Progress on HIPC and MDRI Implementation Preliminary data, not for quotation Economic Policy and Debt Department World Bank MDB Meeting on Debt Issues, Washington, DC July 6, 2011
HIPC/MDRI Implementation PLAN FOR PRESENTATION 1. Recent progress and current status 2. Remaining challenges a) Progress towards debt relief in the remaining 8 HIPCs b) Ensuring full creditor participation c) Maintaining debt sustainability 3. Conclusions & next steps
1. Recent progress and current status Progress since last year s MDB meeting 2 countries reached CP Togo and Guinea-Bissau (Dec. 2010) Most of Interim countries are making progress HIPC Initiative is largely implemented: 32 completion point countries and 4 interim countries out of 40 eligible HIPCs willing to avail themselves of relief under the HIPC Initiative In 2009-2010: 9 completion point cases and 2 decision point cases Some options for the future of the Initiative are considered
1. Recent progress and current status (cont.) A large majority of HIPCs have received or begun to receive debt relief 32 Post CP Countries Afghanistan Benin Bolivia Burkina Faso Burundi Cameroon Central African Republic Congo, DRC Congo, Rep. of Ethiopia Ghana Gambia, The Guinea-Bissau Guyana Haiti Honduras Liberia Madagascar Malawi Mali Mauritania Mozambique Nicaragua Niger Rwanda São Tomé and Príncipe Senegal Sierra Leone Tanzania Togo Uganda Zambia 4 Interim Countries Chad Comoros Côte d Ivoire Guinea 4 Pre-DP Countries Eritrea Somalia Sudan Kyrgyz Republic
1. Recent progress: cost implications Potential Costs of the HIPC Initiative by Creditor Group Total estimated cost: US$76 billion, end-2010 NPV terms Potential MDRI Debt-Service Savings by Creditor and Country Group (in billions of US dollars, in 2010 NPV terms) AfDB Group $5.5 billion (7.2%) IMF $6.5 billion (8.5%) IaDB $1.8 billion (2.3%) World Bank $15.0 billion (19.6%) Commercial $4.5 billion (5.9%) Other Multilateral Creditors $5.5 billion (7.2%) Other Official Bilateral $10.0 billion (13.1%) Paris Club $27.7 billion (36.2%) 21.9 IDA 19.5 4.2 IMF 3.7 4.9 AfDF 4.2 2.9 IaDB 2.9 Estimated MDRI Cost to all 40 HIPCs Cost of MDRI Delivered to 32 completion-point HIPCs
1. Recent progress and current status (cont.) Debt burdens have been reduced by 90% compared to DP levels and key debt burden indicators have substantially declined PV of Debt after HIPC Initiative, Additional Bilateral Debt Relief and MDRI (In billions of U.S. dollars, in end-2010 PV terms ) Debt Stock Ratios for the 36 Post-Decision-Point HIPCs 160 140 120 100 80 60 40 17.9 122.9 17.4 99.6 12.9 12.9 PV of debt-to-gdp PV of debt-to-exports PV of debt-to-revenue Debt service-to-revenue Debt service-to-exports 20 0 Before traditional debt relief After traditional debt relief 45.0 After HIPC Initiative debt relief 35.1 After additional bilateral debt relief 4 Interim Countries 32 Completion-Point Countries 10.3 4.8 After MDRI 0% 200% 400% 600% 1999 2010
1. Recent progress and current status (cont.) As of 2009, poverty-reducing expenditure increased in similar proportions as the debt-service reduction 14 13 12 11 10 9 Percent of GDP 8 Poverty Reducing expenditure 7 6 Debt service before MDRI 5 4 3 2 Debt service after MDRI 1 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009e 2010p 2011p 2012p 2013p 2014p
2. Remaining challenges a) Progress towards debt relief in the remaining 8 pre-completion point HIPCs b) Ensuring full creditor participation c) Maintaining debt sustainability
3. Remaining challenges (cont.) a) Progress towards debt relief
3. Remaining challenges (cont.) a) Progress towards debt relief All pre-cp HIPCs (except Kyrgyz Republic) are fragile states (WB definition) 3 of the remaining 4 Interim HIPCs are progressing toward CPs Cote d Ivoire: after the resolution of the political standstill progress is resumed on triggers, PRSP, IMF program. Completion point expected in Sept. 2012 Guinea: after presidential elections, government confirmed HIPC as first priority. Completion point expected in Jun./Sept. 2012 Comoros: good progress on triggers, PRSP, IMF program is on track. Completion point expected in Dec. 2012
