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Mr. James D. Wolfensohn: Statement on the G-7 Declaration

Press Release No:96/72S
Contact: Patrice Dufour
(33) 08-23-13-53

Mr. James D. Wolfensohn, President of the World Bank, issued the following statement:

LYON, June 29, 1996 The World Bank welcomes the declaration of the G-7 on the debt of the heavily indebted poor countries as a constructive step towards the conclusion of an action plan by next Autumn. In particular, it welcomes the call for Paris Club creditors to go beyond the Naples terms in that context. This recognizes the need for a comprehensive international approach to debt reduction.

The G-7 communiqué endorses the objective of providing an "exit" strategy for heavily indebted poor countries, as a basis for a concrete solution to their debt problems. This was the key principle underlying the debt initiative for heavily indebted poor countries, agreed at the Development Committee meeting of last April.

Mr. Wolfensohn said: "I have recommended to my Board that the World Bank be prepared to provide its full share to the costs of this initiative, within a framework of broad and equitable participation by all creditors involved. In particular, I have proposed that we set aside $500 million this year for a special Trust Fund, to be used as the Bank's initial contribution. In addition, I have proposed that each year, the Board allocate amounts more than sufficient to cover a proportionate share of the costs."

The exact amounts allocated by the Bank will be determined by the Board, and will depend on coordination of required action by all creditors involved, and those countries that will make voluntary contributions to the Trust Fund.

Reducing the debt of heavily indebted poor countries to sustainable levels will only be achievable if bilateral creditors and multilateral institutions act together to provide a further reduction beyond current mechanisms. As the G-7 communiqué envisages, action by multilateral creditors alone is not sufficient to achieve this objective. Multilateral institutions currently hold less than one quarter of the debt owed by potentially eligible countries. So further action by Paris Club creditors beyond the current Naples terms is key to securing the success of this initiative. The World Bank therefore welcomes the G-7 appeal to urge Paris Club creditors to go beyond the current Naples terms in the context of this initiative, and looks forward to agreement on concrete action by the Paris Club which will deliver such enhanced relief.

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