Outcome of G-7 Meeting on HIPC (Heavily Indebted Poor Country)

PARIS, DECEMBER 10, 1999

U.S. Treasury Secretary Larry Summers announced today at a press briefing that four countries-Uganda, Bolivia, Mozambique, and Mauritaniaare on track for receiving debt relief in January under the "enhanced" Heavily Indebted Poor Country (HIPC) initiative of the World Bank/IMF program for the poorest countries.

Some eleven countries could receive relief by the Bank/Fund spring meetings. In addition to the first four countries, five more-Mali (April), Senegal (February), Benin (February), Burkina Faso (March), and Tanzania (March)could begin receiving relief by the spring. The decision points, in parentheses, are based on Bank and Fund staff assessments about when the necessary documents should be ready. At the meeting, the United States representative said Burkina's poor track record on participation could be grounds for a delay. Cote d'Ivoire and Guyana were also identified as possible candidates for decision points in the first or second quarter of 2000, although the United States raised concerns about the former's governance record [recent coup d'etat].

Uganda, Bolivia, and Mozambique have already begun to receive limited debt relief under the existing HIPC program launched in 1996. Widespread criticism [on humanitarian and economic hardship grounds] of the program among religious and development groups led the Group of Seven at the June summit in Cologne to expand the program to provide deeper and faster relief to more countries.

... The United States was alone in arguing that countries should meet performance targets in the four areas (outlined in the Cologne agreement) before the [debt relief] decision point [is reached]: governance, economic management, poverty reduction, and transparency/ accountability/participation. The US argued for "enhanced relief for enhanced performance" but others made the case for "enhanced relief for commitment to poverty?, and cautioned that the expectations of the US in these areas was too high.

Under the new program, countries that meet criteria related to governance, poverty reduction, and economic management, and agree to reinvest debt relief into schools, health care, and other basic needs will receive debt relief. Up to 33 countries, most of which are in sub- SaharaD Africa, are potentially eligible for relief worth a total of $27 billion net present value. Financing ... [of the debt relief program has been seriously underfunded, and European nations and the US have not been fully forthcoming with additional funding. US contribution has been curtailed by disagreements between the Congress and the President over the level of funding.]