A total of 42 countries are considered
HIPCs. Of these, twenty-four have reached the decision point under the
enhanced HIPC initiative (i.e., have been approved for debt relief): Benin,
Bolivia, Burkina Faso, Cameroon, Chad, Ethiopia, The Gambia, Guinea, Guinea
Bissau, Guyana, Honduras, Madagascar, Malawi, Mali, Mauritania, Mozambique,
Nicaragua, Niger, Rwanda, Sao Tomé & Principe, Senegal, Tanzania,
Uganda, and Zambia. To date, four of these countries (Bolivia, Mozambique,
Tanzania, and Uganda) have reached completion point, or the point at which
the full amount of committed debt relief is given.
NB. Fourteen countries have not yet been approved for relief
The Cologne Debt Initiative dates back
to a June, 1999 meeting of the G7/8 countries (The U.S., Germany, France,
Japan, the United Kingdom, Italy, Canada, and Russia) in Cologne, Germany.
The Initiative calls for the G7 and other bilateral creditors to cancel
debts owed them by HIPC countries. The U.S. also committed to make contributions
totaling $600 million to the HIPC trust fund, administered by the World
Bank.
For fiscal years 2000-2002, Congress appropriated a total of $769 million for bilateral and multilateral debt relief. These appropriations are sufficient to meet the U.S. commitment to the Cologne Initiative.
| Fiscal year | Administration requested | Congress appropriated |
| 2000 | $110 million bilateral $210 million multilateral | $110 million bilateral $0 multilateral |
| 2001 | $75 million bilateral $150 million multilateral | $75 million bilateral $150 million multilateral, plus the $210 million the Administration requested the previous year. |
| 2002 | $240 million multilateral | $224 million multilateral 3 |
The IMF estimates the cost of providing
assistance to some 34 countries under the HIPC Initiative to be $33 billion
in 2000 NPV terms. Bilateral donors will cover half of this expense, with
most of the rest coming from multilateral lenders. In an effort to help
fund the multilateral portion of the cost, the IFIs have established the
HIPC Trust Fund, which is administered by the World Bank. So far, pledges
to this fund total $2.6 billion, and about $1 billion of these pledges
have already been paid.
What should be noted here is that the principal donors to the HIPC Trust Fund are precisely the same bilateral creditors who have already agreed to cancel all bilateral debt owed to them. In short, the World Bank and IMF have not followed the example of the G7 creditors, who are effectively paying twice for debt relief.
Yet, relative to the resources of the World Bank and IMF, a complete write-off of HIPC debt would not be prohibitively expensive. It is estimated that the World Bank and IMF could cancel all remaining debt at a cost of $721 million per year over the next several years. Alternatively, they could write off the entire remaining debt stock for a one-time cost of between $8.5 and $11.5 billion. Independent auditors have shown that the World Bank and IMF have sufficient resources to afford cancellation of remaining debt without affecting their future lending.
Debt relief has made it possible for
many heavily indebted countries to increase social spending, especially
in the areas of education and health care. For example, the government
of Tanzania has ended school fees, and Honduras has been able to offer
three additional years of free schooling enabling children to attend school
for free through the ninth grade. Uganda has almost triple elementary school
attendance with their debt savings. Other countries, such as Mali, Mozambique,
Senegal, and Cameroon, will be able to increase spending on HIV/AIDS prevention
and treatment in an effort to slow the spread of infection.
Though there has been progress on debt
relief for the world’s poorest countries, the relief offered so far under
the HIPC and Enhanced HIPC Initiatives does not go far enough. Part of
the problem with HIPC is that, in making determinations about debt reduction,
the IFIs do not take into account new debt that countries incur while they
try to meet the HIPC program requirements. Additionally, HIPC is not intended
to do away with the debt of heavily indebted countries; instead, it aims
to reduce that debt to a "sustainable" level.
The result is that many of the world’s most heavily indebted nations will, in the long run, see their overall level of debt and their debt service burdens rise, potentially erasing the gains they have made in the social sector. Clearly, deeper and broader debt relief is needed.