Press Release: IMF and World Bank Approve Exceptional Assistance to Cote d'Ivoire under the HIPC Initiative
March 19, 1998
The International Monetary Fund (IMF) and the World Bank have agreed to support a debt reduction package for Côte d’Ivoire under the Initiative for Heavily Indebted Poor Countries (HIPC)1. The total assistance to be provided to Côte d’Ivoire by all of its external creditors will reduce the country’s external debt burden by US$345 million in Net Present Value (NPV) terms. This is estimated to translate into debt-service relief over time of close to US$800 million. The IMF and World Bank will provide assistance with an NPV of US$22.5 million and US$91 million, respectively. The completion point for the delivery of the debt reduction package will be March 2001.
The delivery of the debt reduction package from the IMF and World Bank is subject to confirmation from Côte d’Ivoire’s other creditors that they will provide their share, and the satisfactory implementation of reforms agreed by the Government. The World Bank will provide its contribution in the form of IDA grants—as opposed to the normal credits—of US$314 million tied to specific adjustment operations through the completion point as part of its lending program to Côte d’Ivoire over the next three years. The IMF will provide its assistance at the completion point in the form of a grant into an escrow account to be used to pay debt-service falling due to the IMF. The debt relief provided under the HIPC initiative will free budgetary resources for increased expenditure on primary health and education, rural development, and poverty alleviation.
The HIPC debt relief package is in support of Côte d’Ivoire’s wide-ranging economic and structural reforms that aim at keeping the economy on a path of sustained growth, ensuring financial viability, reducing poverty, and substantially improving the living standards of the population. To this end, the key policy components of the authorities’ reform strategy include: (a) further fiscal consolidation to reduce the dependence on external assistance and increase public saving, with a more efficient use of scarce public resources; (b) a deepening of structural reforms that promote private sector development and investment—including foreign direct and portfolio investment—and foster continuing diversification and transformation of the Ivoirien economy; and (c) the pursuit of an ambitious social development agenda designed to reduce poverty, especially through well-targeted and efficient public spending on education and health.
Commenting on the announcement, the Ivoirien Minister of Finance, N’Goran Niamien, said, "Côte d’Ivoire warmly welcomes the decision by the IMF and World Bank Executive Boards to approve a substantial debt reduction for Côte d’Ivoire under the HIPC Initiative. This reduction comes in direct support of the three-year ESAF program adopted on March 17, 1998 by the IMF Board, and will contribute to Côte d’Ivoire realizing its economic and social objectives, achieving a significant reduction in its debt burden, and accelerating its progress in the fight against poverty.
"The measures envisaged under the program will be implemented with determination, and the budgetary savings which will be achieved, in particular through debt relief, will be used in support of spending in the health and education sectors.
"The Government depends on all Ivoiriens for the success of the program, which will consolidate and strengthen economic growth and increase per capita income, and above all, will further improve the well-being of the Ivoirien population."
Côte d’Ivoire is the fifth country to benefit under the HIPC Initiative, raising the total debt relief committed under the Initiative to about US$1.5 billion in NPV terms, or about US$2.8 billion in debt service over time. Côte d’Ivoire is the second country to qualify under the fiscal/openness criteria that were established under the Initiative in April 1997 for highly open economies with a heavy fiscal burden of external debt despite strong efforts in mobilizing revenue. In the special case of a country with an open economy that is making a substantial effort to collect fiscal revenues, the NPV of debt-to-exports target may be set below 200 percent, with the target set so that the NPV of debt-to-fiscal revenues would be 280 percent at the completion point. Consistent with this fiscal/openness criteria, Côte d’Ivoire’s target for the NPV of debt was set at 141 percent of exports, compared to a projected ratio of 148 percent before assistance.
1The HIPC Initiative entails coordinated action by the international financial community, including multilateral institutions, to reduce to sustainable levels the external debt burden of heavily indebted poor countries that pursue World Bank-and IMF-supported adjustment and reform programs, but for whom traditional debt relief mechanisms are insufficient.