Press Release: Côte d'Ivoire Reaches Decision Point Under the Enhanced HIPC Debt Relief Initiative
March 31, 2009Press Release No. 09/104
March 31, 2009
The World Bank's International Development Association (IDA) and the International Monetary Fund (IMF) have agreed that the Republic of Côte d'Ivoire qualifies for debt relief under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative, enabling it to reach the decision point under the Initiative. Côte d'Ivoire becomes the 35th country to reach its decision point.
Côte d'Ivoire will receive interim debt relief from certain creditors, but in order to qualify for irrevocable debt relief at the completion point, Côte d'Ivoire will be implementing a broad set of reforms. In particular, Côte d'Ivoire has adopted a Poverty Reduction Strategy (PRS) in 2009 and has established a track record of policy performance under the economic programs supported by the IMF's Emergency Post-Conflict Assistance (EPCA). In order to reach the completion point, Côte d’Ivoire will have to implement the PRS for at least one year and maintain macroeconomic stability as evidenced by satisfactory performance under the economic program supported by an arrangement under the Poverty Reduction and Growth Facility (PRGF). The country will also have to implement the floating completion point triggers, which cover key structural and social reforms, including in the areas of public finance management, debt management, and governance.
In addition to HIPC debt relief, Côte d'Ivoire will access relief under the Multilateral Debt Relief Initiative (MDRI) when it reaches the HIPC completion point. This will further increase the resources available to the government in order to reduce poverty.
Mr. John Lipsky, IMF First Deputy Managing Director and Acting Chair of the IMF Executive Board, said: “Côte d'Ivoire has fulfilled the requirements to reach the decision point under the Enhanced HIPC Initiative. Côte d'Ivoire could reach the HIPC Initiative completion point, following satisfactory performance under the IMF-supported program, implementation of the Poverty reduction strategy for at least one year, and implementation of proposed measures in public finance management, the social sectors, debt management and governance, at which point, Côte d'Ivoire would also qualify for debt relief under Multilateral Debt Relief Initiative. Côte d'Ivoire also qualifies for interim debt relief in the period between the decision and completion points, in line with existing HIPC initiative guidelines.
Mr. Arend Kouwenaar, IMF Mission Chief for Côte d'Ivoire, said: “After more than a decade of civil strife and economic hardship, Côte d'Ivoire is in the process of economic recovery and political normalization. Despite the adverse impact of the global economic downturn, performance under the programs supported by the IMF’s EPCA has been broadly satisfactory. While there have been some important slippages related to large public works, Côte d'Ivoire has kept fiscal policies broadly in check. Despite a difficult post-conflict situation, it has undertaken important public finance management reforms to reach the Decision Point for debt relief under the HIPC Initiative. Prudent macroeconomic policies, more transparent public finance management, and further improved governance in the handling of public resources will be critical for achieving debt sustainability and sustained growth while creating space for pro-poor and pro-growth spending.”
Mr. [Madani Tall], the World Bank Country Director for Côte d'Ivoire, said: "We are pleased that Côte d'Ivoire has reached the Decision Point of the HIPC initiative. We expect Côte d'Ivoire to rapidly meet the requirements for the Completion Point so as to benefit from the full debt relief program that will free up resources to finance essential spending in social sectors. Under the HIPC program, Côte d'Ivoire is continuing its commitment to improve governance, foster transparency in public finance and debt management, accelerate reforms in the energy and cocoa/coffee sectors, and strengthen social programs, as reflected in the Completion Point triggers. These reforms are critical for fostering increased economic growth and improved living standards in Côte d'Ivoire."
Specifics of the Debt Relief Operation
• Côte d'Ivoire's public and publicly guaranteed external debt was estimated at US$14.3 billion in nominal terms as of end-December 2007, equivalent to US$12.8 billion in net present value (NPV) terms.
• Debt relief under the enhanced HIPC Initiative is estimated at US$3.0 billion in NPV terms, equivalent to a 23.6 percent reduction of its debt after traditional debt relief mechanisms. Upon reaching the HIPC completion point, Côte d'Ivoire would also access MDRI debt relief from IDA, the AfDF, and the IMF, projected at about US$1, 692.6 million, US$311.6 million, and US$9.3 million, respectively.
• Côte d'Ivoire has already received about half of its estimated HIPC debt relief through past debt reschedulings and concessional arrears clearance operations.
• The combination of traditional debt relief, HIPC debt relief, MDRI relief, and additional bilateral relief beyond HIPC would bring the NPV of debt to 75 percent of fiscal revenues in 2011, compared to 327 percent in 2007.
Note to Editors:
Côte d'Ivoire’s gross national income (GNI) per capita was US$960 in 2007. The period of political instability and civil strife have resulted in an economic decline that has reduced living standards and increased poverty. Real per capita GDP has fallen by 15 percent in 2000-2006. Poverty incidence has increased significantly from 38.2 percent in 2002 to 48.9 percent in 2008. In 2007, the country was ranked 166th (out of 177 countries) in the UN Development Index. In 1999, it was ranked 154th out of 174.
The HIPC Initiative
In 1996, the World Bank and IMF launched the HIPC Initiative to create a framework in which all creditors, including multilateral creditors, can provide debt relief to the world's poorest and most heavily indebted countries, and thereby reduce the constraints on economic growth and poverty reduction imposed by the debt-service burdens in these countries. The Initiative was modified in 1999 to provide three key enhancements:
Deeper and Broader Relief. External debt thresholds were lowered from the original framework. As a result, more countries have become eligible for debt relief and some countries have become eligible for greater relief;
Faster Relief. A number of creditors began to provide interim debt relief immediately at the "decision point." Also, the new framework permitted countries to reach the "completion point" faster; and
Stronger Link Between Debt Relief and Poverty Reduction. Freed resources were to be used to support poverty reduction strategies developed by national governments through a broad consultative process.
To date, 35 HIPC countries have reached their decision points, of which 24 have reached completion point.