Debt Relief
Debt relief for Benin, Burkina Faso, Mozambique and Senegal

afrol.com, 3 November  - This week, the African Development Bank announced that it had approved US$ 277 million in debt relief to support poverty reduction in Benin, Burkina Faso, Mozambique and Senegal. The relief goes under under the Bank’s participation in the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. 

Benin will benefit US$ 57.8 million, while the Bank's contribution to Burkina Faso’s debt relief will amount to US$ 121 million. Mozambique will benefit US$ 27 million and Senegal’s debt due to the Bank will be reduced by US$ 71.5 million. The African Development Bank will provide the debt relief by reducing up to 80 percent the annual debt service of these countries due to the Bank Group, until the entire amount of debt relief is provided. 

The provision of debt relief to the four countries brings to a total of seven countries that have benefited from the Bank’s participation in the enhanced HIPC framework. Under the original HIPC framework, the Bank Group provided debt relief to Uganda and Mozambique in 1998 and 1999 respectively. The total debt relief provided to countries by the Bank Group in the current year, under the enhanced HIPC initiative, has now reached US$ 684.4 million. 

- Debt relief assistance to Benin, Burkina Faso, Mozambique and Senegal is in recognition of their economic stabilisation and poverty reduction efforts, the Bank reports. Progress on the macroeconomic front has been complemented by wide ranging policy reforms in the social and economic sectors, and a strong emphasis on poverty reduction. "The Bank Group supported these policy reforms through concessional resources, in addition to a number of sector investment and project loans to the four countries. The Bank Group’s debt relief assistance will support further the countries’ poverty reduction programme," according to a statement from the Bank.

The African Development Bank’s participation in the enhanced HIPC framework is financed by the Bank’s own internal resources and by contributions from bilateral donors and the European Community. At a meeting in Paris on June 30, 2000, Deputies representing State Participants in the African Development Fund (ADF) assured the Bank Group's effective participation in the program through pledges of adequate financial support. 

The HIPC Initiative
The HIPC Initiative was established in 1996, and enhanced in 1999, as part of the international effort to deal comprehensively with the debt burdens of the world's poorest countries. The objective of the Initiative is to offer assistance to reduce the external debt of countries facing unsustainable debt obligations after full use of existing debt relief mechanisms. The main features of the HIPC Initiative are that it goes beyond currently available options to address the entire debt stock - including the multilateral component of the debt - and reduce it to sustainable levels. 

Proceeds from debt relief enable poor countries pursue policy reforms and commit their scarce resources to achieving sustainable development and reducing poverty. The HIPC Initiative, therefore, will enhance prospects for economic growth by allowing African countries to allocate resources to the social sectors, especially in basic education and health. Among these and other benefits, removing the debt overhang will restore the confidence of investors and facilitate greater private sector capital inflows. The overall contribution envisaged from the ADB Group for the HIPC Initiative in support of the eligible African countries is estimated at US$ 2.3 billion in 1999 net present value terms.

Source: African Development Bank

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