[stop-imf] IMF discusses debt cancellation proposal

[robert weissman]

http://www.imf.org/external/np/sec/pn/2005/pn0579.htm

IMF Executive Board Discusses G-8 Finance Ministers' Proposal for
Further Debt Relief for HIPCs

On June 22, 2005, the Executive Board of the International Monetary Fund
(IMF) met for an initial discussion of the proposal for debt
cancellation for countries under the Heavily Indebted Poor Countries
(HIPC) Initiative advanced by the Group of Eight (G-8)1 Finance
Ministers in London on June 10-11. This meeting was not intended to draw
firm conclusions on the proposal, but instead served to clarify the
status of current Fund operations with low-income countries in light of
the G-8 proposal, and raise issues that will need to be addressed in
analyzing the proposal, as well as necessary modifications to the work
program of the IMF to accommodate this work.

The G-8 has proposed that the IMF, the World Bank, and the African
Development Bank cancel 100 percent of their claims on 18 countries that
have reached the completion point under the HIPC Initiative and the
claims on other HIPCs (currently 17 countries) as they reach completion
point2. The costs of debt relief to the World Bank and the African
Development Bank would be met by bilateral contributions from the G-8
countries and other donors. The costs of debt relief for obligations to
the IMF would be met from current IMF resources (G-8 Communiqu=E9). The
G-8 proposal stated, "In situations where other existing and projected
debt relief obligations cannot be met from the use of existing IMF
resources (e.g., Somalia, Liberia, and Sudan), donors commit to provide
the extra resources necessary. We will invite voluntary contributions,
including from the oil-producing states, to a new trust fund to support
poor countries facing commodity price and other exogenous shocks."

Executive Directors stressed the Fund's commitment to support of
low-income countries, including the poorest and most heavily indebted
member countries of the IMF. To that end, Directors endorsed a staff
analysis of the latest proposal on debt relief, and they also stressed
that the Fund will continue to operate under existing policies and
procedures until decisions to change or modify these policies are taken
by the required majorities. That is, the Fund will make new commitments
and disbursements under the Poverty Reduction and Growth Facility (PRGF)
and the HIPC Initiative, and member countries will continue servicing,
in full and on a timely basis, their financial obligations to the Fund
and the PRGF Trust.

Directors agreed that the Fund's work program (see Press Release No.
05/147) should be modified in light of the proposal. They asked staff to
prepare a careful assessment of the proposal, of its legal, financial,
and policy implications for the Fund, as well as possible modifications.
This paper can be considered in the context of various other proposals
related to the Fund's involvement with low-income countries that are
already on the agenda for discussion before the Executive Board's August
recess.

1 The members of the G-8 are: Canada, France, Germany, Italy, Japan,
Russia, United Kingdom, and the United States.

2 The financing identified by the G-8 covers the following 35 HIPC
countries:

Completion Point countries (18): Benin, Bolivia, Burkina Faso, Ethiopia,
Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique,
Nicaragua, Niger, and Rwanda, Senegal, Tanzania, Uganda and Zambia.

Decision Point countries (9): Cameroon, Chad, Democratic Republic of
Congo, The Gambia, Guinea, Guinea-Bissau, Malawi, Sao Tome and Principe,
Sierra Leone.

Pre-Decision Point countries, or countries still to be considered for
HIPC relief (8): Burundi, Central African Republic, Comoros, Republic of
Congo, Cote d'Ivoire, Lao PRD, Myanmar, Togo. Other countries may be
declared eligible for HIPC Initiative debt relief by the IMF and World
Bank Boards on the basis of their economic and debt situations.