Multilateral Debt Relief Initiative —
Questions and Answers
Last Updated: June 18, 2012
The Multilateral Debt Relief Initiative (MDRI) was adopted by the IMF in late 2005. This initiative puts into action a debt relief proposal initially advanced by the G-8 in June 2005, which called for the cancellation of 100 percent of the claims of three multilateral institutions--the IMF, the International Development Association (IDA) of the World Bank, and the African Development Fund (AfDF)--on countries that have reached, or will eventually reach, the completion point under the enhanced Initiative for Heavily Indebted Poor Countries (HIPC Initiative).
The IMF Executive Board modified the G-8's proposal to meet the requirement, specific to the IMF, that the institution's resources be used in an evenhanded manner across its membership, consistent with the principle of uniformity of treatment. Thus, it was agreed that all member countries (whether HIPC or non-HIPC) with per capita income US$380 a year or less would be eligible for MDRI debt relief from the IMF's resources. The remaining HIPCs with per capita income above that threshold would be eligible for MDRI relief from an existing pool of funds administered by the IMF but originally contributed by individual countries. The implementation modalities of the MDRI in the Fund were approved by the Executive Board in November 2005 (see Press Release 05/164).
On December 21, 2005, the Executive Board assessed which eligible countries qualified for the MDRI (see Press Release 05/286).; and on January 6, 2006, the IMF turned commitment into action when it delivered MDRI debt relief—amounting to US$3.4 billion--to an initial group of 19 countries1. Other countries are eligible and the IMF is helping them make rapid progress to qualify. Total debt relief by the IMF under the MDRI is expected to be over US$5 billion.
Debt relief under the MDRI is intended to help qualifying countries advance toward the United Nations' Millennium Development Goals (MDGs), which are focused on halving poverty by 2015.
How does this affect IMF finances, in particular with regard to other support for low income countries, such as the PRGF? Does this mean that in the future the IMF will only provide grants? If not, why not?