World Bank approves $37 billion in debt relief
World Bank member nations approved $37 billion in debt relief for 17 countries at the end of March. The 40-year debt cancellation deal begins 1 July, covering debts accumulated before January 2004 of those countries that have completed the Heavily Indebted Poor Countries initiative (HIPC). This includes Benin, Bolivia, Burkina Faso, Senegal, Guyana, Tanzania, Mozambique, Nicaragua, Niger, Mali, Rwanda, Ethiopia, Honduras, Ghana, Uganda, Zambia and Madagascar. Mauritania has been told that it will not be granted debt relief until it implements "key public expenditure management reforms", but could still qualify by July. More countries could become eligible for debt relief under the HIPC scheme once the Bank and Fund make final decisions over who qualifies in April.
Debt advocacy NGOs insist that the Bank deal amounts to holding poor countries hostage to the institution's need for self-preservation. Rather than following the IMF's lead in starting debt relief in January, the Bank plan sees all the debtors sending non-refundable payments until July (18 months after the announcement of the plan by G8 finance ministers in February 2005). Moreover, while the IMF forgave debts accumulated by the eligible countries up until the end of 2004, the World Bank will only cancel debts accumulated until the end of 2003. Some donors had expressed fears that if there was no form of funding to make up for the losses, the deal would severely undermine the International Development Association's (IDA) ability to continue lending to the world's poorest nations. The Bank received commitments from donor countries to cover 60 per cent of the costs for the full 40-year term, while the rest "will have to be dealt with over time," a Bank official said.
A partial victory for debt campaigners came in the board's decision to provide decisions about debt relief on a quarterly basis for those countries which have newly completed the HIPC process. Under the original plan, newly eligible countries would have had to wait another year for cancellation. Under the new plan, a country like Malawi, which is estimated to reach HIPC completion point in June, will see debt cancellation begin in July 2006, rather than having to wait until July 2007.
Jubilee South insists that the G8 agreement is not only limited to a fraction of the poor countries that need relief, but continues to subject recipients to onerous programmes of economic austerity. They call on poor countries to "renounce unjust debts rather than wait for overdue forgiveness".
The deal must be approved by the IDA board of governors at the WB-IMF spring meetings in Washington in April.