Debt Solutions: The HIPC Initiative and PRSPs The Heavily Indebted Poor Countries (HIPC) Debt initiative arose in response to the debt crisis facing a large number of countries who could neither pay their debts nor increase substantially their economic development in a manner that bode positively for future debt repayment. Begun in 1994 by the World Bank, the IMF and private lenders, the HIPC program to alleviate the burden of debt shouldered by very poor countries has undergone a number of shifts. A major component of the debt-relief process is the requirement for HIPC countries to produce a Poverty Reduction Strategy Paper (PRSP), an attempt to induce development and structural adjustment to address the need to reduce poverty, rather than focus solely on improved economic indicators, such as GNP/capita. Which Countries Qualify for Debt Relief? Thirty-seven countries fall within the World Bank's classification of Highly Indebted Poor Countries (HIPC). HIPC countries that are eligible for debt-relief are the poorest countries, those that are only eligible for highly concessional assistance from the international Development Association (IDA), the part of the World Bank that lends on highly concessional terms, and from the IMF's Poverty Reduction and Growth Facility (previously the Enhanced Structural Adjustment Facility). The eligible nations are those that also face an unsustainable debt situation even after the full application of traditional debt relief mechanisms (such as application of Naples terms under the Paris Club agreement). http://www.worldbank.org/hipc/about/hipcbr/hipcbr.htm Progress on Debt-Relief While the first step to debt-relief is recognition from the multilateral lending institutions as a member of HIPC, there are a number of steps that must be taken to receive the funds necessary to get rid of debt. For countries to qualify, they have to have a certain debt-sustainability ratio, and after a number of years of proving that Structural Adjustment Policies (LINK HERE TO GLOSSARY AND SAP PAGE) are being implemented, some reduction of debt would be allowed. Then, after another set of years of continued monitorization of governance and economic reform, countries would be eligible for total debt relief. As of February, 2004, ten countries have reached their completion point. Role of PRSBs in Debt Relief In September 2000 at the United Nations General Assembly, Poverty Reduction Strategy Papers (PRSPs) became a mandatory element of debt-relief qualification. This PRSP condition was a positive move that has attempted to encourage country ownership of adjustment programs and involved civil society in decision-making. The PRSPs, though their effectiveness in actual poverty reduction remains questionable, place the responsibility for a poverty reduction strategy in the hands of the country-nationals. An affiliated goal of the PRSP is for market-oriented reforms, such as Structural Adjustment Policies (SAPs), to become pro-poor, and the PRSP attempts to create a linkage from economics to poverty through the active participation of developing-world populations in country-specific policy creation. Debate Regarding PRSPs Some critics argue that PRSPs are simply Structural Adjustment Policies dressed semantically in the language of poverty-reform and country-ownership. While the responsibility of authorship lies with the country-specific legislators, in order to receive further aid, the PRSP must be in line with World Bank/IMF standards. Essentially, these critics say, these governments are being given a homework assignment from the multilateral lending institutions to produce a poverty-reduction statement, and the assignment will be acceptable as long as the policies echo the neo-liberal economic rules implied within Structural Adjustment Policies.
Map from http://www.worldbank.org/hipc/about/map/map.html The following is a list of the HIPC countries shown in the map above: Africa (34 Countries): Angola, Benin, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoros Congo, Congo Dem. Rep., Cote d'Ivoire, Ethiopia, The Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Rwanda, Sierra Leone, Sao Tome and Principe, Senegal, Somalia, Sudan, Tanzania, Togo, Uganda, Zambia, Latin America (4 Countries): Bolivia, Honduras, Guyana, Nicaragua Middle East (1 Country): Yemen Rep. Of |
