For those unfamiliar with the term, certain countries are considered Heavily Indebted Poor Countries, or HIPC. These are countries that can get special assistance from the International Monetary Fund and World Bank.
The annual “HIPC Status of implementation” report was published a couple of weeks ago. The report has some interesting information in it:
In total, 35 out of 40 HIPCs have qualified for assistance; and 26 have reached completion point. For the 35 post-decision-point HIPCs, poverty reducing expenditures between 2001 and 2008 increased by 2 percentage points of GDP, on average.
The total amount of debt cancellation now stands at $117 billion, out of which $72 billion was cancelled under HIPC and $45 billion under the Multilateral Debt Relief Initiative. This is an increase of roughly $5.5 billion in cancelled debt since last year. However, the number of post-completion-point countries that are at risk of re-incurring unsustainable debt (especially due to the global economic crisis) has increased from four in 2008 to five now.
This highlights the importance of continuing and expanding the initiative. Post completion point countries must have a chance to maintain bearable levels of debt even when shocks, such as the global economic crisis, occur. This can be done by providing grants rather than loans for example. Otherwise, financing the achievement of the Millennium Development Goals in many countries will be tantamount to re-accumulating unsustainable debt.
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