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Starting more than two decades ago, the World Bank, in partnership with the International Monetary Fund (IMF) and the international community, has worked with developing countries to reduce their debt burdens. The purpose of this work is to help them fight against poverty and contribute to the achievement of the Sustainable Development Goals (2015-2030).

The World Bank's debt relief work is divided into two main categories:

  1. Multilateral and Bilateral Debt.  In 1996, the World Bank and the IMF launched the Heavily Indebted Poor Countries (HIPC) Initiative in response to accumulation of unsustainable, developing-country debt in the 1970s and 1980s. It called for voluntary debt relief from all creditors, and gave eligible countries a fresh start on foreign debt that had placed too great a burden on resources for debt service. In 2006, recognizing that countries that had graduated from HIPC were struggling to make progress towards the UN Millennium Development Goals (MDGs), a second phase of debt relief was launched to help meet these goals. This is known as the Multilateral Debt Relief Initiative (MDRI), which offered full debt relief for eligible debt from the World Bank's International Development Association (IDA), the IMF, the African Development Fund and the Inter-American Development Bank held by low-income countries that have completed the HIPC process. Combined, the MDRI and HIPC initiatives have provided around USD 99 billion in debt relief.
  2. Commercial Debt. In 1989, the Boards of IBRD and IDA approved the Debt Reduction Facility (DRF) for IDA-only countries funds, which provides grant funding to eligible governments to buy back—at a deep discount—the debts owed to external, commercial creditors. Since its inception, the DRF has supported 25 buy-back operations in 22 IDA-only countries, extinguishing about US$10.3 billion of external commercial debt principal and more than US$3.5 billion of associated interest arrears and penalties. Since its inception, the DRF has supported operations and provided technical assistance to 18 countries that are part of the HIPC Initiative. 


As the debt relief initiatives have matured, the international community has focused on strengthening the links between debt relief and poverty-reduction efforts. Challenges remain to ensure that debt burdens do not return to unsustainable levels, however. Beyond debt relief, long-term debt sustainability requires efforts by borrowers, lenders, and donors to promote prudent borrowing, suitably concessional finance, sustained economic growth, diversified exports, and greater access to markets in developed countries.