3. Remaining challenges (cont.) a) Progress towards debt relief Main challenges facing remaining HIPCs: Chad: serious political challenges remain; unable to implement policies to maintain macroeconomic stability The main obstacles to the other 4 pre-dp countries are of a political or security nature Eritrea: limited engagement with IFIs Kyrgyz Republic: uncertain scenarios Somalia: protracted arrears to MDBs Sudan: timing of debt reconciliation and apportionment, arrears clearance, financing assurances, PRSP will determine the date for the decision point
3. Remaining challenges (cont.) b) Ensuring full creditor participation Distribution of Potential Costs under the HIPC Initiative by Creditors 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Post-Completion Point Interim Pre-Decision Point Commercial Other Bilateral Paris Club Multilateral Participation by other bilateral and commercial creditors is key for the delivery of debt relief to pre-cp countries Multilateral and bilateral creditors continue to provide debt relief in line with HIPC Initiative commitments
3. Remaining challenges (cont.) b) Ensuring full creditor participation: Multilateral Creditors Updates on debt relief and disbursements received from 11 multilateral creditors, compared to 14 in 2010 The reporting creditors represent 97% of total HIPC debt relief to post-completion point countries Excluding IDA, IMF and the 3 regional MDBs, the coverage drops to 65% Creditors HIPC Assistance Costs In millions of U.S. Percent of dollars, in end- Total Cost 2010 PV Terms HIPC Assistance delievered In millions of Percent of U.S. dollars, in Cost end-2010 PV Terms Reporting (14 creditors) 26,405 97.4 16,472 62.4 World Bank Group 12,592 46.5 7,266 57.7 African Development Bank (AfDB) Group 4,639 17.1 2,856 61.6 International Monetary Fund (IMF) 4,458 16.4 3,440 77.2 Inter-American Development Bank (IaDB) 1,715 6.3 966 56.3 European Union/European Investment Bank (EU/EIB) 999 3.7 819 82.0 Central American Bank for Economic Integration (CABEI) 750 2.8 372 49.7 International Fund for Agricultural Development (IFAD) 450 1.7 363 80.5 Arab Bank for Economic Development in Africa (BADEA) 316 1.2 15 4.7 Islamic Development Bank (IsDB) 162 0.6 139 86.2 Corporación Andina de Fomento (CAF) 136 0.5 132 97.2 West African Development Bank (BOAD) 81 0.3 77 94.8 Asian Development Bank (AsDB) 67 0.2 3 3.9 Nordic Development Fund (NDF) 41 0.1 25 60.8
3. Remaining challenges (cont.) b) Ensuring full creditor participation: Multilateral Creditors Cost of starting submissions is high, but cost of continuing reporting is very low Deadline for final submission is on August 26, 2011 Creditors HIPC Assistance Costs In millions of U.S. Percent of dollars, in end- Total Cost 2010 PV Terms HIPC Assistance delievered In millions of Percent of U.S. dollars, in Cost end-2010 PV Terms Non-reporting (10 creditors) 544 2.0 OPEC Fund for International Development (OFID) 267 1.0 Arab Fund for Economic and Social Development (AFESD) 93 0.3 Caricom Multilateral Clearing Facility (CMCF) 89 0.3 Fund for the Financial Development of the River Plate Basin (FONPLATA) 36 0.1 Caribbean Development Bank (CDB) 26 0.1 Arab Monetary Fund (AMF) 18 0.1 Central Bank of West African States (BCEAO) 9 0.0 East African Development Bank (EADB) 5 0.0 Shelter Afrique 1 0.0 Banco Interamericano de Ahorro y Préstamo (BIAPE) 0 0.0 Non-participating (8 creditors) 160 0.6 - - Banque des Etats de l'afrique Centrale (BEAC) 45 0.2 - - Economic Community of West African States (ECOWAS) 23 0.1 - - Banque de Développement des Etats de l'afrique Centrale (BDEAC) 13 0.0 - - Eastern and Southern African Trade and Development Bank (PTA Bank) 13 0.0 - - Banque de Dévelopment des Etats des Grands Lacs (BDEGL) 58 0.2 - - Conseil de L'Entente (FEGECE) 4 0.0 - - Fondo Centroamericano de Estabilización Monetaria (FOCEM) 3 0.0 - - Islamic Solidarity Fund for Development (ISFD) 1 0.0 - -
