OUTCOME OF G-7 MEETING ON HIPC (fwd)

[Robert Weissman <rob@essential.org>]

This update is from Lydia Williams of Oxfam:

December 13, 1999

OUTCOME OF G-7 MEETING ON HIPC (Paris, December 10)

U.S. Treasury Secretary Larry Summers announced today at a press briefing
that four countries - Uganda, Bolivia, Mozambique, and Mauritania - are 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.


Which countries and when?

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 and "could be off track " on
the IMF program and the Bank and Fund staff seemed to be closer to the US
position than the rest of the G-7.  While formal approval rests with
boards of the World Bank and the IMF, the G-7 consensus, reached at a
December 10 Group of Seven meeting held in Paris, carried a great deal of
weight in the boards.

Uganda, Bolivia, and Mozambique have already begun to receive limited debt
relief under the existing HIPC program launched in 1996.  Widespread
criticism 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.  These countries will
now receive additional relief to bring their debt stock down 150% of
exports; Mauritania and the others will receive relief under the program
for the first time.


Implementation of the PRSP

There was consensus among the G-7 that retroactive countries should move
quickly to decision points where they would begin to receive interim debt
service relief and exit from the program (i.e. receive unconditional debt
stock reduction) when they have a Poverty Reduction Strategy Paper
approved by the boards of the Bank and Fund, which may be a matter of
months.
  There was also consensus among the G-7 that new (non-retroactive) cases
should have a PRSP in place by the decision point and reach the completion
point when they have met targets outlined in the PRSP.  Requiring a full
PRSP at the decision point would give countries incentive to do a rush job
on the PRSP and thus undermine participation and quality in order to get
debt relief they desperately need, or it would result in undue delay in
moving countries to decision points.  Staff papers on how the PRSPs should
be implemented have been produced for board decisions at the Bank and Fund
later this month.

The United States was alone in arguing that countries should meet
performance targets in the four areas (outlined in the Cologne agreement)
before the decision point: 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-Saharan Africa, are
potentially eligible for relief worth a total of $27 billion net present
value.


Financing

The meeting also addressed the financing gap.  The European Union has
approved a $700 million contribution to the HIPC Trust Fund for ACP
countries.  There appears to be sufficient funds for the early African
cases since much of the $200 million in the Trust Fund is earmarked for
Africa.  But financing is still not secure for Bolivia as the IDB has yet
to find financing either from its own resources (or from a US contribution
to the Fund).  The G-7 agreed that countries should move to decision
points regardless of whether funding was secure as this would put pressure
on the institutions (and presumably the US Congress) to find the needed
funds.

During last month's budget agreement, President Clinton and Congressional
leaders reached agreement for provide $110 million of the $320 million
requested by the Administration as well as approval of a plan to enable
the IMF to revalue some of its gold reserves to finance its portion of the
initiative.  The President lists the debt relief program among his foreign
policy accomplishments of the last year.  In the coming year, the White
House is expected to ask Congress for roughly $600 million to cover the
U.S. share of the international debt relief program.  Failure of the
Congress to provide full funding for the debt relief program has left a
financing gap that debt relief advocates and other wealthy nations have
urged the United States to move quickly to fill or risk shortchanging
countries that have struggled to meet the debt program's conditions.
Congress must also reauthorize the IMF gold revaluation plan.


-Lydia Williams, Policy Advisor, Oxfam America