1. The HIPC Initiative and the MDRI: Status of Implementation
Briefing to the Multilateral Development Banks
Gallina Vincelette
PRMED, The World Bank
July 9, 2008

2. I. Progress in Implementation II. Costing Update
Outline
I. Progress in Implementation
II. Costing Update
III. Creditor Participation

3. I. The HIPC Initiative: Progress in Implementation Developments since last MDB Meeting (July 2007)
More than ½ of eligible HIPCs (23) have reached the completion point
More than ¾ of eligible countries (33) are past the decision point
The Central African Republic and Liberia reached decision point of the HIPC Initiative in September 2007 and March 2008, respectively
The Gambia reached completion point in Dec. 2007

4. The HIPC Initiative: Country List
Note: * Countries that have reached decision or completion point since last MDBs Meeting in July 2007

5. The HIPC Initiative: Country Status
To date:
33 post-decision-point HIPCs have benefited or continue to benefit from HIPC Initiative assistance
23 post-completion-point HIPCs have received debt relief under the MDRI from the 4 participating multilateral creditors
The HIPC Initiative has helped post-completion-point HIPCs reduce debt burdens, but some of the remaining HIPCs face difficulties entering and/or completing the HIPC process

6. The HIPC Initiative Process and Country Status
Remaining HIPCs are not a homogenous group
RECEIVE IRREVOCABLE HIPC&MDRI DEBT RELIEF
ESTABLISH ELIGIBILITY
ESTABLISH QUALIFICATION
RECEIVE INTERIM ASSISTANCE
Pre-decision Point
Decision Point
Completion Point
Progressing
Progressing
Kyrgyz Rep.
Comoros
Nepal
Cote d’Ivoire
Eritrea
Togo
Sudan
Somalia
Chad
Afghanistan
Congo, Dem. Rep
Burundi
Congo, Rep.
Central African Republic
Guinea
Guinea-Bissau
Haiti
Liberia
23 post-completion-point HIPCs
8 pre-decision-point HIPCs
10 interim HIPCs

7. HIPC Implementation Progress & Challenges– Interim Countries
Of the 10 Interim countries:
DRC, Rep. Congo, Chad are not advancing to completion point at this time
The remaining 7 are making progress to reaching completion point
Poverty reducing strategies (PRS) in place in all 7 advancing Interim HIPCs, but progress on establishing the one-year PRS implementation record has been uneven
Difficulties meeting CP triggers mainly in:
governance and transparency
public administration and capacity

8. Main implications of not reaching the CP? The Interim HIPCs
Prolonged interim periods could lead to (Chart):
(i) Creditors’ interim relief dry-out
(ii) Difficulties servicing external debt obligations
(iii) Further weakening of reform efforts
(iii) Non-concessional borrowing?

9. Duration of Interim Period in 33 Post-DP HIPCs (years)

10. Implementation Progress – Pre-Decision-Point Countries
Of the 8 Pre-Decision-Point HIPCs:
Cote d’Ivoire, Togo, and Comoros re-engaging with IFIs and making progress to DP
Absence of progress in the remaining pre-decision-point HIPCs mainly due to political choices:
Kyrgyz and Nepal not availed themselves of the Initiative
Somalia and Sudan in protracted arrears to IFIs
Eritrea limited engagement with IFIs

11. Inability to meet eligibility criteria to benefit from debt relief
Main implications of delaying DP? The Pre-Decision-Poin HIPCs
Inability to meet eligibility criteria to benefit from debt relief
Possibly Kyrgyz, Nepal, Sudan may fall below the indicative thresholds
Continued arrears accumulation to external creditors to ensure debt levels remain high for qualification (expectation of debt forgiveness)
Potential for engaging in non-concessional borrowing

12. II. Preliminary Costing Update Cost of HIPC Initiative Debt Relief
Total cost for 41 potentially eligible HIPCs is estimated at $71 bln (end-2007 NPV terms)
Debt relief to the 23 post-completion-point HIPCs is nearly ½ of total est. cost (US$35 bln, end-2007 NPV terms)
Debt relief to 10 interim HIPCs is about ¼ (US$16bln, end-2007 NPV terms) of total est. costs
Estimated cost to 8 pre-decision-point HIPCs is US$20bln, end-2007 NPV terms

13. II. Preliminary Costing Update Cost of MDRI (preliminary)
Total cost of MDRI debt relief for all potentially qualifying HIPCs is estimated at $33 bln end-2007 NPV terms
Debt relief to qualifying post-completion-point HIPCs is nearly 2/3 of total estimated costs

14. III. Creditor Participation - Multilateral Creditors
Multilateral financial institutions account for about 46% of total estimated cost of HIPC Initiative debt relief (or US$32.5 billion, in end-2007 NPV terms)
IDA accounts for 20%, IMF for 9%, and AfDB for 7% of total estimated HIPC Initiative cost, respectively
Continue to provide debt relief in line with HIPC Initiative commitments
Continue to provide interim relief to interim HIPCs

15. III. Creditor Participation - Paris Club Creditors
Paris Club creditors account for about 35% of total estimated cost of HIPC Initiative debt relief
Continue to provide interim relief to interim HIPCs, and stock-of-debt reductions to post-CP HIPCs
Estimated cost of additional debt relief beyond HIPC Initiative to post-CP countries over US$7bln

16. III. Creditor Participation – Non-Paris Club Creditors
Non-Paris Club (NPC) creditors account for about 13% of total estimated cost of HIPC Initiative debt relief
Survey sent out to major NPC creditors & post-CP HIPCs
Estimated delivery by NPC creditors of expected HIPC relief to post-CP HIPCs around 40%
Large variation in NPC creditors HIPC relief delivery:
only 7creditors providing full debt relief to HIPCs, 22 creditors partial, and 21 creditors none
Estimated delivery of NPC Creditors published on WB and IMF web (Scorecard) in Nov and updated in April 2008

17. III. Creditor Participation – Commercial Creditors
Commercial creditors account for about 4% of total est. cost of HIPC Initiative
Traditionally, low rate of participation in the Initiative
However, significant progress made in the past year thanks to:
Two DRF operations (Nicaragua and Mozambique)
One London Club debt restructuring agreement (Rep. of Congo)

18. III. Creditor Participation – Commercial Creditors’ Litigation against HIPCs
Some non-participating commercial creditors resort to litigation for debt recovery
Annual HIPCs authorities Survey on Commercial Creditor Litigation sent out in May 2008 and results are being analyzed
Preliminary results of the Survey show most litigation cases in Liberia, Rep. of Congo, Uganda, Sierra Leone
Range of instruments to support HIPCs in litigation has increased:
Active and cooperative negotiations
CW Secretariat Legal Clinic to provide legal advice to HIPCs
African Legal Support Facility at the AfDB

19. Summary
HIPC Initiative and MDRI: significant progress over the last few years advancing Finance for Development agenda
Since mid-2007, 1 HIPC reached CP and 2 reached DP
3 pre-DP HIPCs are advancing to qualification and 7 Interim HIPCs making progress to completion point
Delivery of debt relief significant, mainly due to efforts by multilateral, Paris-Club, some commercial & bilateral creditors
The situation of the remaining few potential HIPC beneficiaries poses special challenges and requires continuous commitment from governments and creditors in restoring and maintaining sustainable levels of debt