Commonwealth Convenes High Level Meeting to reform the Heavily Indebted Poor Countries (HIPC) Debt Initiative
22 July 1999
The Commonwealth Secretariat is convening a high-level meeting on Monday and Tuesday 2-3 August 1999, to exchange ideas and experiences on the issues central to reform of the HIPC (Heavily Indebted Poor Countries) Initiative, launched in September 1996.The Cologne Debt Initiative launched in June 1999 by the G8 industrialised countries has ushered in a new phase in the debt debate. It aims to secure deeper, broader and faster debt relief with major changes to the HIPC Initiative as well as to secure a greater focus on poverty reduction by releasing resources for investment in health, education and social needs, as well as support for good governance and sustainable development.
The Cologne Initiative "represents an important step forward on the issue of the unsustainable debt burden of the poorest countries" says the Commonwealth Secretary-General, Chief Emeka Anyaoku. "I am aware that the process still has a considerable distance to travel before poor countries can achieve a sustainable exit."
The meeting, to be held at Marlborough House in London, will provide an opportunity for Commonwealth HIPCs and representatives of civil society, senior government officials, academics, religious groups, non-governmental organisations (NGOs), and members of the press to take a critical look at the implications of the Cologne Initiative, and develop proposals for linking the HIPC framework much more strongly with human development and poverty reduction objectives. The discussion will enhance the capacity of HIPCs to participate more effectively in the current discussion of the HIPC review
The meeting will provide answers to a number of pertinent questions, including the following:
How far forward has the G8 Cologne Initiative moved the HIPC programme and what are the limitations?
How can the Cologne Initiative be financed in a way that most contributes to poverty reduction? Given the magnitude of the financial resources that are needed, what is the best concerted 'burden-sharing' approach?
What are the net gains from HIPC debt relief, in terms of freeing up scarce resources for essential investments - growth and social reforms? How has the HIPC debt relief package affected total debt stock and external debt-service payments?
How effectively can debt relief and aid flows be used to promote poverty reduction? How can the risk of aid substitution be prevented? What changes are necessary to the existing ESAF framework to facilitate poverty reduction?
What needs to be done by the Commonwealth to build on the outcome of the Cologne Initiative, including the issue of domestic debt burden? What measures, including total external debt cancellation, can be taken to achieve debt relief for those debtor countries that are in a more desperate situation?
Representatives have been invited from Guyana, Malawi, Mozambique, Tanzania and Uganda to share experiences in implementing the HIPC Initiative. The results of the meeting will form part of the review of the HIPC Initiative by Commonwealth Finance Ministers at their meeting in the Cayman Islands, 21-23 September 1999.
Notes to Editors:
Forty-one countries were initially classified as HIPCs under the Initiative, including 10 Commonwealth countries. After more than two years of implementing the Initiative, 10 countries have been considered eligible. Of these, 8 (Bolivia, Burkina Faso, Côte d'Ivoire, Guinea Bissau, Guyana, Mali, Mozambique and Uganda) have qualified for debt relief packages. Only four countries - Bolivia, Guyana, Mozambique and Uganda - have received actual relief under the Initiative.
The Commonwealth Secretariat has played an active role in all the processes involved in the launching of the HIPC Initiative. At the Commonwealth Finance Ministers Meeting in 1997, Chancellor Gordon Brown had proposed the Mauritius Mandate, which sought to enable all HIPC countries to have embarked on the process of securing a sustainable exit from their debt problems and to have firm decisions on the amounts and terms of debt relief for at least three-quarters of eligible poor countries. At their meeting in Ottawa last year, Commonwealth Finance Ministers had also asked for a comprehensive review of the Initiative, which should have an external and independent input, including from the Commonwealth. The Secretariat is also assisting member countries to develop capacity in good debt management practices, including debt sustainability analysis through the use of the Commonwealth Secretariat Debt Recording and Management System (CS-DRMS), now in use in about 50 countries.
The key elements of the Cologne Initiative are as follows: (i) debt sustainability targets will be reduced (NPV debt/exports ratio to 150 per cent, from 200-250 per cent; NPV debt/revenue ratio to 250 per cent, from 280 per cent, with a revenue/GDP ratio greater than 15 per cent and an export/GDP greater than 40 per cent): (ii) debt relief will be fixed at the decision point rather than the completion point: (iii) a greater share of debt relief to be provided upfront (i.e. by covering a substantial proportion of debt service as it falls due); and (iv) the enhanced framework will be applied retroactively to those countries that have already reached their decision points under the current framework.
Issued by the Information and Public Affairs Division, Commonwealth Secretariat,
Marlborough House,
Pall Mall,
London SW1Y 5HX,
United Kingdom.
Tel: 0207-839 3411;
Fax: 0207-839 9081;
Telex: 27678
99/46 22 July, 1999
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