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Debt Relief

HIPC : Heavily Indebted Poor Countries

What is the Heavily-Indebted Poor Countries (HIPC) Initiative?

  • Aim – to reduce to sustainable levels the external debt burden of the poorest and most indebted countries.

  • Set up by the World Bank and IMF in September 1996.

    Run as a coordinated effort by all categories of creditors, including multilateral institutions.

  • 41 countries involved so far, mostly in Africa.

    As of June 2008, 23 countries have completed all stages of the procedure to qualify for relief, 10 have completed preliminary stages (passed "decision point") and 8 have been identified as potentially eligible for debt relief.

  • Supplemented by the multilateral debt relief initiative (MDRI)

    Countries that qualify for HIPC debt relief will also be granted 100% relief on eligible debt owed to various multilateral bodies (World Bank, African Development Bank, IMF and Inter-American Development Bank).

EU contribution to HIPC

  • More than €1.6bn pledged so far – €680m in relief on its own claims and €934m donated to the HIPC trust fund.
  • Commission was first multilateral institution to provide debt relief beyond the HIPC terms.
  • Reserves from the European Development Fund used for contribution to HIPC (with the consent of the normal beneficiary countries).

Results

Some encouraging results for HIPC beneficiary countries:

  • reduction in debt and interest payments
  • increased spending on poverty reduction
  • better management of public finances

Challenges

  • securing full financing of the HIPC initiative, and participation of all creditors (non-Paris Club official and commercial)
  • dealing with litigation against HIPCs by some creditors
  • ensuring long-term debt sustainability (Commission is following international discussions closely. For background see EU council conclusions on faster progress on MDGs (2008)
  • tackling difficult cases – essentially HIPCs emerging from conflict, with substantial arrears

HIPC Status Report 2008

HIPC and MDRI 2007 implementation report

Last update: 17/02/2012 | Top