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From Africa Recovery, Vol.17 #1 (May 2003), page 27 Debt relief progressing, but still some snags Since its inception in 1996, the Heavily Indebted Poor Countries initiative (HIPC) has reduced the outstanding debt stock of 26 countries, primarily in sub-Saharan Africa, by two-thirds, the World Bank announced in its annual Global Development Finance report released in April. The reduction amounts to $40 bn in net present value (representing the market value of the original debt, discounted as if it were paid now, in a lump sum). Despite the debt reduction achieved so far, the report warns, "the deterioration in the global economic environment and the related decline in commodity prices have raised concerns about the ability of several HIPCs to reduce their debt burdens to sustainable levels." The World Bank considers a country's debt to be sustainable if the ratio between its total debt and its export earnings is less than 150 per cent, implying that it has enough export revenue to service its debt. Most African countries earn foreign currency through the sale of agricultural commodities, which, over the years, have been fetching lower and lower prices on the international market. The report notes that challenges remain in terms of creditor participation in the HIPC initiative. Debt relief committed to 26 countries that have reached the debt forgiveness stage of the programme is 12 per cent below the total required. At least 24 creditor countries have not expressed an intention to provide debt relief, the report observes, and many commercial creditors "remain unwilling to participate in the initiative." Despite HIPC, sub-Saharan Africa's total debt stood at $204
bn last year, according to the report. This was down from a peak
of $231 bn in 1996, but still significantly above the $177 bn
registered at the start of the 1990s. Moreover, the steady decline
in the region's debt since 1996 appears to have at least temporarily
stalled, with the 2002 level almost the same as the $203 bn recorded
the year before. This article may be freely reproduced, with attribution to
"Africa Recovery, United Nations". Africa Recovery Tel: (212) 963-6857
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