The HIPC Initiative and the MDRI: Status of Implementation Report 2006

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The HIPC Initiative and the MDRI Status of
Implementation Report 2006

• Briefing to the Multilateral Development Banks
• PRMED
• The World Bank
• June 2006

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Outline

• I. Progress in Implementation
• II. Costing Update
• III. Creditor Participation

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I. Progress in Implementation Overview

• As the 10th anniversary of HIPC approaches
• of 40 HIPCs,
• 29 have reached DP of which 19 countries have
  reached CP and
• 10 are in the interim period.
• 11 pre-DP countries remain.

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I. Progress in Implementation Overview
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I. Implementation Progress Completion Point and
Interim Countries

• One interim country reached CP in past 12 months
• Cameroon (in April 2006)
• Out of 10 interim countries
• 2 have reached the decision point during last 12
  months
• Burundi (in August 2005)
• Republic of Congo (in March 2006)
• 5 faced interruption of or delays in
  macroeconomic programs
• No PRGF currently in DRC, Gambia, Guinea, Guinea
  Bissau
• Chad faced delay in first review under PRGF
• 3 could reach CP in remainder of 2006
• Malawi, Sao Tome and Principe and Sierra Leone

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I. Implementation Progress Pre-DP Countries

• In September 2004, the Boards of World Bank and
  IMF decided to extend the sunset clause to
  end-2006 and
• to ring-fence its application to countries that
  meet the Initiatives income and indebtedness
  criteria at end-2004.
• In April 2006, staffs provided Boards with a list
  of 14 pre-DP countries that could be shown to
  meet the income and indebtedness criteria at
  end-2004

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I. Implementation Progress Pre-DP Countries

• Of these 14 countries
• 7 have been previously identified as HIPCs (CAR,
  Comoros, Cote dIvoire, Liberia, Somalia, Sudan
  and Togo)
• 4 have newly joined the HIPC countries (Eritrea,
  Haiti, Kyrgyz and Nepal)
• 3 indicated they wished not to avail themselves
  of the Initiative (Bhutan, Lao PDR and Sri Lanka)
• It was not possible to assess two additional
  countries (Myanmar and Afghanistan)

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I. Implementation Progress Pre-DP Countries

• As a result of the ring-fencing exercise, the set
  of countries that are potentially eligible for
  HIPC changed
• Pre-Decision Point Countries are now defined as
  countries
• that meet the income and indebtedness criteria at
  end-2004 and
• wish to avail themselves of the HIPC Initiative
• Future of the sunset clause now under review

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I. Implementation Progress Pre-DP Countries

• There are 11 Pre-Decision Point Countries
• Central African Republic
• Comoros
• Côte dIvoire
• Eritrea
• Haiti
• Kyrgyz Republic
• Liberia
• Nepal
• Somalia
• Sudan
• Togo

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I. Implementation Progress Pre-DP Countries

• Of the 11 pre-decision point countries
• 3 are making progress toward meeting the
  qualification for debt relief under the HIPC
  Initiative (Kyrgyz Republic and Haiti could reach
  DP in 2006 CAR in 2007)
• 3 are facing difficulties in implementing
  macroeconomic policies and structural reforms
  (Cote dIvoire, Nepal, Togo)
• 5 countries do not meet policy performance
  criteria
• and so are not yet eligible for HIPC debt relief
  (Somalia, Sudan, Eritrea, Comoros and Liberia)

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II. Costing Update

• Total costs for the 40 potentially HIPC-eligible
  countries are estimated to be 62 billion in 2005
  NPV terms
• Change from 2005 Progress Report largely due to
  change in set of pre-decision point countries,
  inclusion of Rwanda topping up and updated
  information on Republic of Congo and Cameroon.
• The total cost for the post-decision point
  countries is 41.3 billion in 2005 NPV terms,
  compared to 38.2 in 2004 NPV terms.

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II. Costing Update contd
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II. Costing Update- MDRI

• 2006 Progress Report will present initial
  progress with implementation of the Multilateral
  Debt Relief Initiative (MDRI)

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III. Creditor Participation

• Full creditor participation is critical for the
  success of the HIPC Initiative and concerted
  efforts are needed to improve participation
• To examine participation of Non-Paris Club
  creditors in more detail, questionnaires have
  been sent to major Non-Paris Club creditors
• Results of the questionnaires will be presented
  in the Progress Report

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III. Creditor Participation contd

• Progress report will also include survey results
  on commercial creditor participation and
  litigation
• Commercial creditors are generally not
  participating in the initiative and some are
  resorting to litigation as a means of debt
  recovery
• IDA Debt Reduction Facility was replenished by
  US50 million and extended by 3 years in July
  2004
• Mozambique and Nicaragua operations in an
  advanced stage of development
• DRC is tendering for financial and legal advisers
  following Board approval of a preparation grant
  in August 2005
• A Sierra Leone preparation grant under discussion

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Summary

• In past 12 months 1 HIPC reached CP and 2 reached
  DP
• In 2006, 3 HIPCs could reach CP and 2 DP in
  remainder of 2006
• Total HIPC costs have increased by US4 billion
  due to increase in number of pre-decision point
  countries, inclusion of Rwandas topping up and
  discount rate changes
• Progress report will present for the first time
  implementation of MDRI
• Progress report will include update on creditor
  participation