100 Percent Debt Cancellation - The Multilateral Debt Relief Initiative

Emmanuel Ayomide Praise
 


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On March 28, 2006, the Board of IDA approved IDA’s participation in the Multilateral Debt Relief Initiative (MDRI), requiring IDA to cancel all debt outstanding and disbursed owed by HIPCs to IDA as of end-2003 as soon as these countries reached the HIPC completion point. The Bank began providing MDRI debt relief on July 1, 2006.

The MDRI provides HIPCs that have reached the completion point irrevocable, up-front cancellation of debt owed to IDA, the African Development Fund, and the IMF. Debt cancellation under the MDRI will be in addition to debt relief already committed under the HIPC Initiative. The full benefit of the MDRI from all three institutions to the 21 countries that have so far reached completion point will be over US$18 billion (NPV) – about US$13 billion from IDA. The MDRI aims to provide additional resources to help countries reach the MDGs, at the same time preserving the financing capacity of the International Financial Institutions. IDA donors therefore agreed to compensate IDA for all MDRI assistance provided. MDRI donor contributions to IDA are used to benefit all IDA recipients: they are attributed to countries according to the performance-based allocation mechanism used by IDA. For newly qualifying completion-point HIPCs (Cameroon was the first in May 2006), qualification for MDRI is automatic.

Avoiding the Need for another Debt Relief Initiative:

The Debt Sustainability Framework for Low-Income Countries

The debt sustainability framework is a forward-looking approach to guide borrowing and lending decisions to devote resources toward achieving the MDGs without creating the buildup of unsustainable debt. By assessing each country’s circumstances, the framework balances the need for funds with current and prospective ability to repay debt.

This approach puts responsibilities on both borrowers and creditors. Low-income countries that seek new loans are responsible for strengthening policies and institutions to enhance capacity to manage debt and reduce vulnerability to shocks. Creditors, for their part, review long-term debt projections, which incorporate forward-looking economic analysis and account for possible shocks.

Emmanuel Ayomide Praise Emmanuel Ayomide Praise is a world leading internet entreprenuer and investor. Some of his areas of interest include sport management, merchandise, ownership, internet entreprenuership, investments, media and writing amongst others. Business URL: http://www.emmapraise.blogspot.com ,

http://www.nigeriasoccer.blogspot.com ,

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