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HIPC -WB vindicate critics after 5yrs

Author:
Elenor Crabbe
Date:
2003-03-01 08:40:03


All the criticisms we made back when HIPC started in '99-'97, being vindicated by the World Bank now in 2002 and 2003. Shameful...

An international debt relief initiative for the world's poorest countries became the victim of unrealistic expectations as a result of political pressure, the World Bank has concluded.

A study by the bank's internal review department said the debt relief initiative was supposed to be one of many things that would make it possible for the 40 or so countries never again to default on their debts. But political pressure gave the impression the initiative would do this on its own.

The original objective of the heavily indebted poor countries (HIPC) initiative "was to reduce debt to a sustainable level as part of a strategy to achieve debt sustainability".

"Over time, this objective was transformed to the stated enhanced HIPC objective of assuring a 'permanent' exit from debt rescheduling," it said. In reality, achieving a complete exit from debt problems was never possible from a one-off reduction in debt levels, the report said.

The World Bank and its sister institution, the International Monetary Fund, came under repeated pressure for more debt relief from development campaigners and government ministers, such as Gordon Brown, Britain's finance minister. Mr Brown said in 2000 that the international community should make "deeper, wider and faster debt relief the essential and unbreakable foundation of . . . a new virtuous circle of debt relief, poverty reduction and sustainable development".

The bank's management broadly agreed with the report's conclusions. "By reducing the debt stock, the initiative was expected to contribute to a more comprehensive development effort, but not to supplant it," the management said. It also reiterated its acceptance of criticisms in the report that the debt sustainability analysis which underlay the amount of relief offered under the initiative had been too optimistic.
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