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IMF: Heavily Indebted Poor Countries Initiative

DEVELOPMENT COMMITTEE
INTERIM COMMITTEE
JOINT MEETING OF THE INTERIM AND DEVELOPMENT COMMITTEES
SUNDAY, SEPTEMBER 26, 1999

JOINT STATEMENT BY CO-CHAIRMEN

Heavily Indebted Poor Countries Initiative (HIPC) and Enhanced Poverty Focus of IDA and IMF Concessional Programs

1. Ministers of the Development and Interim Committees met jointly for the first time this morning to discuss the enhancement of the HIPC Initiative which will provide faster, broader and deeper debt relief with the central goal of reducing poverty in the poorest countries in the world. This joint meeting symbolizes the cooperation and high political commitment of all countries and institutions in this effort, and the new closer relationship between the Bank and Fund which will be crucial in achieving this goal.

2. We focussed on three main areas: first, the reforms required to deliver deeper, broader and faster debt relief; second, strengthening the focus on poverty reduction in Bank and Fund programs; and third, an overview of the financing arrangements that will allow the enhanced HIPC Initiative to start after these Annual Meetings.

3. We endorsed the enhancements and reforms to the HIPC Initiative for those countries pursuing sound policies and committed to reform. We support: lowering the debt sustainability thresholds; providing faster debt relief; shifting the focus of the initiative toward a commitment to, and positive achievements in, poverty reduction; and increasing the number of countries expected to be eligible for debt relief.

4. We stressed the need to ensure that debt relief will result in poverty reduction, though we recognise that debt relief alone is insufficient to achieve this goal. We therefore endorse the framework proposed by the Bank and Fund for strengthening the link between debt relief and poverty reduction. In particular, we welcomed the proposed Poverty Reduction Strategies that countries will prepare in close collaboration with the Bank and Fund. We stressed the need to put in place macroeconomic, structural and social policies that will generate growth and contribute to poverty reduction. We stressed the crucial role good governance must play in HIPC poverty reduction and implementation of debt relief. We also endorsed the proposals to extend the same approach to strengthen the poverty focus of all IDA and IMF concessional programs.

5. We agree that Poverty Reduction Strategies should be country-driven, and be developed transparently with broad participation of civil society, key donors and regional development banks. These strategies should be clearly linked with the agreed international development goals, with measurable indicators to monitor progress. We called on the Bank and Fund to give all possible assistance to countries in developing their Poverty Reduction Strategies. These strategies will provide the basis for all IDA and Fund lending to low income countries and will so assure the close integration of the institutions' work in these areas. We strongly welcomed the commitments of the President and Managing Director to the effective implementation of this approach. We also encouraged regional development banks and donors to use the Poverty Reduction Strategies to guide their support.

6. We reaffirmed the importance of implementing the enhanced HIPC Initiative in accordance with the principles that have guided the Initiative since its inception, including (i) additionality of debt relief, (ii) maintaining the financial integrity of multilateral financial institutions, and (iii) cost sharing on a broad and equitable basis. We agreed financing of debt relief should not compromise the financing made available through concessional windows such as IDA.

7. We expressed appreciation for the many contributions to the HIPC Initiative made thus far, and for the efforts made by multilateral development institutions to provide funding for the Initiative from their own resources. We also welcomed the agreement by the Paris Club to increase its debt relief under the enhanced framework by providing increased debt reduction in NPV terms up to 90 percent or more, if needed, on commercial loans as well as additional relief on ODA claims-up to full cancellation-on a bilateral basis.

8. We heard today from Jim Wolfensohn, Michel Camdessus, Omar Kabbaj and Enrique Iglesias and we have a clear picture of their financing needs. Ministers recognized that there will need to be additional bilateral support in order to meet the financing requirements of the enhanced Initiative. These financing arrangements will need to be considered at the forthcoming Development and Interim Committees. Based on the expressions of goodwill and support that we have heard, we are confident that the political will and commitment is there to allow the Enhanced HIPC Initiative to commence after these meetings so that eligible countries can receive enhanced debt relief within the new poverty reduction framework.

9. We urge the speedy implementation of the enhanced Initiative so that as many countries as possible would qualify for assistance under the Initiative by end 2000.

ENDS

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