Press Release: Mauritania Qualifies for US$1.1 Billion Debt Relief Under HIPC to Support Poverty Reduction
February 10, 2000
The International Monetary Fund (IMF) and the World Bank's International Development Association (IDA) have agreed to support Mauritania's eligibility for a debt reduction package under the enhanced Heavily Indebted Poor Countries (HIPC) initiative. To address fully Mauritania's external debt burden, the fiscal criterion-the ratio of debt to government revenues-is being used to calculate the reduction of the debt in net present value terms. Resources made available from this debt relief will help finance social expenditures, contributing to Mauritania's efforts to reduce poverty.
In net present value terms, total relief from all of Mauritania's creditors would amount to US$622 million, equivalent to about 40% of total debt outstanding at the end of 1998. This is expected to translate into debt relief over time of approximately US$1.1 billion, which implies debt service savings of roughly US$36 million per year over the next ten years, or 40% of total yearly debt service obligations.
The HIPC initiative was launched by the IMF and the World Bank in 1996 as the first international effort to eliminate unsustainable debt in the world's poorest, most heavily indebted countries. In October, the international community agreed to major enhancements designed to make the initiative deeper, broader, and faster by increasing the number of eligible countries, raising the amount of debt relief each eligible country will receive, and speeding up its delivery.
Under the enhanced HIPC initiative, IMF assistance of US$50 million (US$47 million in net present value terms) will be provided to Mauritania, starting in 2000, by covering around one half debt service falling due from then to 2007. IDA's assistance to Mauritania will amount to US$185 million (US$100 million in net present value). This relief would be delivered over 20 years starting in February 2000 and will cover 70% of debt service falling due to IDA. The reduction of Mauritania's debt service to IDA would average about US$9 million per year. Mauritania's assistance under the enhanced HIPC initiative will be confirmed upon the granting of comparable treatment assurances from Mauritania's other creditors.
Mauritania has established a good track record of adjustment and reform on the macroeconomic, social, and political fronts. Substantial structural reforms have been implemented and fiscal consolidation has been achieved. Reflecting this effort, GDP has grown by an annual average of close to 5% since 1992 and there has been significant improvement in social indicators, although 50% of the population remains under the poverty line.
In line with the enhanced HIPC initiative framework, the Boards of the IMF and IDA supported a floating completion point, which would be triggered by the successful implementation of a set of predefined reforms in the macroeconomic, structural, and social domains. In particular, to achieve the completion point will require the preparation of a fully developed participatory Poverty Reduction Strategy Paper (PRSP) broadly endorsed by the IMF and IDA Boards and successfully implemented for at least one year. The PRSP will also serve as a basis for future concessional assistance from the IMF and World Bank. As noted above, the IMF and the IDA will provide interim relief-between the decision and completion points-and the Paris Club is also expected to do likewise.