SRNEC K., GEBRIANOVÁ E.
Abstract
The article of the HIPC, “The Heavily Indebted Poor Countries”, initiative concerned of the WB and IMF activity and analyzing the situation in the poor countries.
This activity was the first comprehensive approach to reduce the external debt of the poorest, most heavily indebted countries, and represented an important step forward in placing debt relief within an overall framework of poverty reduction. There had been successive initiatives since the 1980s to tackle debt owed to other Governments, known as bilateral debt. These high levels of debt have been increasingly recognised as a constraint on the ability of poor countries to pursue sustainable development and reduce poverty. In 1994 the so called ‘Naples terms’ were launched offering 67% debt relief on government to government debt.
The HIPC Initiative, launched by the World Bank and the IMF, was the first comprehensive effort to eliminate unsustainable debt in the world's poorest, most heavily indebted countries, by including multilateral debt.
The IMF provides financial assistance to low-income members in two ways:
1. Through confessional lending under the Poverty Reduction and Growth Facility (PRGF)
2. Through debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative.
The HIPC Initiative has been enhanced to provide deeper, broader, and quicker debt relief, and the PRGF has been modified to increase its focus on poverty reduction and lasting economic growth.
The HIPC Initiative is designed to reduce the external debt burden of eligible countries to sustainable levels, enabling them to service their external debts without the need for further debt relief and without compromising growth.
The poorest countries, those that are only eligible for highly confessional assistance from the
International Development Association (IDA), the part of the World Bank that lends on highly confessional terms, and from the IMF's Poverty Reduction and Growth Facility previously the Enhanced Structural Adjustment Facility). Those that also face an unsustainable debt situation, even after the full application of traditional debt relief mechanisms (such as application of Naples terms under the Paris Club agreement).
Key words:
HIPC, debt, creditors, sustainability, developing countries, poverty.