HIPC Assessments

Heavily Indebted Poor Countries (HIPC) are a group of 37 least developed countries with the highest levels of poverty and debt overhang, which are eligible for special assistance from the International Monetary Fund (IMF) and the World Bank. For more detailed historical context, please refer to the History section below.

Completed Assessments

In the summer of 2000, World Bank and IMF Boards asked Management to explore how the use of resources released through HIPC debt relief would be monitored. Management turned to the Joint Implementation Committee (JIC), a Bank-Fund committee for implementing debt relief. The JIC turned to IMF Fiscal Affairs Department (FAD) and World Bank Public Sector Group staff.

In the summer and fall of 2000, the Assessment was applied in 24 countries as a desk assessment based on existing analytical studies, bringing together World Bank and IMF country economists/teams.

World Bank and IMF staff have undertaken to update the assessments of the 24 HIPCs and 4 additional countries in 2003 and 2004, in preparation for another Board paper in Fall 2004.

History

Following the buildup of foreign debt owed by many low-income countries throughout the 1970s and 1980s, low growth, falling commodity prices, and other economic shocks left many nations with unsustainable debt burdens. By 1992, the 33 most indebted low-income countries faced debts whose present value had more than doubled in ten years to over six times their annual exports. Starting in the late 1980s, the Paris Club and other bilateral creditors rescheduled and forgave many of these debts. But by the mid 1990s, with an increasing share of debt owed to multilateral lenders such as the World Bank, the IMF, and regional development banks, a new debt relief initiative was called for, involving these creditors, to address the concern that poor countries' debts were stifling poverty reduction efforts.

In response, in 1996 the International Development Association (IDA), which is the World Bank's concessional lending arm for poor countries, and the IMF launched the HIPC Initiative. The Initiative is comprehensive - it calls for the voluntary provision of debt relief by all creditors, whether multilateral, bilateral, or commercial - and aims to provide a fresh start to countries struggling to cope with foreign debt that places too great a burden on export earnings or fiscal revenues.

The HIPC Initiative was enhanced in 1999 to provide deeper, more rapid relief to a wider group of countries, and to increase the Initiative's links with poverty reduction. By January 2007, 30 countries had benefited from HIPC debt relief, 22 having reached the completion point, at which debt relief becomes irrevocable. Eight more are receiving some debt relief and a further ten are potentially eligible for HIPC debt relief, pending the agreement of macroeconomic reforms, poverty reduction strategies, or arrears clearance plans.

In 2006, following the 2005 Gleneagles Summit of the G8 group of nations, the World Bank joined the IMF and the African Development Bank in implementing the Multilateral Debt Relief Initiative (MDRI), forgiving 100 percent of eligible outstanding debt owed to these three institutions by all HIPC countries reaching the completion point of the HIPC Initiative. The MDRI will effectively double the volume of debt relief already expected from the enhanced HIPC Initiative.