From Africa Recovery, Vol.12#4 (April 1999), Watch page

DEBT

G-7 ministers agree to improve HIPC debt relief package

Finance ministers of the Group of Seven major industrialized nations (G-7) meeting in Bonn on 20-21 February agreed in principle to proposals that would grant faster debt relief to more of the world's poorest countries. Key to achieving consensus was the attitude of the new German government under Chancellor Gerhard Schröder, which has dropped its predecessor's policy of opposition to some proposals. While the decision on the exact amounts of debt to be written off will have to wait until the G-7 summit meeting scheduled for June this year, reforms proposed at the recent ministerial meeting would cancel some $50 bn in debt over a period of just under two years.

G-7 finance ministers resolved to reform the Highly Indebted Poor Countries' (HIPC) initiative, which has been widely criticized for being ineffective in reducing debt burdens of the world's poorest countries.

Of the 41 countries (33 of them African) originally classified as HIPCs when the initiative was launched in 1996, only two have had actual debt relief - Uganda and Bolivia, in April and September 1998 respectively. Five others have qualified - Burkina Faso, Côte d'Ivoire, Guyana, Mozambique and Mali - while conflict in Guinea-Bissau has delayed its qualification, which was set for the first half of 1999. Mozambique is to get actual debt relief in mid-1999, Burkina Faso in April 2000 and Côte d'Ivoire in March 2001).

One proposal would ease HIPC eligibility criteria by lowering the threshold ratio for "sustainable" debt to exports from 200-250 per cent at present to around 150 per cent. Another proposal, tabled by Germany, would shorten from six to three years the policy track record that countries need to maintain in order to qualify for debt relief.

Ministers also considered a proposal that would fund extra debt relief by selling off 10 per cent of the International Monetary Fund's $30 bn in gold reserves and reinvesting the proceeds.

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