IMF Approves Joining of Sudan to Heavily Indebted Poor Countries Initiative

A senior official at the Ministry of Finance in Sudan said that the Executive Board of the International Monetary Fund (IMF) has approved the joining of Sudan to Heavily Indebted Poor Countries Initiative (HIPC).

This decision came as the board ruled that Sudan took the measurements that went with the initiative.

After the IMF decision, it will ease Sudan's debts that are estimated at more than $ 50 billion, which pose a major obstacle to alleviate the strangling economic crisis.

The launch of the Heavily Indebted Poor Countries (HIPC) Initiative in the fall of 1996 represented a major departure from past practice in dealing with debt problems of developing countries; it focused on achieving overall external debt sustainability with comprehensive participation by all external creditors for the most heavily indebted countries with good track records.

Since the fall of 1996, the eligibility of twelve HIPCs has been reviewed by the Boards of the Bank and Fund, and work is well underway in four additional countries.

Seven countries have already qualified for debt-relief packages, and three more would be expected to qualify based on preliminary discussions.

Debt relief totaling US$6 billion in nominal terms, or US$3 billion in net present value, has been committed to these countries. Assistance for two countries -- Uganda and Bolivia -- has already been released.

As the implementation has progressed, there has been widespread interest in the issue of debt relief and possible changes to the Initiative among religious groups, non-governmental organizations, the media, international organizations, and governments

More recently, five G-7 governments have made proposals for changes to the Initiative that would be discussed at the Cologne Summit in June.

The staff of the Bank and Fund have prepared a technical note describing the tentative costing of some illustrative changes to the Initiative in order to facilitate an informed discussion.4 This paper is intended to provide further information on the specific proposals which have been made and to suggest some considerations for assessing them.

The paper is organized as follows. Section II summarizes the various proposals for changes that have been received from non-governmental organizations (NGOs) and other interested groups, and from member countries of the IMF and IDA. In general, these proposals seek to deliver deeper, broader, and faster debt reduction and to link debt relief more tightly to poverty reduction programs. Section III assesses these proposals. (The costs of alternative scenarios for debt relief and financing implications for creditors, especially multilateral institutions, will be set out in a supplement to this paper.) Issues for discussion are presented in the last section.