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Significant milestone achieved: Twenty-two poorest countries qualify for debt relief under joint IMF–World Bank HIPC Initiative

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
January 2001
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A crucial milestone in providing relief to the poorest countries was reached when IMF Managing Director Horst Köhler and World Bank President James D. Wolfensohn announced that 22 eligible countries (18 of them in Africa) had qualified for debt relief under the Heavily Indebted Poor Countries (HIPCs) Initiative. This means these countries begin to be spared some $34 billion in debt-service obligations. Once they reach their completion points under the initiative, these countries will see their foreign debt reduced by two-thirds on average, reflecting relief under traditional mechanisms, the HIPC Initiative, and additional bilateral actions.

In their December 22 joint statement, Köhler and Wolfensohn said:

“In this millennium year, the Bretton Woods institutions have been determined to play their part in tackling one of the most pressing challenges of our time—helping the poorest members of the world community to share in the prosperity enjoyed by so many. A key element has been debt relief for the heavily indebted poor countries.

“In 1996, the IMF and the World Bank launched an initiative with many other partners to reduce the debt of the HIPCs to sustainable levels as a way to renew their prospects for growth and to free up resources for vital social needs. Last year, we committed to strengthen that initiative to provide faster, deeper, and broader debt relief. When progress still seemed too slow, we pledged to make every effort to permit at least 20 countries to benefit from debt relief by the end of this year. This goal has been reached and even exceeded.

“In recent weeks, our Executive Boards and staffs have worked intensively to finalize debt relief for many HIPCs. These efforts will lift some $34 billion in debt-service obligations from the shoulders of 22 eligible countries, 18 of them in Africa (see charts, pages 3 and 4, and table, page 5). As a result, after they reach their completion point and receive full assistance under the enhanced HIPC Initiative, these countries will see their foreign debt reduced by almost half on average. Combined with existing debt-relief programs—such as those of the Paris Club of creditor nations—these countries will see their debts fall, on average, by about two-thirds.

“Much hard work and commitment has been required. The countries concerned have shown their willingness to put debt relief to effective use to improve the lives of the poor. They have formulated strategies to reduce poverty, to invest in their people’s future, and to create the basis for sustained growth in their countries.

“These countries face a continuing challenge to remain focused on long-term goals—even in the face of difficult circumstances, not least the AIDS pandemic affecting so many of them. Together, we have laid a strong foundation and will continue to make every effort to build upon it in all of these 22 countries.

“We shall also continue working to bring debt relief to the remaining heavily indebted poor countries that have yet to qualify for HIPC Initiative assistance. Their already difficult situations are, in many cases, compounded by civil conflict or its immediate aftermath. An end to these conflicts is an essential first step for these countries to rebuild economically and truly benefit from debt relief.

“To ensure that the relief is translated into poverty reduction, the beneficiary countries must continue with their economic, social, and governance reforms. In this context, they will need to design and implement nationally owned poverty reduction strategies. Our institutions and many other partners look forward to helping poor countries in these efforts. We will continue to offer our advice and financial assistance in support of their programs of human development, good governance, and sound economic management.

Enhanced HIPC Initiative: comparative debt reduction and debt relief for 22 decision point countries

(as of end-December 2000)

Note: Debt reduction is measured by the common reduction factor. This refers to the percentage by which each creditor needs to reduce its debt stock at the decision point so as to enable the country to reach its debt sustainability target. The calculation is based in net present value (NPV) information.

For Bolivia, Burkina Faso, Guyana, Mali, Mozambique, and Uganda, assistance under the original and enhanced frameworks is combined.

Enhanced HIPC Initiative: debt-service reduction for 22 decision point countries

(as of end-December 2000)

Note: The debt stock before any relief is estimated at $53 billion in NPV terms or $73 billion in nominal terms.

