Commission Participation in the HIPC Initiative 2004 Status Report

Transcription

1 EUROPEAN COMMISSION DEV/B/2*2 D(03) Commission Participation in the HIPC Initiative 2004 Status Report DG DEV DG RELEX EUROPAID

2 1. Background The Highly Indebted Poor Countries (HIPC) Initiative was proposed by the World Bank and the IMF in 1996 as a co-ordinated approach to bring down poor countries' external debt to sustainable level. The initiative involves both bilateral and multilateral public creditors as well as commercial creditors. In 1999 the Initiative was revised and strengthened and, in the same year, endorsed by the G7 summit in Cologne, Germany. The enhanced version of HIPC was put in place in September The HIPC initiative has multiple dimensions, emphasising debt relief but linking it to poverty reduction, structural adjustment and social policy reform, in particular the health and education sectors. There are currently 42 countries that are potentially eligible for the HIPC initiative. Out of these Yemen, Angola, Kenya and Vietnam were considered to have a sustainable debt situation after the application of traditional mechanism of rescheduling and debt reduction (including on so called Naples terms), therefore the actual list is reduced to 38 countries, the majority of which are located in sub-saharan Africa. So far 27 countries have actually entered the initiative and reached Decision Point being thus eligible for the receipt of interim relief. Among these 27, fifteen countries 2 have reached Completion Point, making them eligible for irrevocable relief. The remaining 11 eligible countries 3 have faced difficulties in reaching their Decision Point as they are affected by conflict and/or substantial arrears to various creditors. Despite these difficulties some countries are making progress in establishing a track record of macroeconomic performance, namely Burundi, the Republic of Congo and the Central African Republic. The extension of the Sunset Clause (i.e. the expiration date) of the Initiative for further two years to end-2006 will provide a new chance to enter the initiative for the remaining countries of the list, and possibly other countries that may satisfy the eligibility criteria by end The most recent total cost estimate of debt relief assistance under the HIPC initiative amounts is based on 37 countries, (excluding Lao PDR because of uncertainty on debt data), and it amounts to $ 54.5 billion in 2003 NPV terms 4, and to $35.7 billion considering only the 27 countries that have currently reached Decision Point. These costs are almost equally divided between bilateral and multilateral creditors. However it must be noted that the estimates of the cost of topping-up (see below) are not included in these amounts. 1 Major modifications introduced by the enhanced HIPC regarded eligibility criteria (a lower NPV debt-to export target 150 percent and debt-to-revenue target to 250 per cent with lower threshold for the latter 30 percent export-to- GDP, and 15 percent revenue-to-gdp), earlier assistance, link timing of Completion Point with implementation of structural reforms. 2 Benin, Bolivia, Burkina Faso, Ethiopia, Guyana, Ghana, Mali, Madagascar, Mauritania, Mozambique, Nicaragua, Niger, Senegal, Tanzania, and Uganda 3 Burundi, Central African Republic, Comoros, Republic of Congo, Cote d Ivoire, Lao PDR, Liberia, Myanmar, Somalia, Sudan and Togo. 4 HIPC Initiative Status of Implementation report of September

