Press Release: IMF and World Bank Announce Debt Relief to the Republic of Congo
IMF News, January 28, 2010
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- Published: January 28, 2010
Debt relief decision and amounts
- The International Monetary Fund (IMF) and the World Bank's International Development Association (IDA) agreed to support US$1.9 billion in debt relief for the Republic of Congo.
- Debt relief provided by the two institutions totals US$255.2 million.
- Total debt service savings generated by the Boards' decision: US$1.9 billion, comprising:
- US$1.7 billion from Enhanced Heavily Indebted Poor Countries (HIPC); and
- US$201.3 million from the Multilateral Debt Relief Initiative (MDRI).
Completion point, reforms, and implications
- The Boards determined that the Republic of Congo met the necessary steps to reach its completion point under the HIPC Initiative.
- Authorities have fully implemented measures related to:
- the national poverty reduction strategy;
- macroeconomic stability;
- public financial management;
- oil sector management;
- governance;
- reforms in the health and education sectors; and
- debt management.
- All completion point triggers were met despite their stringency.
- The Republic of Congo becomes the 28th country to reach the completion point under the Initiative.
- The HIPC process for Congo began in March 2006 when the Executive Boards agreed Congo had met requirements for reaching the decision point.
- Expected outcomes and advice:
- The forthcoming HIPC and MDRI assistance will provide further fiscal space for growth-enhancing and poverty-reducing spending.
- Congo’s external debt burden indicators will decline significantly and will be well below the HIPC thresholds.
- Strengthening debt management capacity and maintaining a conservative external borrowing policy are important to safeguard long-term debt sustainability.
- Authorities should maintain fiscal discipline, improved governance, and implement key structural reforms to reduce poverty and sustain macroeconomic stability.
Statements from officials
- Marie-Françoise Marie-Nelly, World Bank Country Director for the Republic of Congo:
- “We are very pleased that the Boards of the Bank and the Fund have approved full debt relief for the Republic of Congo under the HIPC initiative and MDRI.”
- Praised “remarkable progress” by Congolese authorities in major and difficult reforms leading to significant improvements in fiscal and economic management.
- Urged use of debt relief to make the economy more diversified and competitive, and to improve social outcomes.
- Robert York, IMF Mission Chief for the Republic of Congo:
- Noted that “the conditions for reaching the completion point were set very high for Congo” to support prioritization of public expenditures, public financial management, anti-corruption, and governance and transparency in oil resource management.
- Identified a key challenge: “to maintain a sustainable external and domestic debt position through careful borrowing and prudent fiscal policy”.
- Chair statement by Mr. Murilo Portugal, Deputy Managing Director and Acting Chair (after IMF Executive Board discussion on January 27, 2010):
- Confirmed Congo satisfied all conditions for reaching the completion point under the Enhanced HIPC Initiative and qualifies for additional assistance under the MDRI.
- Emphasized the importance of full participation by all of Congo’s creditors, including non-Paris club and those under litigation, in providing debt relief in the HIPC framework.
- Reiterated that relief will strengthen resilience of the country’s debt indicators to external shocks and stressed the importance of ambitious debt management capacity, conservative external borrowing, fiscal discipline, improved governance, and continued structural reforms.
HIPC Initiative and MDRI descriptions
- The HIPC Initiative (launched in 1996; modified in 1999) aimed to create a framework for creditors, including multilateral creditors, to provide debt relief to the poorest and most heavily indebted countries to reduce constraints on growth and poverty reduction.
- Three key enhancements from the 1999 modification:
- Deeper and Broader Relief: External debt thresholds were lowered, making more countries eligible and enabling greater relief for some.
- Faster Relief: Some creditors began interim relief at the decision point and the framework permitted faster progression to the completion point.
- Stronger Link between Debt Relief and Poverty Reduction: Freed resources were to support poverty reduction strategies developed through broad national consultative processes.
- To date under the Initiative: 35 HIPC countries have reached their decision points, of which 28 have reached the completion point (including the Republic of Congo).
- The MDRI (pledged at the July 2005 G8 Summit in Gleneagles, Scotland):
- Aimed to cancel the debt of the world’s most indebted countries to provide additional resources to help reach the Millennium Development Goals (MDGs).
- Operationally linked to but separate from HIPC.
- Under MDRI, three multilateral institutions (the World Bank's IDA, the IMF, and the African Development Fund) provide 100 percent debt relief on eligible debts to countries having reached the HIPC completion point.
- The MDRI does not involve participation of official bilateral or commercial creditors, or of multilateral institutions other than the three named above.
Press Release No. 10/20 — January 28, 2010.