Press Release No. 99/65

The Executive Boards of the International Monetary Fund (IMF) and World Bank have endorsed the adoption of the Poverty Reduction Strategy Paper (PRSP) as the central mechanism for developing and coordinating concessional lending to low-income member countries, including the commitment of resources under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative.¹

The PRSP will be formulated by national authorities in broad consultation with stakeholders. It will describe and diagnose poverty conditions in a country and present a medium-term action plan to reduce poverty and generate more rapid economic growth. The PRSP, which will include performance indicators as a central element, is intended to provide a framework for assistance from bilateral donors, and from multilateral financial institutions.

A joint IMF-World Bank paper entitled "Poverty Reduction Strategy Papers: Operational Issues," has been posted on the IMF and World Bank websites for public comment and to underline the importance of participation by civil society in the development of effective poverty-reduction programs. The joint paper can been accessed at: www.imf.org/external/np/pdr/prsp/poverty1.htm and www.worldbank.org/poverty/strategies/index.htm

The Executive Boards of the IMF and World Bank were mandated to implement a broad poverty-reduction effort by the Governors of the IMF and World Bank at their Annual Meetings in September 1999. This mandate included steps to underpin the enhanced HIPC Initiative, and to strengthen the poverty-reduction focus of debt relief and various forms of concessional assistance.

IMF and World Bank Directors have reviewed the status of implementation under the enhanced HIPC framework, and endorsed an updated schedule which would bring three countries - Bolivia, Mauritania and Uganda - to their final decision points when full debt relief is committed in January 2000. Depending on policy implementation and resolution of outstanding issues, five to eight additional countries, including Mozambique, could reach their decision points by early spring. The total debt relief packages under the Initiative for these countries could reach from US$7 billion to US$10 billion in net present value terms (between US$13 billion to US$18 billion in nominal terms).

Financing for multilateral institutions is critical to assure rapid implementation of the enhanced HIPC framework. One important source of this financing is the HIPC Trust Fund, which is administered by the World Bank's International Development Association (IDA). By early September 1999, the HIPC Trust Fund had received approximately US$330 million in contributions from bilateral donors. Subsequently, donors announced or reconfirmed pledges to the HIPC Trust Fund of nearly US$1.8 billion. The recent US$70 million contribution by the Netherlands is the first of these new pledges to be paid in.

Earlier in December, the IMF Executive Board took the decisions necessary to enable the IMF to begin to make its contribution to the enhanced HIPC Initiative, and the first off-market gold sales were completed on December 14 and December 17 (See Press Release No. 99/57 and News Briefs No. 99/84 and 99/86).

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1 The HIPC Initiative entails coordinated action by the international financial community, including multilateral institutions, to reduce to sustainable levels the external debt burden of heavily indebted poor countries that pursue IMF and World Bank-supported adjustment and reform programs, but for whom traditional debt relief mechanisms are insufficient.