Article

In the news: IMF provides $3.3 billion in debt relief to 19 countries

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
January 2006
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On January 5, the historic Multilateral Debt Relief Initiative (MDRI) became fully effective and, as a consequence, the IMF’s Executive Board formally adopted the decisions that provide 100 percent debt relief immediately in the amount of $3.3 billion to 19 countries. This follows a December 21, 2005 meeting where the Board completed its assessment of the first group of countries eligible for debt relief. The 19 beneficiaries are Benin, Bolivia, Burkina Faso, Cambodia, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tajikistan, Tanzania, Uganda and Zambia. The MDRI will allow these countries to increase spending in priority areas to reduce poverty, promote growth, and make progress toward achieving the Millennium Development Goals.

The IMF Executive Board agreed on the implementation modalities in the IMF of the debt relief proposal advanced by the Group of Eight in June 2005. The initial objective of the proposal was for the IMF, the World Bank’s International Development Association, and the African Development Fund to cancel 100 percent of their claims on countries that have reached, or will eventually reach, the completion point under the enhanced Initiative for Heavily Indebted Poor Countries (HIPC) Initiative. The proposal was modified to meet the requirement, specific to the IMF, that the institution’s resources be used in an evenhanded manner across its membership. Thus, all member countries at or below the per capita income threshold of $380 will be eligible to receive 100 percent debt relief from the IMF’s resources. The remaining HIPCs with per capita income above that threshold will be eligible to receive 100 percent debt relief from an existing pool of funds contributed by individual countries and administered by the IMF.

The MDRI was unveiled alongside two other initiatives: the new Policy Support Instrument and a new Exogenous Shocks Facility (see box on page 5).

What follows are interviews with Mark Allen, Director of the IMF Policy Development and Review Department, and Abdoulaye Bio-Tchané, Director of the IMF African Department, and a look at Zambia, one of the countries that will benefit from the debt relief.

Countries covered by the Multilateral Debt Relief Initiative

Now eligibleUnder the “MDRI-I Trust”Under the “MDRI-II Trust”
(per capita income below $380)(per capita income above $380)
HIPCs that have reachedBurkina Faso, Ethiopia,Benin, Bolivia, Guyana,
the completion pointGhana, Madagascar, Mali,Honduras, Mauritania,
Mozambique, Niger,Nicaragua, Senegal,
Rwanda, Tanzania, UgandaZambia
Non-HIPC countries withCambodia, Tajikistan
per capita income below
$380 and outstanding
debt to the IMF
Eligible once the HIPCUnder the “MDRI-I Trust”Under the “MDRI-II Trust”
completion point is reached(per capita income below $380)(per capita income above $380)
HIPCs (10) have reachedBurundi, Chad, DemocraticCameroon, Guinea
the decision point underRepublic of the Congo, The
the Enhanced HIPC InitiativeGambia, Guinea-Bissau, Malawi,
Sao Tome and Principe,
Sierra Leone
Countries whose eligibilityPotentially HIPC-eligible are Central African Republic, Comoros, Cote
for HIPC assistance needsd’Ivoire, Lao PDR, Myanmar, Togo (Inclusion under one of the MDRI Trusts
to be confirmed on the basiswill be based on per capita income)
of end-2004 debt data
Protracted arrears casesLiberia, Somalia, Sudan

Receiving immediate debt relief

As of December 21, 2005, 19 countries qualified for debt relief under the IMF’s Multilateral Debt Relief Initiative.

Estimated eligible IMF credit outstanding1
SDRsU.S. dollars
(million)
HIPCs22,2033,160
Benin3652
Bolivia161231
Burkina Faso6289
Ethiopia112161
Ghana265381
Guyana4565
Honduras107154
Madagascar137197
Mali75108
Mozambique107153
Nicaragua140201
Niger78111
Rwanda5376
Senegal100144
Tanzania234336
Uganda88126
Zambia403577
Non-HIPCs126181
Cambodia5782
Tajikistan6999
Total2,3303,341

Projected credit outstanding at end-2005 resulting from disbursements made prior to January 1, 2005.

Heavily Indebted Poor Countries that had reached the completion point.

Data: IMF.

Projected credit outstanding at end-2005 resulting from disbursements made prior to January 1, 2005.

Heavily Indebted Poor Countries that had reached the completion point.

Data: IMF.

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