The Multilateral Debt Relief Initiative

1
The Multilateral Debt Relief Initiative

• Status of Implementation
• Multilateral Development Bank Meeting on Debt
  Issues
  
• Washington, DCJune 21-22, 2006

2
Overview

• Origins and purpose of the initiative
• Financing of the MDRI in the Fund
• Eligible countries
• Eligible debt
• Implementation to date

3
Origins and Purpose of the Initiative

• Launched by the G8 in June 2005, confirmed at
  Gleneagles
  
• Purpose free up additional resources to help
  poor indebted countries advance faster towards
  the MDGs
  
• Three IFIs (IMF, IDA, AfDF) to forgive 100
  percent of their claims on 35 HIPCs
  
• Modalities may vary across IFIs
• In particular different financing sources
• IMF own resources
• IDA, AfDF to receive compensation from donors

4
Financing the MDRI in the Fund

• Two sources of resources available for debt
  relief from the Fund
  
• Remaining proceeds from the 1999-2000 off-market
  gold sales
  
• Bilateral contributions received to subsidize
  lending under the PRGF

5
Financing the MDRI in the Fund

• Gold sales proceeds
• Must be used uniformly across the membership
• Debt relief to all members below a certain income
  cutoff
  
• Income cutoff set at 380 per capita
• 23 HIPCs and 2 non HIPCs

6
Financing the MDRI in the Fund

• Bilateral contributions to the PRGF account
• Not subject to uniformity of treatment
  requirement
  
• But require consent from each contributor
• Debt relief to HIPCs above the 380 cutoff

7
Financing the MDRI in the Fund

• Two Trust Funds set up
• MDRI-I SDR 1.5 bn from gold sale proceeds
• MDRI-II SDR 1.12 bn from PRGF Subsidy account
• Donors commit to provide additional funds
• Debt relief for protracted arrears cases
  (Liberia, Somalia, and Sudan)
  
• Debt relief for sunset clause HIPCs (Eritrea,
  Haiti, Kyrgyz Republic, and Nepal)
  
• Subsidies for future PRGF, ESF loans

8
Country coverage in the Fund
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Eligible debt

• Cutoff date end 2004
• No provision for reimbursement of payments made
  between January 1, 2005 and qualification
  
• Delivery through stock-of-debt cancellation
• Total estimated cost SDR 5.3 bn (US 8 bn) in
  2005 NPV terms
  

10
Qualification

• Post-completion-point HIPCs must qualify for MDRI
  relief
  
• Other HIPCs qualify automatically upon reaching
  their HIPC completion point
  
• No additional conditionality after HIPC
• No material change since completion point
• Continued satisfactory performance in three
  areas macroeconomic management, poverty
  reduction policies, public expenditure
  management

11
Qualification assessments

• Undertaken in close collaboration with the World
  Bank
  
• 17 of the 18 post-completion-point countries
  qualified for MDRI relief from the Fund
  
• Mauritania to implement remedial actions
• 2 non HIPCs also qualified for MDRI relief from
  the Fund

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Implementation

• Modalities approved November 21, 2005
• Qualification of 19 countries December 21, 2005
• Consents received from contributors January 5,
  2006
  
• Relief delivered to 19 countries January 6, 2006
• Relief delivered to Cameroon upon completion
  point April 28, 2006
  
• Mauritania could qualify today

13
MDRI relief delivered to date

• Relief delivered to 20 countries 18 HIPCs and 2
  non HIPCs
  
• SDR 2.5 bn (US 3.6 bn)
• Including SDR 330 mn (US 475 mn) in remaining
  HIPC assistance
  
• Countries expected to receive MDRI relief in the
  near future Mauritania, Malawi, Sao Tome and
  Principe, Sierra Leone

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