3 Creditor participation is still among the challenges to be faced by the initiative, and unfortunately no major changes in the status of creditor participation are reported. For the 27 Decision Point countries, bilateral Paris Club creditors have committed to provide debt relief of $13.1 billion, although most of them go beyond HIPC and provide 100% debt relief (e.g. G7 and 15 EU Member States); non-paris Club creditors only committed 80% of the total costs (approx $3.5 billion) of relief. In fact there are 22 countries that have not yet agreed in to provide their share of HIPC debt relief and they account for 21 % of the total non Paris Club costs. Commercial creditors have not committed any relief (total cost estimated at $0.9 billion). Multilateral creditors have already committed to their full cost of the HIPC initiative (i.e. 37 countries), with relief amounting to $25.2 billion. The HIPC initiative has shown some encouraging concrete results, even if it is clear by now that it constitutes only a first, though important, step towards the attainment of long term debt sustainability. So far, the debt stocks of the 27 countries that have reached Decision Point are projected to decline by two thirds. Also, debt service as a percent of exports has declined from nearly 17% in 1998 to around 10% in Savings deriving from debt relief seem to have been channeled towards more poverty-reducing expenditures, which have increased from 6.4% in of GDP in 1999 to 8% of GDP in Even if in 2004 the speed of implementation of the initiative has picked up, it has been at a slower pace than the forecasts of the 2003 annual report by the World Bank and the IMF staff. In countries in the interim period were expected to reach Completion Point by the end of 2004, but so far only six have done so. Some concerns remain also due to the fact that the latest Status Report (Sept 2004) by the World Bank and the IMF points out that only six of the thirteen countries in their interim period are on track with their macroeconomic programmes. Only five countries (Cameroon, Honduras, Madagascar, Rwanda and Zambia) are expected to reach Completion Point in 2004 or in the first semester of It is also worrying to see that the net present value of debt-to-exports ratio for most post- Completion Point countries have climbed since their Completion Point. 4. The contribution of the EC to the HIPC initiative The EC has always been deeply committed to the HIPC initiative. So far, the EC has pledged more than 1.6 billion to the initiative: 680 million, as a creditor, on its own claims, and 934 million as a donor to the HIPC Trust Fund. Table 1 summarizes the situation of the EC pledges, distinguishing between the resources coming from the European Development Fund (EDF) and from the EC Budget. 3

4 Table 1 - EC pledges to the HIPC initiative Summary table (MEURO) EC acting as a Creditor (EDF) Council Decision (98/453/EC) of July Joint ACP-EC Council Decision of December ' Joint ACP-EC Council Decision of December (LDC ACP HIPCs initiative) Joint ACP-EC Council Decision of December Joint EU-ACP Council Decision of May Total resources pledged as a creditor 680 of which transferred to the EIB for disbursement 420 Donor to the HIPC Trust Fund Joint EU-ACP Council Decision of December 99 (EDF) 680 Commission contribution for Latin America (EC Budget) 45 Commission contribution for Asia (EC Budget) 9 Joint EU-ACP Council Decision of May 2003 (EDF) 200 Total pledged as a donor 934 Of which transferred to the HIPC Trust Fund 834 GRAND TOTAL EC Contribution as a Creditor EIB 5 Prior to the inception of the EIB Trust Fund, debt relief assistance was granted directly to Guyana ( 6.44 million) and Uganda ( 4.59 million) 6 Following the signature of the Financing Agreement detailing the Community Contribution as creditor in July , and the subsequent Convention between the Commission and the EIB signed in December 2000, an amount of 100 million was transferred to the EIB Trust Fund. The second tranche of 100 million was paid in December The last tranche of about 149 million 8, representing the balance of the 1998 and 1999 EC commitments, was paid in October The pledged EC contribution as Creditor by country is set out in Table 5 (in annex). It is worth noting that at end 2003 fourteen countries were expected to reach Completion Point during 2004, but only six actually did, thus explaining the relatively high outstanding balance of 154 million. 5 The EIB participates to the HIPC initiative in its own right. EIB s Board approved a contribution of 70 million to HIPC. 6 These amounts are not to be accounted for from the EIB Trust Fund 7 Project N. 7 ACP GPR 019 and 8 ACP GPR 011 for an amount of 348,97 million. 8 The amount is equal to the balance of Council decision of July 1998 (40-11 = 29 million) plus the balance of the Council decision of December 1999 (120 million) 4

5 Operations concluded in 2004: Relief was provided to Cameroon, Chad, Congo DRC, Ethiopia, Gambia, Ghana, Guinea, Guyana, Madagascar, Malawi, Niger, Rwanda, Senegal, Sierra Leone and Zambia. Table 2 shows the details by country of the relief granted by the Commission since the inception up to September 30, 2004 and the resulting status of account. Table 2 - Debt relief granted through the EIB Trust Fund - by country - ( million ) Q TOTAL Benin Burkina Faso Cameroon Congo DRC Ethiopia Gambia Ghana Guinea Guinea-Bissau Guyana Madagascar Malawi Mali Mauritania Mozambique Niger Rwanda S.T. & Principe Senegal Sierra Leone Tanzania Tchad Uganda Zambia Total EIB Account balance as of September 30, 2004 in million First tranche Dec Second tranche - Dec Third tranche Oct Interest income Debt relief granted Balance as of Sept 30, Detail of interest earnings interest interest interest interest interest Total Source: EIB statements 9 The difference between this amount and the total debt relief quoted in table 4 is due to the implementation modalities agreed upon. For some loans the instalment payment scheme continues for several years. 5

