reports on how the enhanced Initiative for Heavily Indebted Poor Countries (HIPCs) is meeting its aim of delivering faster, broader, and deeper debt relief to more HIPCs once these countries have shown a commitment to put the freed-up funds to work for the poor. The pamphlet also includes introductory sections that explain the rationale for the HIPC Initiative and describe how it works. A concluding section discusses the Initiative’s top challenge in the year ahead: to bring the remaining eligible countries to their decision points under the Initiative as fast and realistically as possible.

Ms. Jacqueline T Irving

Abstract

Many factors contribute to poverty. War, corruption, and destructive economic management are among the most pervasive. Others worsen poverty’s impact. Unsustainable debt is one such factor. Half of the 600 million people living in the 40 poorest, most debt-burdened countries struggle to survive on less than one dollar a day. They die earlier, have access to fewer schools and teachers, and are hungrier and sicker than their counterparts in other developing countries.

International Monetary Fund

Abstract

Countries affected by the debt crisis of the 1980s received concerted support from the international financial community in the form of Paris Club flow reschedulings (rescheduling of debt service falling due), stock-of-debt operations (reduction in the stock of outstanding debt) under the Brady plan, and adjustment programs supported by the multilateral financial institutions. These measures proved effective in significantly improving the debt situation of many middle-income countries. A number of poor countries, especially those in sub-Saharan Africa, however, continued to face difficulties in meeting their external debt-servicing obligations because of a confluence of factors. These included the accumulation—through, among other things, provision by creditors of official export credits and poor external debt-management strategies in the debtor countries—of significant nonconcessional debt, a deterioration in debtors’ terms of trade, vagaries of weather, protracted civil wars, weak economic policies, and weaknesses in governance.1