“But the international community must play its full part to improve the lot of poor countries, for there cannot be a good future for the rich nations if the poor nations do not share prosperity. The combination of improved policies and debt relief will not be enough in most cases. We need to make sure that the HIPC Initiative is supported by all creditors, including official bilateral and commercial creditors that have yet to provide the required debt relief. Also, it is important to resolve the remaining funding issues for some multilateral creditors and to ensure that financing for the HIPC Initiative is truly additional and does not come at the expense of other aid flows. More broadly, we call upon industrial countries to raise their official development assistance toward internationally agreed levels. And we urge them to open their markets to the exports of the poor countries, giving them a better chance to succeed on their own. The international community also has an important role in conflict resolution, especially in Africa.

At the turn of the millennium, many parts of the world are enjoying unprecedented prosperity. But we also know that too many people cannot yet meet their very basic human needs. It is time to redouble our efforts to make the global economy work for the good of all.”

The text of this statement and other information about the HIPC Initiative are also available on the IMF’s website (www.imf.org).

For a comprehensive discussion of the significant progress that has been made in debt relief for the poorest countries, please refer to the interview with Jack Boorman, Director of the IMF’s Policy Development and Review Department, which was published in the IMF Survey, December 11, 2000, pages 285–88.

HIPC Initiative: committed debt relief and outcome, status as of end-December 2000(million U.S. dollars)
Reduction in NPV termsNominal debt-service relief
OriginalEnhancedOriginalEnhancedPress
HIPC InitiativeHIPC InitiativeTotalHIPC InitiativeHIPC InitiativeTotalrelease numberDate
Reached decision points (22)
Benin26526546046000/44July 2000
Bolivia4488541,3027601,3002,06000/07January 2000
Burkina Faso22916939840030070000/42June 2000
Cameroon1,2601,2602,0002,00000/56October 2000
The Gambia6767909000/68December 2000
Guinea54554580080000/85December 2000
Guinea-Bissau41641679079000/71December 2000
Guyana2563295854405901,03000/61November 2000
Honduras55655690090000/41July 2000
Madagascar18148141,5001,50000/81December 2000
Malawi6436431,0001,00000/77December 2000
Mali12140152322065087000/52September 2000
Mauritania6226221,1001,10000/09January 2000
Mozambique1,7162541,9703,7006004,30000/28April 2000
Nicaragua3,2673,2674,5004,50000/78December 2000
Niger52152190090000/76December 2000
Rwanda45345381081000/84December 2000
São Tomé and Príncipe979720020000/74December 2000
Senegal48848885085000/36June 2000
Tanzania2,0262,0263,0003,00000/26April 2000
Uganda3476561,0036501,3001,95000/06January 2000
Zambia2,4992,4993,8203,82000/67December 2000
Total3,11717,20220,3206,17027,46033,630
Still to be considered (13)
Possible early cases
Chad157157250250ReviewedJuly 2000
Ethiopia6366361,3001,300ReviewedNovember 1998
Côte d’Ivoire345345800800Approved2March 1998
Subtotal3457931,1388001,5502,3502
Others
Burundi
Central African Republic
Congo, Dem. Rep. of
Congo, Rep. of
Liberia
Myanmar
Sierra Leone
Somalia
Sudan
Togo
Total debt relief
committed23,46217,99521,4576,97029,01035,980

Preliminary.

Approved debt relief under the original framework.

Countries that reached their decision points under the enhanced HIPC framework through December 2000 and Côte d’Ivoire, which reached its decision point under the original framework.

Note: NPV = net present value. Ghana and Lao PDR are not seeking HIPC debt relief.Data: HIPC Initiative country documents; World Bank and IMF staff estimates

Preliminary.

Approved debt relief under the original framework.

Countries that reached their decision points under the enhanced HIPC framework through December 2000 and Côte d’Ivoire, which reached its decision point under the original framework.

Note: NPV = net present value. Ghana and Lao PDR are not seeking HIPC debt relief.Data: HIPC Initiative country documents; World Bank and IMF staff estimates

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