Debt Relief for Poverty Reduction
It is internationally recognised that the debt burden of the world's poorest, most indebted poor countries has to be tackled if they are to set themselves on a path of sustainable growth, development and poverty reduction. Since 1999, the Heavily Indebted Poor Countries (HIPC) initiative has been providing faster, broader and deeper debt relief to poor countries committed to eradicating poverty. The objective is to provide a permanent exit from unsustainable debt burdens.
To date, 23 countries have received full debt cancellation under HIPC. 10 others are receiving interim debt relief under HIPC. Relief totalling more than US$60 billion is being provided to these countries, reducing their debts by around two-thirds on average, and freeing up resources for spending on poverty reduction. Poverty-reducing expenditures in countries that receive HIPC assistance are projected to have increased from 6.4% of GDP in 1999 to 8.4% of GDP in 2007.
Despite these successes, further debt relief is still needed to allow countries to make the investments in health, education and infrastructure that would allow them to attain the Millennium Development Goals. Many bilateral donors, including the UK, go beyond the HIPC Initiative and provide 100% relief for HIPCs, but multilateral institutions currently provide relief at around half this level.
Therefore the Multilateral Debt Relief Initiative was agreed by G8 members, under which HIPCs receive 100% cancellation of the remaining debt owed to the concessional lending arms of the World Bank, African Development Bank (AfDB) and International Monetary Fund (IMF). The deal is worth over $50bn for 41 eligible HIPCs. So far, HIPC and MDRI have delivered over $100 billion of debt relief. For more information about debt relief, please see the following:
World BankLast updated: 18 May 2008
