Press Release: Niger To Receive US$890 Million In Debt Service Relief: The IMF and World Bank Support Debt Relief for Niger Under the Enhanced HIPC Initiative
IMF News, December 20, 2000
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- Published: December 20, 2000
Overview
- The International Monetary Fund (IMF) and the World Bank Group's International Development Association (IDA) agreed to support a comprehensive debt reduction package for Niger under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
- Total relief from all of Niger's creditors is worth about US$890 million, corresponding to aboutUS$520 million in Net Present Value (NPV) terms, 1 which is equivalent to 53.5 percent of total debt outstanding after the full use of traditional debt relief mechanisms.
- The debt relief is intended to free resources for poverty reduction priorities, including basic health care, primary education, HIV/AIDS prevention, and rural infrastructure.
Impact on Debt Service and Budget
- Frees about $40 million per year over the coming years for expenditures on basic health care, primary education HIV/AIDS prevention, rural infrastructure and other programs geared at poverty reduction.
- Debt service as a percentage of government revenue:
- nearly 44 percent in 1999
- 10.9 percent in 2003
- average 4.3 percent during 2010-2019
- Debt service as a percentage of export revenue:
- more than 23 percent today
- 8.4 percent in 2003
- decrease to about 5 percent in later years
IMF, IDA, and Creditor Contributions
- IDA will provide debt relief amounting to US$302 million, covering about 66.5 percent of Niger's debt-service obligations to IDA over the coming 20 years.
- The IMF committed US$34.3 million in debt relief, to be delivered over a seven-year period, and will cover on average 31 percent of debt-service obligations to the Fund.
- Confirmation of participation by other creditors in the debt relief operation is required as part of reform steps.
Track Record in Social Policies and Macroeconomic Reform (Annex)
- The economic and financial structural adjustment program launched in 1996, with IMF and World Bank support, produced substantial progress on macroeconomic and budgetary imbalances and structural reforms (private sector development, privatization, civil service reform).
- Achievements between 1996 and 1998 suffered a setback after the Coup d'etat of April 1999, compounded by the almost total withdrawal of external financial assistance during the transition period.
- After transparent and democratic elections at end-1999, the newly elected authorities:
- established an agenda aimed at restoring financial stability, stimulating economic growth and reducing poverty;
- resumed financial relations with development partners;
- restored transparency and accountability in public finance and implemented a tight cash management system;
- revived important structural reforms and prepared an interim Poverty Reduction Strategy Paper (interim PRSP).
- Social priorities emphasized: increasing primary school enrollment, improving infrastructure in rural areas, broadening access to health services, and confronting the growing crisis of HIV-AIDS.
- The interim PRSP is seen as providing an adequate framework for the use of resources freed by the enhanced HIPC Initiative.
Reform Steps to Be Taken Before the Completion Point
- Continued commitment of Niger to the financial and economic program supported by the IMF's Poverty Reduction and Growth Facility (PRGF) program.
- Completion and a one-year satisfactory implementation of a fully participatory poverty reduction strategy paper .
- Implementation of an agreed set of measures in the context of the government's poverty reduction strategy in the areas of primary education, basic health care and the fight against HIV/AIDS. Specific targets include the construction of classrooms and deployment of teachers in rural areas, the expansion of the immunization coverage for children; and the adoption of a national strategy to fight HIV/AIDS.
- Confirmation of the participation of other creditors in the debt relief operation.
HIPC Initiative: General Framework
- Launched by the World Bank and the IMF in 1996 to eliminate unsustainable debt in the world's poorest, most heavily indebted countries.
- Enhanced Initiative (October 1999) objectives: broader, deeper and faster debt relief by increasing eligible countries, raising amount of debt relief and speeding up delivery.
- The enhanced Initiative aims at reducing the net present value (NPV) of debt at the decision point to a maximum of 150 percent of exports and 250 percent of government revenue, and will be provided on top of traditional debt relief mechanisms (Paris Club debt rescheduling on Naples terms, involving 67 percent debt reduction in NPV terms and at least comparable action by other bilateral creditors).
- Eligibility and delivery occur in two stages:
- First stage: satisfactory track record (normally of three years) under IMF- and IDA-supported programs.
- Second stage: after reaching the decision point, implement a full-fledged poverty reduction strategy prepared with broad participation of civil society and an agreed set of measures aimed at enhancing economic growth; interim relief provided if the country stays on track.
- At the floating completion point the IMF and IDA provide the remainder of committed relief; Paris Club creditors enter into a highly concessional stock-of-debt operation; other multilateral and bilateral creditors must contribute on comparable terms.
- Some three-dozen countries expected to qualify under the enhanced HIPC Initiative: 29 in sub-Saharan Africa and 4 in Latin America.
- Including Niger, 17 countries have reached their decision points under the enhanced framework (Benin, Bolivia, Burkina Faso, Cameroon, The Gambia, Guinea-Bissau, Guyana, Honduras, Mali, Mauritania, Mozambique, São Tomé and Príncipe, Senegal, Tanzania, Uganda, and Zambia), with total committed assistance estimated at nearly US$25 billion, representing an average stock-of-debt reduction of about 45 percent on top of traditional debt relief mechanisms.
Definition
- Net Present Value (NPV) of debt: the discounted sum of all future debt-service obligations (interest and principal) on existing debt. The NPV of debt reflects the degree of concessionality; when the interest rate on a loan is lower than the market rate, the resulting NPV is smaller than face value, with the difference reflecting the grant element.
Press Release No. 00/76, December 20, 2000, International Monetary Fund.