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BRIEF

Heavily Indebted Poor Country (HIPC) Initiative

January 11, 2018

World Bank Group

Relieving the World's Poorest Countries of Unmanageable Debt Burdens
  • The HIPC and related Multilateral Debt Relief Initiative (MDRI) programs have relieved 36 participating countries of $99 billion in debt.
  • To date, 36 countries – 30 of them in Africa – have received the full amount of debt-relief for which they were eligible through HIPC and the MDRI.
  • But challenges remain to ensure that debt burdens do not return to unsustainable levels.

The World Bank, the International Monetary Fund (IMF) and other multilateral, bilateral and commercial creditors began the Heavily Indebted Poor Country (HIPC) Initiative in 1996. The structured program was designed to ensure that the poorest countries in the world are not overwhelmed by unmanageable or unsustainable debt burdens. It reduces the debt of countries meeting strict criteria.

The HIPC and related Multilateral Debt Relief Initiative (MDRI) programs have relieved 36 participating countries of $99 billion in debt.

The following countries have received the full amount of debt-relief for which they were eligible through HIPC and the MDRI.

Afghanistan

Central African Republic

Ethiopia

Haiti

Mauritania

Senegal

Benin

Chad

The Gambia

Honduras

Mozambique

Sierra Leone

Bolivia

Comoros

Ghana

Liberia

Nicaragua

Tanzania

Burkina Faso

Republic of Congo

Guinea

Madagascar

Niger

Togo

Burundi

Democratic Republic of Congo

Guinea-Bissau

Malawi

Rwanda

Uganda

Cameroon

Cote d’Ivoire

Guyana

Mali

Sao Tome & Principe

Zambia

Eritrea, Somalia and Sudan are potentially eligible for debt relief, but have not yet started the process. 

To be eligible for the HIPC Initiative a country must:

  • Face unsustainable debt situation after the full the full application of the traditional debt relief mechanisms (such as the application of Naples terms under the Paris Club agreement).
  • Be only eligible for highly concessional assistance from the International Development Association (IDA) and from the IMF’s Poverty Reduction and Growth Trust (PGRT).
  • Have established a track record of reform and sound policies through IMF and World Bank supported programs.
  • Establish a track record of reform and develops a Poverty Reduction Strategy Paper (PRSP) that involves civil society participation.

The Way Forward

As the HIPC program has 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. These include:

  • Establishing a track record of reform in the remaining three countries potentially eligible for HIPC; some of these countries are affected by conflict, and this has led to problems of protracted external arrears.
  • Strengthening management of debt and public finances in all countries.
  • Ensuring full participation by creditors.

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.