Debt Relief Under the Heavily Indebted Poor Countries Initiative

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The IMF and World Bank launched the Heavily Indebted Poor Countries (HIPC) Initiative in 1996 to ensure that no poor country faces an unmanageable debt burden.
In 2005, the HIPC Initiative was supplemented by the Multilateral Debt Relief Initiative to accelerate progress toward the United Nations’ Sustainable Development Goals; this allows countries completing the HIPC Initiative process to receive 100 percent relief on eligible debts by the IMF, the World Bank, and the African Development Fund.
In 2007, the Inter-American Development Bank provided additional (“beyond HIPC”) debt relief to the five HIPCs in the Western Hemisphere.
Facts in this factsheet are current as of February 2023.

Eligibility criteria to be considered for HIPC Initiative assistance:
- Be eligible to borrow from the World Bank’s International Development Association and from the IMF’s Poverty Reduction and Growth Trust.
- Face an unsustainable debt burden that cannot be addressed through traditional debt-relief mechanisms.
- Have a track record of reform and sound policies through IMF- and World Bank-supported programs.
- Develop a Poverty Reduction Strategy Paper (PRSP) through a broad-based participatory process.
Decision point and completion point process:
- The Executive Boards of the IMF and World Bank formally decide on a country’s eligibility for debt relief at the decision point; at that stage the international community commits to reducing debt to a level considered sustainable and a country may immediately obtain interim debt relief.
- To reach the completion point and receive the full debt relief committed at the decision point, a country must:
- Establish a further track record of good performance under programs supported by loans from the IMF and the World Bank.
- Successfully implement key reforms agreed at the decision point.
- Adopt and implement its PRSP for at least one year.
Coverage to date:
- Of the 39 countries eligible or potentially eligible for HIPC Initiative assistance, 36 have reached their completion point and are receiving full debt relief from the IMF and other creditors.

Redistribution of public spending:
- Before the HIPC Initiative, on average, eligible countries were spending slightly more on debt service than on health and education combined.
- Since the initiative, eligible countries are spending about five times more on health, education, and other social services than on debt service.
Changes in debt service burdens:
- For the 36 countries receiving debt relief, debt service paid declined by about 1.5 percentage points of GDP between 2001 and 2015.
- More recently, with the increase in public debt in low-income countries, debt service burdens have started to rise, although they still remain 1 percentage point below the pre-HIPC levels in 2017.

The IMF’s share of the cost is financed by bilateral contributions and from IMF resources, mainly investment income on the proceeds from off-market gold sales in 1999, which were deposited to the IMF’s PRGT-HIPC Trust.
Resource shortfalls and specific cases:
- Resources in the trust have been insufficient to finance debt relief to the remaining two countries with protracted arrears to the IMF, Somalia and Sudan, which have met the initial conditions for debt relief and reached the decision point.
- The original financing plan did not include the cost of debt relief to countries with protracted arrears to the IMF.
- In December 2019 and May 2021, the IMF Executive Board approved financing plans that would help mobilize the resources needed for the IMF to cover its share of debt relief to Somalia and Sudan, respectively.
- Eritrea is also eligible for HIPC debt relief but does not have financial obligations to the IMF.

Creditor participation:
- One major challenge is ensuring that eligible countries get full debt relief from all their creditors.
- Poor countries’ largest creditors—the World Bank, African Development Bank, IMF, Inter-American Development Bank, and all Paris Club countries—have provided their full share of debt relief under the HIPC Initiative and beyond, but other creditors have not done so.
- Because creditors’ participation in the HIPC Initiative is voluntary, the IMF and the World Bank will continue to encourage creditors to participate and to deliver their share of HIPC Initiative debt relief.

Post-Completion-Point (36):
- Afghanistan, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoros, Republic of Congo, Democratic Republic of Congo, Côte d’Ivoire, Ethiopia, The Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, São Tomé & Príncipe, Senegal, Sierra Leone, Tanzania, Togo, Uganda, Zambia
Interim Countries (Between Decision and Completion Point) (2):
- Somalia, Sudan
Pre-Decision Point Countries (1):
- Eritrea