The International Monetary Fund (IMF) and the World Bank’s International Development Association (IDA) approved US$3.1 billion1 in debt relief for Côte d’Ivoire under the Heavily Indebted Poor Countries (HIPC) Initiative, representing a 24 percent reduction of its external debt, plus a further US$1.3 billion dollars of debt relief2 under the Multilateral Debt Relief Initiative (MDRI).3
The Boards of Directors of both institutions4 determined the country has made satisfactory progress in meeting the requirements to reach the completion point under the HIPC Initiative, the stage at which debt relief becomes irrevocable and at which countries start to benefit from additional multilateral relief (MDRI).
The requirements met by Côte d’Ivoire included satisfactory implementation of the Poverty Reduction Strategy Paper (PRSP), the maintenance of a sound macroeconomic policy framework, regular publication of information on public finances, and reform of the governance of the cocoa sector, among others. Côte d’Ivoire was granted waivers for delays/interruptions of five completion point triggers related to publication of information on public finances, as satisfactory progress has been made before and after the post-elections crisis.
“Reaching the HIPC completion point represents a milestone for Côte d’Ivoire and its population. It reflects the significant progress achieved in economic management since the Ouagadougou peace accord of 2007 and the end of the post-election crisis in April 2011,” said Doris Ross, IMF mission chief for Côte d’Ivoire. “Reaching the completion point will also help Côte d’Ivoire normalize relations with its external creditors. Although this will increase debt service payable in the medium term, it will also help catalyze further support from donors and potential investors. Judicious macroeconomic management will remain critical to make the country’s enormous growth potential a reality and bring prosperity to its people, while maintaining debt sustainability,” Ross said.
“We are very pleased to provide full debt relief to Côte d’Ivoire, as this will help the country devote more resources to poverty reduction and development,” said Madani M. Tall, World Bank Director for Côte d’Ivoire. “We will continue to work with the country to ensure the economy remains stable and resilient in the face of potential economic shocks.”
Of the resulting reduction of US$3.1 billion in the stock of debt under the HIPC Initiative, 23 percent comes from multilateral creditors, 43 percent from Paris Club bilateral creditors, and the remainder from other bilateral and commercial creditors. Under MDRI, IDA, the World Bank’s fund for the poorest countries, will provide a further US$1.1 billion (in end-2011 PV terms) with the cancelation of almost all remaining IDA credits after HIPC relief, and the African Development Bank (AfDB) will provide debt relief of US$156.2 million (in end-2011 PV terms), canceling almost all of the country’s repayment obligations to the AfDB. There remain no loans eligible for MDRI relief from the IMF.
Full delivery of debt relief (HIPC Initiative, MDRI, and additional bilateral assistance) at the completion point will considerably reduce the debt burden of Côte d’Ivoire. The PV of debt will fall from about US$12.0 billion (in 2011 PV terms, or about 3 times 2011 government revenues) in 2011 to about US$4.7 billion (in 2011 PV terms, or about the level of 2012 revenues) in 2012. Nevertheless, both the IMF and the World Bank consider that the country remains vulnerable to potential economic shocks, underlining the need for continued strong economic management and structural reforms.
Côte d’Ivoire becomes the 33rd country to reach the completion point under the HIPC Initiative. The completion point marks the end of the HIPC process, which started in 2009 when the Executive Boards of the IMF and the World Bank’s IDA agreed that Côte d’Ivoire had met the requirements for reaching the decision point, the stage at which countries start receiving debt relief on an interim basis.
The HIPC Initiative. In 1996, the World Bank and IMF launched the HIPC Initiative to create a framework in which all creditors, including multilateral creditors, can provide debt relief to the world’s poorest and most heavily indebted countries to ensure debt sustainability, and thereby reduce the constraints on economic growth and poverty reduction imposed by the unsustainable debt-service burdens in these countries.
To date, 36 HIPC countries have reached their decision points, of which 33 (including Côte d’Ivoire) have reached the completion point.
The MDRI. Created in 2005, the aim of the Multilateral Debt Relief Initiative is to reduce further the debt of eligible low-income countries and provide additional resources to help them reach the Millennium Development Goals. Under the MDRI, three multilateral institutions – the World Bank’s International Development Association, the International Monetary Fund and the African Development Fund--provide 100 percent debt relief on eligible debts to qualifying countries normally at the time they reach the HIPC Initiative completion point.
For more information on Cote d’Ivoire, please visit: http://www.imf.org/external/country/CIV/index.htm
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In 2007 present value terms.
In 2011 present value terms.
Amounts are presented in end-2007 (HIPC) and end-2011 (MDRI) present value (PV), which is the discounted sum of all future debt service (principal and interest) at a specific market rate of interest (called the discount rate). In debt-reorganization discussions, the present value concept is used to measure, in a consistent manner, the burden sharing of debt reduction among creditors. The nominal value of debt is the amount that the debtor owes to creditors at a moment in time. For further explanation click here to see entries for Nominal Value and Present Value in Appendix III--Glossary of External Debt Terms IMF, External Debt Statistics: Guide for Compilers and Users, (2003) IMF, Washington DC.
The IMF Executive Board met on June 25, 2012, and the IDA Executive Board met on June 26.