The 2005 commitment on debt was to cancel 100% of the multilateral debts owed to the IMF, World Bank and the African Development Bank (ADB) by Highly Indebted Poor Countries (HIPCs). The effort, known as the Multilateral Debt Relief Initiative (MDRI), was designed to deliver multilateral cancellation in a manner that would ensure that the institutions would not lose financing capacity as a result. By the end of 2005, the IMF, World Bank and ADB shareholders had agreed with the G8 members and finalised agreements to implement almost $50 billion of additional debt cancellation. The Poverty Reduction Strategy Plans devised by African governments as part of the HIPC deal have ensured that African countries have largely used the funds that they no longer spend on debt service to help reduce poverty. Partly because of debt cancellation, qualifying countries increased the share of their government revenues directed to poverty reduction from 37.8% in 2000 to 55.1% in 2007. In absolute terms, this means an increase in poverty-reducing expenditure of $14 billion.
The G8 are on course to fully meet their commitment to cancel 100% of multilateral debts to qualified poor countries. Ensuring that donors compensate the international financial institutions for the loss in income due to the agreement remains a long-term task and, while most G8 countries have taken provisional measures to ensure long-term financing, some do not have sufficient commitments beyond 2008.
$86.7bnDebt stock reduction of African Post-Decision- Point countries by debt relief.
This year's report welcomes the flexibility shown by donors in 2007, which ensured that Liberia could benefit from the debt commitment at a critical moment in the country's development, and notes that similar flexibility may be needed in the future. The G8 must also take it upon themselves to establish a charter for responsible lending and creditor co-responsibility, a fair and transparent process for considering odious debt and a lasting solution to the issue of vulture funds.