6 Pending operations: Completion Point for Ethiopia ( 25.7M + approx. 23M 10 topping up), Ghana ( 10.9M), Niger ( 8.4M+ approx 3.5M topping up), and Senegal ( 8.8M), for a total of approx million. These operations are expected to be completed by the end of the year Foreseen operations: The interim relief for the current beneficiary countries for the entire year 2005 amounts to approx 21 million. The countries that are likely to reach Completion Point by the first semester 2005 are Cameroon ( 8.1M), Madagascar ( 9.1M), Rwanda ( 16.7M ) and Zambia ( 36.8M) for a total of 70.7 million, excluding any topping up that might be approved by the boards of the World Bank and IMF. The total needs foreseen by the first semester 2005 are therefore around 172 million (excluding any eventual topping up for upcoming cases). 5.a) Complementary Community participation in the HIPC initiative as a creditor (LDC initiative) On December 2001, the ACP-EU Council of Ministers decided, on the basis of a Commission proposal, to grant a further 60 million assistance to HIPC Initiative allowing full relief of the EC special loans of the eligible least developed ACP countries. The funds were transferred in October 2003 to the European Investment Bank following the same operational structure as the EIB Trust Fund described above. It is worth to mentioning that Senegal obtained LDC status in 2001, and had not been included in the calculations for the financing proposal for this initiative. Moreover Senegal has a debt reduction factor that is relatively low (only 10%) and therefore the alleviation of all special loans after the application of HIPC terms amounts to approx 30 million, which will almost deplete the account. Of recent Completion Point cases, Ethiopia and Niger would both be eligible for the LDC initiative, but after the application of the additional assistance at Completion Point no special loan remains left, and therefore the LDC account needs not to be drawn upon. The tables below show the details by country of the relief granted by the Commission under the LDC initiative since the inception up to September 30, 2004 and the resulting status of account. EIB -LDC Account- Debt relief granted TOT Benin 4,01 4,01 Congo DRC 0,18 0,18 Mauritania 0,08 0,08 Sierra Leone 0,92 0,20 1,12 Total 4,93 0,46 5,39 EIB -LDC Account balance as of Sept 30, 2004 in million Opening of account Interest income Debt relief granted Balance as of Sept 30, Detail of interest earnings Interest Interest Total 1.05 Source: EIB statements 10 topping up figures still provisional both for Ethiopia and Niger 6

7 IDA administered EU loans During the latest Completion Point cases, it appeared that the World Bank included in the calculations of debt relief required from the Commission some amounts derived from the so-called IDA-administered EU loans. This happened for example in the case of Guyana, but also more recently in the cases of Ethiopia, Niger and Senegal 11. After in depth investigation, the Commission services hold the view that these IDAadministered EU loans are not to be viewed as multilateral EC claims, as the special loans and risk capital loans managed by the EIB and covered by the Decisions governing the EC participation as a creditor in the HIPC Initiative, but should rather be considered as pure bilateral Member States claims. In fact it appears that in 1978 a Council Decision 12 was approved concerning an Agreement between the EEC and the Member States, on the one hand, and the International Development Association, on the other hand, whereby the EEC requests IDA to administer a Special Action Account of $385 million, to be used for Special Action Credits in Low-Income Countries (including several non-acps). The (then nine) Member States provided a lump sum direct to IDA, without any direct or indirect Community contribution, to be used for this Special Action Account managed by IDA. The terms applied (i.e. grace period, maturity, charges, interest rates) are those of IDA, and all funds have by now been disbursed (58 credits to low-income countries, including non ACPs). The reimbursements from beneficiary countries are made directly to the Member States that originally contributed. The Commission s role is reduced to a very minimum, just being informed of the facts. Unless otherwise instructed during discussions with Member States, the Commission plans to communicate this officially to the World Bank, asking to address the requests for debt relief on these loans directly to the involved Member States, rather than to the Commission. 6. EC Contribution as a donor to the HIPC Trust Fund Following the signature of the Financing Agreement on 7 July 2000, the Commission, on 17 July 2000, transferred the first tranche of the Community contribution which was received by the Trust Fund on 31 July Following the signature of implementation agreements with the World Bank, acting as Fund Administrator, and the African Development Bank (AfDB), the Trust Fund beneficiary, an agreement was reached in March 2001 on the individual country allocation. The terms of this relief are those defined by the AfDB 13. The contribution of 7.5 million earmarked for the interim relief on IFAD loans in favour of Nicaragua stems from the country allocation of the EC Budget. Table 3 : Resources contributed by the European Commission to the HIPC Trust Fund 11 The amounts are respectively: Guyana- USD 0.6 million, Ethiopia USD 0.2 million, Niger USD 0.5 million, Senegal approx USD 1.5 million 12 Council Decision 79/195/EEC of 21 December 1978, O.J. L043 of 20/02/1979, pp The Member States involved are Belgium, Denmark, Germany, France, Ireland, Italy, Luxembourg, Netherlands and United Kingdom. 13 Debt relief from the AfDB is governed by the following: a) delivery of debt relief through annual debt service reductions; b) release of up to 80 per cent of annual debt service obligations as they become due until total debt relief is provided; c) Interim financing between decision and Completion Point of up to 40 per cent of total debt relief; d) debt service to be provided, whenever possible, within a 15-year time-span to assist countries attain the internationally agreed development goals for the year

