Statement by G7 Leaders On Debt Relief For HIPC
Statement by G7 Leaders
Delivering on the Promise of the Enhanced HIPC Initiative
Debt relief alone, no matter how generous, cannot guarantee fiscal solvency, long-term economic growth, and social development. Good governance, prudent new borrowing, and sound debt management by heavily indebted poor countries (HIPCs), as well as responsible financing by creditors, are also essential elements of the policy framework needed to achieve these goals.
The enhanced Heavily Indebted Poor Countries Initiative, launched following the Köln Summit in 1999, is an important avenue for debt reduction. To date, 26 countries are benefiting from debt relief under this Initiative. Overall, debt relief for these countries will amount to US$40 billion in net present value terms - almost two-thirds of their total debt. As many as 37 countries are expected eventually to benefit from debt reduction under the Initiative.
While this is very encouraging, there are factors that may prevent the HIPC Initiative from delivering the debt reduction it has promised:
not all creditors have agreed
to reduce their HIPC debts;
the expected financing needs
of the Initiative have not been fully met;
as a result
of weaker growth and export commodity prices, a number of
countries could be at risk of not having sustainable debt
loads at the Completion Point.
In our discussions we
agreed to take action to address these three issues.
A.
Securing the participation of all creditors
To provide
information on the participation of all creditors, we agreed
to call on the International Monetary Fund (IMF) and World
Bank to:
include, in HIPCs' Poverty Reduction and Growth Facility reviews and Completion Point documents, more detailed information on the respective countries' success in obtaining comparable treatment;
post comprehensive
information on creditor participation on the Bank and Fund
Web sites, including creditors' explanations for
non-participation.
We will ask the IMF and World Bank to
continue to work with regional and small multilateral
development institutions to encourage and facilitate their
participation in the Initiative. We will also write to the
Boards of those institutions that have not yet committed to
participate in order to ask them to take part in the
Initiative. Furthermore, we will encourage those
multilateral institutions that are late in providing debt
relief to accelerate their efforts.
Noting the importance of commercial creditor participation, we agreed to ask the World Bank and IMF to prepare a comprehensive report on legal action brought against HIPCs by non-participating creditors, including by commercial creditors, and on options for HIPCs to obtain technical assistance to facilitate resolution of disputes. We further agreed to ask the IMF and World Bank to continue to encourage bilateral creditors not to sell their claims on HIPCs in the secondary debt market.
As far as non-Paris Club official bilateral creditors are concerned, we will ask the IMF and World Bank to encourage creditors who are members of the two organizations to participate fully in the HIPC Initiative, particularly relatively wealthy creditors that have a significant amount of claims.
In addition, we will urge the IMF to identify creditor countries' participation in the Initiative ahead of any debt rescheduling with the Paris Club. We will also ask the Chair of the Paris Club to consider inviting, on a case-by-case basis, non-member official creditors to participate in its negotiations with HIPC countries on the understanding that these creditors will join a satisfactory consensus and will abide by Paris Club principles.
We agreed to ask the IMF and World Bank to include participation in the HIPC Initiative in reporting under Article IV as well as other Fund and Bank documents.
We will explore means of approaching creditors that are not IMF/World Bank members to encourage them to participate in the Initiative.
B. Completing the financing of the HIPC
Initiative
We acknowledged the threat to sustainable exit
from debt due to under-financing of the Initiative and we
committed to work with other donor countries and the
international financial institutions (IFIs) to address this
issue.
We will also call upon the multilateral development banks to continue to make best efforts to identify internal resources to contribute to the financing of the HIPC Initiative.
C. Debt sustainability at the
Completion Point
We will ask the IMF and World Bank to
ensure that the comprehensive review of debt sustainability
being prepared for the Annual Meetings includes an
assessment of the methodology for assessing the need for,
and amount of, additional assistance (or topping up) at the
Completion Point. We committed to work with other donor
countries and IFIs to ensure that the need for financial
resources for this purpose is met.
Going forward, IFIs need to ensure that forecasts of debt sustainability are made on the basis of prudent and cautious assumptions about growth and exports.
Finally, we agreed on the need for bilateral donors to consider financing HIPCs and HIPC "graduates" primarily through grants for a sustained period, and to refrain from supporting unproductive expenditures. We will also call upon multilateral development funds - which are in many cases the main creditors of HIPCs - to make appropriate use of grants in delivering assistance to HIPCs and HIPC graduates.
06/27 Kananaskis Summit Document: The Kananaskis Summit Chair's Summary
06/27 Kananaskis Summit Document: Statement by G7 Leaders — Delivering on the Promise of the Enhanced HIPC Initiative
06/27 G8 Africa Action Plan Highlights
06/27 Africa Facts
06/27 Kananaskis Summit Document: The G8 Global Partnership Against the Spread of Weapons and Materials of Mass Destruction
06/27 Kananaskis Summit Document: G8 Africa Action Plan
06/26 Kananaskis Summit Document: Report of the G8 Education Task Force
Strengthening Global Economic Growth and Sustainable Development
Building a New Partnership for Africa’s Development
Fighting Terrorism
ENDS