Public Information Notice: IMF Executive Board Discusses G-8 Finance Ministers' Proposal for Further Debt Relief for HIPCs
June 27, 2005
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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 Communiqué). 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 PDR, 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.