8 Amount in EUR Amount in USD (Unaudited) Contributions Africa AFDB Caribbean Guyana Latin America Asia Africa AFDB IFAD- Nicaragua Investment Income Refunds Asia- Principal ( ) Asia- Investment Income ( ) Lat. Am.- Inv. Income (4.508) ( ) Funding provided Africa AFDB Benin Burkina Faso Cameroon Chad Dem Rep of Congo Ethiopia Ghana Guinea Guinea-Bissau Madagascar Malawi Mali Mauritania Mozambique Niger Rwanda Senegal Sierra Leone Tanzania Uganda Zambia ( ) Latin America Bolivia-CAF Bolivia-FONPLATA Guyana-IADB Guyana-IFAD Honduras-CABEI Nicaragua-CABEI Nicaragua-IFAD ( ) Balance as of Sept 30, Source: Data derived from statement of account from the HIPC Trust Fund 8

9 The refund mentioned in Table 3 concerns 9 million earmarked for Asia, and the investment income for Latin America, that were unused at the date of expiration 14 of the Contribution Agreement from the EC budget. In addition to the items in Table 3, completion point operations for Niger, Ethiopia, Ghana and Senegal are still being finalised for a total of approx USD 57 million. For 2005 preliminary estimations of the needs for the countries that could potentially reach Completion Point (Madagascar, Cameroon, Chad, Rwanda and Zambia) range from USD 95 million to USD 110 million, however these figures do not include the interim relief for countries potentially reaching Decision Point next year (Burundi, Congo Rep., Cote d Ivoire, etc ) Overall financing of the Trust Fund: The HIPC Trust Fund has recently presented to the Board a Status Report, which states that Existing HIPC Trust Fund pledges are projected to be sufficient to provide the needed financial support for debt relief for the 27 countries which have already reached their Decision Point, and to meet the currently estimated financing requirements for the Congo Republic and Burundi should they reach their Decision Point over the next six months. But the report also underlines that the estimated costs ($4.17 billion) for the 37 countries included in the current costing exercise would fully exhaust the resources that have been mobilized to date by the HIPC Trust Fund ($3.64 billion) and leave a potential funding gap of $530 million, for which the Trust Fund will need additional pledges. A new pledging session may therefore be organised during the spring Under the current status of the programming exercise of the 9 th EDF the Commission sees little room for contributing in the short term to this additional cost. 7. Other related contributions - arrears clearance operation in Burundi and Republic of Congo. The EC loans have a multilateral status and therefore the arrears owed to the EC cannot be rescheduled. They are cleared only on an exceptional basis, if the perspectives for reaching the HIPC Decision Point are realistic and a internationally agreed arrears clearance scheme exists. In practice, EC arrears clearance implies that the beneficiary country is provided with the necessary financing (e.g. grant budgetary support) to repay the arrears, which comes from its national EDF envelope allocation. Therefore a careful assessment of the country s capacity to pay and of the costs and benefits of the operation must be performed before starting any discussion. Only after EC s own arrears have been cleared, can a new assessment be made to see if participation in the clearance of other multilateral institutions arrears could be considered a meaningful way to use EDF resources. During 2004 two post-conflict countries have been building a track record that could lead to their HIPC Decision Point, and the EC participated, after careful assessment, in the international effort to clear their multilateral arrears. For Burundi: 19,5 million have been used for the clearance of EC arrears. In addition in the context of the new Post Conflict Countries Facility set up by the African Development Bank, a contribution of 7.6 million was made from the country envelop. 14 The exact expiration date was June 30,

