Multilateral And Private Creditor Debt Relief
- The Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI) are comprehensive approaches to reducing the external public debt of qualifying countries.
- Thirty-Six of the 39 countries eligible for debt relief under HIPC and MDRI have graduated from the programs.
- The Debt Reduction Facility (DRF) for IDA-only countries is an instrument that provides
incentivefor commercial creditors to participate in the debt relief initiative.
The World Bank, in partnership with the International Monetary Fund (IMF) and the international community, works with countries in a very structured format to reduce their debt burdens. This, in turn, frees up space in the countries' budgets to focus on important government functions, such as reducing poverty and meeting the Millennium Development Goals, a worldwide initiative that encourages countries to progress toward benchmarks in education, health, poverty reduction and other development standards. Countries that qualify for debt relief need to meet strict criteria, including income status and compliance with recommended policy reforms.
The World Bank's debt relief work is divided into two main categories:
1. The Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI) are comprehensive approaches to reducing the external public debt of qualifying countries. To qualify, these countries must pursue macroeconomic and structural reform programs and have implemented a poverty reduction strategy. The objective of the HIPC initiative is to bring countries’ debt to sustainable levels by offering relief on eligible debt held by multilateral, bilateral and commercial creditors.
Countries graduating from the HIPC Initiative process also benefit from
Countries eligible for assistance through HIPC pass through two milestones. The first is the "decision point," at which the World Bank and IMF formally determine whether the country is eligible for debt relief. Countries at this point have met stringent qualifications, including income thresholds. The international community commits to a level of debt relief, and the country may begin receiving debt relief at this point.
The second milestone is the "completion point," at which countries receive the balance of the debt relief that the international community committed to at the decision point. This is when they graduate from the program. To reach this point, the countries must have achieved certain reforms and taken concrete steps to reduce poverty.
Post-Completion-Point Countries (36): These countries have received the full amount of debt relief for which they are eligible under HIPC and MDRI.
Central African Republic
Republic of Congo
Democratic Republic of Congo
Sao Tome & Principe
2. The Debt Reduction Facility (DRF) for IDA-only countries funds the second form of debt-relief work conducted by the World Bank. It is an instrument that provides