3. Remaining challenges (cont.) b) Ensuring full creditor participation: Non-Paris Club Creditors Non-Paris Club (NPC) creditors account for about 13% (US$10 bill.) of total cost of HIPC Initiative debt relief Around 40% estimated delivery by NPC creditors of expected HIPC relief to post-cp HIPCs Large variation in NPC creditors delivery of HIPC relief: As of 2010, only 11 creditors providing full debt relief to HIPCs, 25 creditors partial, and 18 creditors none Preliminary results 2011 confirm the 2010 survey (annual survey sent to major NPC creditors & post-cp HIPCs) Scorecard on delivery of debt relief by NPC Creditors to be updated in the 2011 Progress Report
3. Remaining challenges (cont.) b) Ensuring full creditor participation: Commercial Creditors Commercial creditors account for about 6% (US$4.3 billion) of total est. cost of HIPC Initiative As of 2010 progress report, creditor participation reached an estimated 33%, but it reflects a limited number of cases: Significant debt relief to Cote d Ivoire, Congo Rep. and Liberia Debt relief provided to Afghanistan and CAR Since last year s report, no new external commercial buyback operation completed with support from IDA s Debt Reduction Facility (DRF) The second closing of the buyback operation of Liberia extinguished the debts of the remaining two hold-out creditors in December 2010
3. Remaining challenges (cont.) b) Ensuring full creditor participation: Commercial Litigation As of 2010 Progress Report, 17 creditors lawsuits against 9 HIPCs were outstanding, 3 more compared to 2009 2 cases for Liberia, now settled; 1 new case for Kyrgyz Republic Lawsuits to Congo Rep., DRC, Sudan and Zambia represent 86 percent of outstanding disputed claims Preliminary results of the 2011 survey: no significant changes expected Range of instruments to support HIPCs in litigation has increased: Active and cooperative negotiations (Nicaragua, Liberia) African Legal Support Facility at the AfDB launched on June 29th, 2009 ComSec HIPC Clinic Law restricting litigating amounts against HIPCs enacted in UK in 2010 and made permanent in 2011
3. Remaining challenges (cont.) c) Maintaining debt sustainability in the aftermath of the crisis Recent analytical work has found no evidence of systemic debt difficulties across LICs which could justify a renewed effort to extend debt relief to a broad group of LICs Most of LICs, including HIPCs saw their debt burden indicators deteriorate during and after the crisis No generalized increase in the risk of debt distress But a significant share of LICs face higher debt vulnerabilities as assessed by recent LIC DSAs There is a strong case for intensifying the cross-country monitoring of, and the reporting on, debt vulnerabilities in LICs A joint IMF-World Bank periodic report on LIC debt vulnerabilities, which would include a section on the implementation of the HIPC Initiative
4. Conclusions and next steps Summary conclusions With the HIPC Initiative largely implemented, a discussion about its future is timely HIPC Initiative and MDRI: limited progress over the last year, but progress is expected to resume in 2012 Since mid-2010, 2 HIPC reached CP 3 DP HIPCs making progress to CP Delivery of debt relief significant, mainly due to efforts by MDBs, Paris-Club, some commercial & bilateral creditors Current crisis has affected a number of LICs, including post-completion point HIPCs, but no generalized increase in the risk of debt distress
4. Conclusions and next steps (cont.) Next steps Updated status of implementation of the HIPC Initiative and MDRI: end-october 2011 after the Annual Meetings Track debt relief delivered and disbursed by all MDBs, as well as new borrowing to HIPCs as reported by MDBs
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