10 For the Republic of Congo: during the Mid Term Review process a revision of the Country Strategy Paper has been proposed with a reallocation of the funds to liberate an amount of 30,45 million for the payment of the arrears on special loans and risk capital loans from EDF resources. Such reallocation has not significantly affected the overall development strategy pursued by the Congo with EC support. The EC has also participated as a donor in the restructuring of the arrears owed to the African Development Bank, providing a total of 8 million, to be pre-earmarked at the HIPC Trust Fund. The disbursement of these funds is foreseen only once the relevant country has reached HIPC Decision Point. 8. Study financed by the European Commission Beyond HIPC In March 2004 the consultancy study on Beyond HIPC was finalised and posted in the Web-page of DG DEV 15. The conclusions reflect the views of the IDC consultants team, lead by Prof Cohen, and are not necessarily the Commission s views. The two major themes analysed by the study are (i) debt sustainability and (ii) the link between debt relief and allocation of resources. As far as debt sustainability is concerned, the first lesson from the HIPC Initiative is that debt crises can be averted if adequate, upstream measures are implemented in due time. Specifically, close monitoring of Low Income Countries debt is critical because they have little or no access to international financial markets and are therefore deprived of the market signal. A second lesson is that, through its support to the PRSP process, the HIPC initiative has provided incentives for donors to co-ordinate early on in the design of their individual country strategies. Moreover, an important objective of the initiative has been to encourage policy and institutional reforms towards poverty reduction. These findings could therefore be inserted in the broader PRSP framework. Concerning the link between debt relief and allocation of aid, a first conclusion is that debt relief indeed seems to have affected the allocation of aid across poor countries. In this context, the study explored the link between debt relief, poverty prevalence and policy performance. The conclusions are that within the group of HIPC countries: (i) there is little correlation between the level of poverty and the amount of debt relief and (ii) within the group of HIPC countries, those benefiting most are not the best performers in terms of policy and institutions. Increasing the number of countries or the level of debt relief would have the same unwelcome consequences, as shown by the analysis of the proposal of 100% debt cancellation for Africa. Debt relief as a result of this proposal would bring about considerable inequality in the distribution of aid among African countries in relation to their relative poverty level. For example, for 100% debt relief Eritrea, one of the poorest countries in the AU, would receive aid worth 35% of its GNI, or about 56 US$ per capita. For Seychelles, the richest country in the AU, the corresponding figures would be 39% of GNI and 2572 US$ per capita. Additionality and accounting of debt relief: Another interesting conclusion of the report is that there is currently no clear evidence of additionality of debt relief to ODA, but it is probably too early to draw clear-cut conclusions. In addition the way in which 15 The report is available at the thematic site under the heading 10 Useful documents at

