Ethiopia and Niger are to receive extra debt relief from the World Bank and International Monetary Fund, after Britain and France persuaded the world’s richest creditors to offer an extra $800 (£430) million, as a test case for a more generous approach to the third world’s loans crisis, the Guardian newspaper reported on 9^th April.

UK Chancellor of the Exchequer Gordon Brown and French Finance Minister Nicolas Sarkozy hope Ethiopia’s case will prompt a revision of the Heavily Indebted Poor Countries Initiative.  

Speaking at the Ministerial Forum on Financing for Development in Paris on Thursday 8^th April, Mr Brown acknowledged that while 27 countries had been “freed from the burden of unpayable debt with $70 billion written off...[and that] debt payments are down from an average of nearly 30% of national income to 11%, we can do more - either through topping up generally, or by specific country by country initiatives – not least for countries facing higher export ratios which prevent an exit from unsustainable debt.” 

“And if debt is to be kept sustainable in the future, we will need to provide more aid in the form of grants.  So what is clear is that to both go further with debt relief and to ensure a sustainable position for the countries most at risk, we need a facility that can both help relieve debt and fund with grants education, health and poverty reduction.”

Mr Brown went on to remark that the “only chance we have of meeting the millennium development goals is if we advance together as a global force”.

Ethiopia’s case will be approved by the boards of the World Bank and the International Monetary Fund over the next few weeks.

Background Notes:

• The Heavily Indebted Poor Countries (HIPC) Initiative was launched in September 1996. The Cologne Debt Initiative, launched in June 1999 by the G8 industrialised countries, aimed to bring about major changes to the HIPC initiative to secure deeper, broader and faster debt relief as well as focusing on poverty reduction by releasing resources for investment in health, education and social needs, as well as support for good governance and sustainable development.

• 41 countries were initially classified as HIPCs under the Initiative, including 10 Commonwealth countries. So far, only 27 have been granted debt relief.

• The Chancellor’s full speech can be found here.

ENDS