Debt Relief: A Review of the HIPC Initiative

Over 75 years later, we still do not have the freedoms President Roosevelt wished upon us. A specific freedom that still does not exist is “economic understandings which will secure to every nation a healthy peacetime life for its inhabitants.” There are still dozens of poverty stricken countries, known as Heavily Indebted Poor Countries (HIPC). These are countries that have a national debt that is unmanageable with traditional manners alone. The good news is that the Heavily Indebted Poor Countries Initiative began in 1996 to address this issue. The World Bank, the International Monetary Fund (IMC), and other creditors teamed up to reduce the debt of 36 countries that met strict criteria.

Argentina is a well known case study of the failure or negative outcome of some IMF's standard policies. In fact, Argentina carefully applied policies dictated by IMF, but, until it stuck up with those policies, it couldn't step out from its crisis, and it ran into even deeper economic and social problems. This failure of the IMF has often been cited as the demonstration of unsuitability of the standard IMF approach (the usual so-called Washington Consensus) for solving economic crisis in developing countries (Serra & Stiglitz, 2008, p. 44). Also, this failure led to hostile feelings versus IMF among the population of Argentina (Kanenguiser, 2000) and fueled generalised suspects over IMF decision-making process being politicized and serving

Due to capital limitations, most governments, particularly in the developing nations borrow funds from their bilateral friends and organizations such as World Bank and International Monetary Fund (IMF) in earnest to enable them pursue development projects, and sometimes to correct balance-of-payment deficits. Nevertheless, such governments must adhere to some outlined conditions that are spelt out in the article of agreement in order for them to secure the loans; otherwise, the loans are withheld (White, 2012). Equally, a healthy population significantly contributes to economic development of

IMF/ World Bank: The International Monetary Fund (IMF) and the World Bank Group's International Development Association (IDA) agreed this week to support a comprehensive debt reduction package for Honduras under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. The debt relief package will save Honduras more than US$900 million in debt service over the coming years, and is equal to US$556 million in net present value (NPV) terms.

The IMF and World Bank providing loans to impoverished and financially unstable countries is not only irresponsible, it's unethical. I intend to use the example of the loans provided to Mexico during the Mexican peso crisis, also called the Tequila crisis or December mistake crisis to illustrate this, and then provide what I believe would be a better solution

is accomplished through loans to struggling countries. In addition to the World Bank, the International Finance Corporation was annexed to provide loans to corporations who are seen to help aide in poor countries’ development. These three organizations

❖ It is an organization of 187 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

provided funds in an elastic manner of time, usually after a decade of a grace period,

The authorities recognize that debt relief under the initiative would provide a unique opportunity to free up resources for additional poverty reducing spending. They also recognize that debt relief under the initiative would provide a unique opportunity to free up resources for additional poverty reducing spending. They also recognize that, to enable the country to benefit from the resources made available for the overarching objectives of poverty reduction and economic growth, structural reforms initiated in critical areas , including governance and anti-corruption, need to be accelerated. Against this

Harvard Business School’s Case Study “Aid, Debt Relief, and Trade: An agenda for fighting World Poverty” outlines the steps, and missteps, that the world community has taken since World War II to address the efficacy of international assistance. The study focuses on international financial institutions (IFIs) and their ability to help poor nations break out of poverty and the possible obligations of rich, developed countries to assist the heavily indebted poor countries (HIPCs). Additionally, the study seeks to see if this assistance has been and can be parlayed into growth and investment for the HIPCs.

This point of view explored functions for agencies such IMF and World Bank would discussed at last part of this essay.

The third world countries debt is only going to increase if the first world countries do not cancel the debt. The main reason that the debt is going to increase is that the third world countries had made loans with the first world countries and the loans continue to increase. According to Vanessa Baird, “Most loans to the third world have to be repaid in hard currencies; and hard currencies are stable currencies: that means their value does not change much.” (1) This makes it difficult for developing

Over the past few decades Africa’s overall economic performance has been in decline especially in the 1980s. There has been little prospect for the future of most of these developing countries, however during recent years there has been a degree of optimism considering the development performance of the economy as well as providing a better long term future. The crisis emerged in 1982 with their debt rising above $140 billion to over $270 billion in 1990 (World Bank, 2013). There has been stagnation regarding the growth of their economies but despite periods of success Africa has been unable to unleash its full potential. In order to fully understand the effects of the debt crisis further examination into the background and causes of the crisis is needed, with attention to specific countries. The effect of the debt on the development of the region has to be discussed in detail in order to understand the difficulties most of these countries face with repaying their debts and promoting continuous economic growth. By highlighting the degree of optimism which has been evident in recent years for developing countries to progress, we can argue that there is a future for most of these countries when they look past the obstacle that debt presents. Especially in the 21st century where Africa is seen as one of the leading economies. This raises the possibility that despite huge overall debt stocks, that Africa may rise on the world economic platform and over take a few of the world’s

To resolve this problem many organizations were formed to help developing countries that are in huge non-payable debt situations through debt cancellation. Through this program, many of Burundi’s debts have been cancelled. Other countries have also done these debts cancellations. This program has helped many countries in financial problems and made it more possible for them to keep building their country and developing.

Indebted Poor Countries (HIPC) initiative in 1996. This has been seen as a failure due to the limited debt relief provided and its SAP requirements. Countries must successfully complete six years of structural adjustment before they become eligible for debt relief under HIPC. By the end of