Source:
IFIs Latin American Monitor
Fri Jan 20 2006
The International Monetary Fund kicked off the debt cancellation deal agreed by the G8. Now, it would be the turn of the World Bank, but it has announced that relief implementation will not become effective until July 1.
The World Bank (WB) will not be implementing debt relief for Highly Indebted Poor Countries (HIPC) until July 1. This announcement became public after the year-end meetings in a document entitled “The Multilateral Debt Relief Initiative”, where the implementation modalities are specified.
According to the outlined schedule, the deadline for the IDA Board of Governors to authorize an increase in said institution’s resources is set for the end of February. One month later (end of March) the Executive Directors should approve a list including the first group of beneficiary countries. Then, the process of analysis of selected countries will be completed by the end of May.
On the other hand, according to the above-mentioned document, the writing-off of World Bank debts only contemplates credits disbursed until the end of 2003. The IMF, in turn, will eliminate those debts undertaken until December 2004. This implies that those credits disbursed by the World Bank between January 2004 and the beginning of relief implementation will not be included in the programme.
With regards to Latin America, these announcements directly affect the four countries that were promised debt cancellation by the G8 at the July 2005 Summit in Scotland, that is to say, Bolivia, Honduras, Nicaragua and Guyana.
For the specific case of Bolivia, the World Bank cancellation will amount to 390 million dollars for the first decade (2007-2016), that is to say, an average amount of 39 million dollars a year, while for the whole writing-off period – from 2007 to 2044 - the total amount will be close to 1.5 billion dollars.
However, in Bolivia’s case the World Bank will leave out more than 200 million dollars which would not be covered by this programme on account of being loans granted after January 2004.
In Bolivia, the total to be written-off by the World Bank and IMF would approximately amount to 1.75 billion dollars. This only accounts for 36 per cent of the total external debt, while the remaining amount represents the debt owed to the Inter-American Development Bank, the Andean Development Corporation (CAF) and to Paris Club member countries.
The debt to the IADB amounts to 1.6 billion dollars and accounts for almost the same percentage of debt cancelled, while debt service payments amount to 100 million dollars a year. The debt owed to the CAF, meanwhile, reaches the sum of 800 million dollars with debt service payments amounting to more than 120 million dollars in 2005.
It should be highlighted that in Honduras and Nicaraguas the IADB is also one of the main creditors. In Honduras, 40 per cent of the external debt is owed to the IADB; and in Nicaragua, said debt accounts for 26 per cent.
On account of the above, Fundación Jubileo in Bolivia (dependent upon the Catholic Church) together with other Latin American social organizations ask for the IADB and the CAF to be included in the debt relief programme. The President of Honduras, Ricardo Maduro, and Bolivia’s President-elect Evo Morales, have also put pressure on the IADB in this sense.
For the time being, there is nothing to do but wait until July for the World Bank to fulfil its promise, although it seems quite a distant deadline taking into account that these countries are in urgent need of resources.
Notes:
World Bank's schedule
End-February 2006: Deadline for adoption of the Resolution by the IDA Board of Governors authorizing an increase in IDA’s resources.
End-March 2006: Approval by the Executive Directors of the first group of postcompletion point HIPCs to benefit from the MDRI. A paper will be submitted to the Executive Directors, which will contain eligibility assessments as well as IDA debt relief delivery schedules.
March to May 2006: Acceptance / delivery of Instruments of Commitment (IoC) by members. May 31, 2006 is the target date for effectiveness.
End-May 2006 – Finalization of revised country allocations of IDA resources for FY07, provided that the MDRI is effective.
Official document (pdf format): The Multilateral Debt Relief Initiative (MDRI): Implementation modalities for IDA
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