11 debt relief is currently accounted for, seems to lead to an overstatement of the value of aid received by HIPC countries. The report makes also two new proposals: A) In relation with the need for upstream measures, it suggests the creation of a Debt Surveillance Mechanism, whose function would be to centralise and monitor information related to the accumulation of debt by poor countries and provide permanent information to the creditors. The Member States admitted the need for a more independent and an improved debt monitoring, but the idea of a new institution does not seem to be feasible as such. The Commission could engage discussion with the World Bank, the IMF and Member States to improve debt surveillance in beneficiary countries. B) The so called FAIR proposal: suggests that HIPC countries should be allowed to swap future grants, as pledged through the IFF, against up-front debt relief at a discount. This proposal contains three different elements: - the idea of the swap at a discount (which would reflect the true value of the debt outstanding ) - a proposal of how to finance such an initiative - the idea of using debt relief as a modality to deliver aid (instead of using it as an allocation factor). External shocks The study also contains some description of the effects of vulnerability to shocks on debt sustainability, and some proposals to reduce such vulnerability, ranging from contingent facilities to market based approaches, and ways to ensure aid is countercyclical. 9. Challenges ahead - Countries having reached Completion Point: The latest Status Report by the World Bank and the IMF mentions the worsening of the long term debt sustainability outlook for several countries. The efforts to maintain macroeconomic stability, to improve debt management and governance are essential in preventing the build-up of unsustainable debt, but in addition external financial assistance needs to be larger enough and on adequately concessional terms. In several of these countries the vulnerability to external shocks need to be further reduced. The operationalization of the new debt sustainability framework by the World Bank and the IMF needs to ensure the transparency of the decisions and the assumptions made during the Debt sustainability analysis. - Countries still to reach Completion Point macroeconomic stability exogenous shocks (need for additional assistance or topping up ) : Preliminary estimates by the WB staff suggest that several countries (Chad, the Gambia, Malawi, Rwanda, and Sao Tome & Principe) would exceed the HIPC ratio of 150% of debt/exports ratio at Completion Point. However additional assistance at Completion Point ( topping up ) is granted exceptionally, on a case by case basis, only if the worsening of the debt sustainability outlook is due to exogenous factors. During the assessment of the cases of Ethiopia and Niger the impact of international interest rate changes on a HIPC s economic circumstances was at the centre of some debates. The IMF issued a note providing relevant empirical evidence supporting the view that changes in discount rates could affect the economic circumstances of HIPC countries, but each future case will have to be judged based on a country specific analysis. 11

12 At present seven countries in their interim period are projected to have external debt in excess of the HIPC thresholds (Chad, Gambia, Guinea, Guinea-Bissau, Malawi, Rwanda and Zambia) but the eligibility of a country for topping up depends on the comprehensive assessment made at Completion Point. The total additional cost for these countries is estimated to be around USD 1 billion in 2003 NPV terms. - Countries still to reach Decision Point Arrears clearance and sunset clause The eligible countries that have yet to reach Decision Point are mainly post-conflict countries, and many of them have accumulated protracted arrears to the multilateral institutions. In order to achieve Decision Point these countries will need to reach an agreement on the clearance of their arrears. For the coming cases of countries with arrears to the Commission, a case-by-case approach will continue to be applied. In some cases, if assistance to clear arrears is considered appropriate, it may be possible, in the context of an internationally agreed initiative, to use resources from the B-envelopes of the ninth EDF to cover part of the arrears owed to the EC. In the current state of the programming exercise of the EDF resources, taking into account the considerable effort already made by the ACP partners with the Decision of May 2003, any further contribution as a donor to help countries clear arrears to other multilateral institutions seems extremely difficult. The Commission welcomes the decision to extend the sunset clause until end 2006, as this new two years span will assure the opportunity for some of the HIPC eligible countries to enter the initiative. However it is possible that by the end of 2006 some countries included in the (then possibly extended) list might still not fulfil the criteria to join the initiative; therefore efforts should be continued to develop credible options beyond HIPC, with particular regard to the needs of post-conflict countries. So far the EC has secured commitments for its full participation as a creditor, i.e. for the current list of all eligible countries. Should a change in the list of countries occur, further commitments will have to be made, if it appears that the EC has any claim on these additional countries. In addition to the current 11 pre-decision point countries, the recent staff paper on the sunset clause 16 by the World Bank and the IMF indicated that this option could include Haiti, Kyrgyz Republic and Tajikistan. For this latter country, as of end-july 2004 there is an outstanding 44 million macro-financial assistance loan (in nominal terms). 10. Conclusions and Recommendations EC as a creditor Taking into account that the needs for the first semester of 2005 are estimated between 151 and 172 million, excluding additional topping up requirements, the current 16 Enhanced HIPC Initiative Possible options regarding the sunset clause; staff paper of the IMF 8 th July

