Participation in the Highly Indebted Poor Countries (HIPC) Initiative in order to reduce poor countries' external debt to sustainable levels

The principal objective of the initiative is to reduce the debt burden of poor countries to sustainable levels in order to ensure that no country faces a debt burden that it cannot manage. It represents a significant step forward, as it places debt relief in the framework of poverty reduction by aiming to ensure that essential restructuring and the development of a country is not compromised by servicing unsustainable debt burdens. The HIPC are also required to embark on clearly defined poverty reduction strategies. The initiative is made up of several dimensions: debt relief/cancellation and structural and social policy reform concentrating particularly on basic health and education provision. For the first time it now involves all types of creditors, i.e. bilateral, multilateral and commercial.

There are two main stages to the HIPC Initiative. During the first stage the countries must adopt a number of measures in order to be considered for interim debt service relief (decision point). Once accepted, they qualify for some interim debt relief and must implement certain policies and meet certain conditions in order to qualify for full assistance (completion point). The process is very flexible, as there is no fixed timetable for the completion of the two stages.

* The HIPC Initiative has already had a positive impact on heavily indebted poor countries. To date 28 countries have reached the decision point and can benefit from interim debt relief. Of those 28, 18 have reached the completion point. The majority of these countries are in sub-Saharan Africa. * The HIPC Trust Fund provides financial support to the debt relief efforts of eligible regional and sub-regional creditors, of which the largest is the African Development Bank. Overall, the latest result indicates that the programme has allowed 78 percent of the countries assisted to make major improvements to their external and domestic debt management strategies.