13 balance of the account ( million) will probably need to be supplemented to ensure continuity of operation. However to avoid excessive outstanding balances it is proposed that the disbursement of the first tranche of 60 million from the new contribution be made according to the needs arising as countries reach Decision and Completion Point during the course of It is proposed that interim relief to eligible countries be continued, under the conditions stated in the financing agreements (i.e. being on track within the HIPC framework as defined by the Bretton Wood Institutions, and not being subject to suspension of financial cooperation on the basis of Art 96 and 97 of the Cotonou Agreement). Should a country be considered no longer fulfil the required conditions, interim relief may be suspended at any time. EC as a donor In view of the facts presented above, and following the same principle of avoiding too large outstanding balances, it is proposed to disburse the second 100 million tranche of the latest contribution to the HIPC Trust Fund, according to the needs arising as countries reach Decision and Completion Point during 2005 or during the first half of 2006, should there be delays in the implementation of the initiative. 13

14 Table 5 - Status of Implementation of EC Assistance as a Creditor, by country - in EUR Cut-off Decision Completion NPV at Reduction Status of delivery of EC assistance Date point Point cod factor 17 Debt relief letter of commitment ORIGINAL HIPC Uganda JUN 96 APR 97 APR % JUN 98 OK 4,59 MEUR Burkina Faso DEC 99 SEP 97 JUL ,60% AUG 01 OK 7,03 MEUR Guyana DEC 96 DEC 97 MAY ,9% JAN 00 OK 6,44 MEUR Mali DEC 98 SEP 98 SEP % OCT 01 OK 3,85 MEUR (JUN 02) Mozambique DEC 98 APR 98 JUN ,8% SEP 00 OK 19,8 MEUR Côte d'ivoire DEC 97 MAR 98 Off-Track Off-Track Off-Track Off-Track Off-Track Off-Track ENHANCED HIPC Benin DEC 98 JUL 00 APR % OCT 01 Full relief in place JUL 03 Burkina DEC 99 JUL 00 APR % AUG 01 Full relief in place MAR 03 Cameroon JUN 99 OCT % DEC-01 Interim relief in place Chad DEC 00 MAY % DEC-01 Interim relief in place Ethiopia JUN 01 NOV 01 APR % JUN-02 Full relief pending Congo RDC JUL % JAN-04 Interim relief in place Gambia DEC 99 DEC % DEC-01 Interim relief in place Ghana DEC 00 FEB 02 JUL % OCT-02 Full relief pending Guinea DEC 99 DEC % JAN-02 Interim relief in place Guinea Bissau DEC 99 DEC % JAN-02 Off-Track Guyana DEC 98 NOV 00 DEC % OCT 01 Full relief in place Madagascar DEC 99 DEC % DEC-01 Interim relief in place JUL 2003 Malawi DEC 99 DEC % DEC-01 Interim relief in place Mali DEC 98 SEP 00 FEB % OCT 01 Full relief in place AUG 03 Mauritania DEC 98 FEB 00 JUN % Full relief in place NOV 02 Mozambique DEC 98 APR 00 OCT % JUL-02 Full relief in place NOV 02 Niger DEC 99 DEC 00 APR % DEC-01 Full relief pending Rwanda DEC 99 DEC % Interim relief in place Sao Tome &P DEC 99 DEC % DEC-01 Interim relief in place Senegal DEC 98 JUN 00 APR % OCT 01 Full relief in place Sierra Leone DEC 00 MAR % MAR 03 Interim relief in place AUG 03 Tanzania JUN 99 APR 00 NOV % OCT 01 Full relief in place (28 JUN 02) Uganda JUN 99 FEB 00 MAY % OCT 01 Full relief in place (28 JUN 02) Zambia DEC 99 DEC % DEC-01 Interim relief in place 17 As a percentage of the NPV calculated at the cut-off date 18 Actual debt relief is higher than a strict application of the reduction factor would imply. As a consequence, this made it possible to alleviate all special loans towards the EC. A strict application of the reduction factor would imply an amount of EUR 19 This amount does not include "LDC initiative" relief, which is worth EUR 3,9 million 20 After the provision of assistance under original HIPC ; Actual reduction factor is higher : relief under HIPC II is (instead of ) plus topping-up of This total to

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